Small Drop in Sugar Acres Adds Pressure on USDA to Enter Market
A 1.5 percent decrease in plantings of sugar beets in 2013 may increase pressure on the government to buy the commodity, as the acreage drop won’t reduce excess supplies enough to stave off purchases.
Farmers intend to plant 1.211 million acres of the crop this year, down from 1.23 million last year, a U.S. Department of Agriculture survey of producers said today. The drop in plantings of beets bought by American Crystal Sugar Co. (ASCS) and sold to processors including Mondelez International Inc. (MDLZ) won’t ease pressure on the government to implement a program to buy surplus sweetener for ethanol plants, said Michael McDougall, a senior vice president at Newedge Group in New York.
“The domestic sugar market will remain oversupplied, and the USDA is more likely to sell sugar at a loss,” McDougall said in a telephone interview today.
Beets are responsible for almost three-fifths of the U.S. sugar crop. Futures prices for sugar through yesterday have dropped 39 percent in the past year as stockpiles have risen to their biggest in a decade, potentially triggering federal purchases under programs designed to rein in surplus. The government next week can begin adjusting import levels, one way to restrict supplies, under agricultural legislation passed in 2008. Sugar-subsidy spending in a time of budget cuts and record farm profits has critics in Congress calling for a reduction in aid.
Domestic raw-sugar traded in New York slumped 0.6 percent to 21.15 cents a pound today at 1:45 p.m. amid the biggest glut since 2000. Production this year, expected to be the most since 1981, has helped boost estimated stockpiles to 20 percent of annual consumption, the highest ratio in 12 years, according to the USDA.
Traders expected a drop in beet plantings of as much as 7 percent, Craig Ruffolo, a vice president at McKeaney-Flavell, a brokerage in Oakland, California, said.
The USDA on March 13 said it’s considering “several options” to support prices, including purchasing excess sweetener, possibly for sale to ethanol plants, or restricting imports to the minimum required by international treaty.
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