On April 10, USDA issued its most important supply and demand estimate of the year. Once this estimate is finalized, USDA typically uses this information to make a decision on any additional imports from our foreign suppliers.
April estimates are that stocks will drop to a level of 6.8%, due to imports from Mexico dropping by 385,000 tons from the previous month’s estimates. Speculating how much sugar will come from Mexico is a very difficult process, and numbers can fluctuate significantly from month to month.
Prior to the April estimates, industrial sugar users asked the secretary to import volumes in the 700,000- to 900,000-ton range, which would clearly oversupply the market and collapse prices. Most of the domestic industry has advised the Secretary to be cautious in any consideration of additional imports. We have an earlier- than-usual spring this year. If we avoid late-spring frosts and have a good growing season, we could see earlier harvests and production for the 2012 crop that would be sold in the current fiscal year ending September 30.
This administration has done an admirable job in managing additional imports while constantly facing the uncertainty of unrestricted imports from Mexico and operating the policy at no cost to taxpayers.
The United States District Court for the District of Columbia has scheduled oral arguments on June 15, 2012, on the summary judgment motions in the Grant litigation. The summary judgment motions that will be heard by the court include motions by the sugarbeet industry and USDA that ask the court to conclude that the partial deregulation of Roundup Ready® Sugarbeets was proper, and a motion by the Center for Food Safety asking the court to find that even partial deregulation with conditions required a full Environmental Impact Statement. It is unclear how soon after the argument the court will rule on the parties’ motions. We are also waiting to see a final Environmental Impact Statement, which we believe will be ready this summer.
For years we have tried to address the problematic lack of adequate compensation for costs to replant our crop. The system that is currently in place has two key factors for determining coverage: price election (which changes each year based on the presumed value of the crop before it is planted) and a multiplier of the price election. When market prices are stronger, this formula is helpful to cover replant costs. But when market prices drop, so does the replant coverage when using the current system.
Grower leaders have asked for — and we have now achieved — a fixed number for replant coverage. Having a fixed number decouples it from market price swings, so when market prices drop and your costs don’t, you have a better risk management tool.
In April, RMA published a fixed number for replants for the 2013 crop at $80 per acre in California (closing date is April 30); and we expect that this will be applicable to all other growing areas. This number can be changed as future costs continue to increase. The coverage only applies to seed and fuel, which is why it does not fully reflect your actual cost of replanting the crop.
2012 Farm Bill
A clear path for completing a farm bill in 2012 remains shrouded in a cloud of uncertainty. The Senate Agriculture Committee is committed to reporting out a bill in April for consideration on the Senate floor as early as May. There is no assurance as to when it will come up for debate, but the Senate will need to act promptly in order to force the House to move on a farm bill. Typically, the House forces members to take tough votes on bills, only to have the bills die in the Senate — which creates political risk for House members. So, in an election year, the House will wait for the Senate to act before taking a bill to the House floor.
There also are two fundamental problems that have to be dealt with.
First, the Senate is writing a farm bill with cuts of $23 billion over 10 years from the commodity-related provisions. Under the House budget (which is not law because the Senate will not agree to it), the House version is supposed to cut about $33 billion out of the commodity provisions of the farm bill. So the two bodies would have to somehow reconcile a $10 billion difference between their bills, which is no simple task.
Second, time is slipping away. When the House returns on May 7, there will be only 51 legislative days before the election, which is not a lot of time to pass a bill as major as the farm bill. Four anti-sugar policy bills (two in the House and two in the Senate) remain active, but with relatively few co-sponsors — most of whom are the usual fervent opponents. The industry is well-prepared to oppose such proposals when they are brought to the floor as amendments to the farm bill.