Panel Replays Presentation to New York City’s Sugar Club for ASGA Meeting Participants
Back in mid-November, just as the 2013 farming season was concluding, four sugarbeet growers — Kelly Erickson, Rick Gerstenberger, Galen Lee and John Snyder — traveled from their homes in Minnesota, Michigan, Idaho and Wyoming, respectively, to downtown New York City. Their purpose was to attend a dinner meeting of the Sugar Club, an international forum of traders and large customers of sugar.
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But the trip wasn't just about dinner and conversation. The four beet grower/leaders were in Manhattan to inform Sugar Club members about what’s involved in producing the sugarbeets whose sugar they trade and buy. It was an opportunity for the growers to tell their story directly to the users of their commodity — to reach out and inform about the challenges and risks inherent in producing this crop. By all accounts, their presentation was very well received.
The four growers provided an encore presentation in early February. Only this time they were in front of their colleagues at the annual meeting of the American Sugarbeet Growers Association. As Kelly Erickson, outgoing ASGA president put it, “We have scheduled this presentation with you because it’s our message to our customers that they need to understand what it takes to provide the safe and reliable ingredient that they demand.
“The people we gave this presentation to [in New York City] probably had never met a farmer,” Erickson continued. “They all trade our commodity, but they just don’t [interact with] farmers. This was our attempt to explain what we go through.”
Provided below are summaries of each presenter’s comments to the Sugar Club — and ASGA — audiences.
Challenges Faced --
Having just come through the harvest season, “mud” was the first challenge Erickson explained to Sugar Club members. He showed images of trucks being pulled through muddy fields, of a beet cart being off-loaded manually after tipping in a soaked field. He also talked of frost. “If you wake up in the morning, look outside, and it’s below freezing and snowing, you've got a big problem,” he told the sugar traders.’
“What do our customers want?” Erickson asked. “They want a quality sugar that meets their specifications; assured supplies; sugar stored by a reliable seller and delivered ‘just in time’ – and multiple sellers, domestic and foreign, to assure quality supplies and competitive pricing and terms.” Yet there are obvious threats to the overall sugar supply chain. Weather is a big one, be it a hurricane in the Gulf region or extreme cold in the North. Then, too, there are facility disasters, such as warehouse fires.
Erickson pointed out that beet sugar accounts for 56% of total U.S. sugar production and 41% of total domestic sugar deliveries. The nation’s sugarbeet crop covers 1.2 million acres in 11 states. “We’re the lowest-cost beet producers in the world, and we are committed to constant innovation and investment in all aspects of our business,” he emphasized.
As both producers of sugarbeets and owners of the companies that process them into sugar and byproducts, beet growers have four main risk pools, Erickson concluded: (1) on-farm production; (2) processing/marketing; (3) consumer demand/health issues; and (4) foreign trade policy and domestic farm policy. He outlined the various types of farm operation structure as well as the rights and responsibilities inherent in being a shareholder of a beet sugar cooperative.
What Goes into Producing Beets --
Gerstenberger, who also serves as board chairman of Michigan Sugar Company, outlined for Sugar Club members all the components that go into producing a crop of sugarbeets:
• Seed — It takes eight to 10 years to bring a new variety to commercialization, he noted, with about 150 different sugarbeet varieties currently on the U.S. market. Nearly 100% of them are biotech (Roundup Ready®); but, Gerstenberger pointed out, “the sugar is the same” as that coming from a conventional variety. Different brands of coatings are applied to the raw seed for aid with vigor and protection against pests. Seed costs to the grower have increased by about 700% since 1985*, he noted, with “a lot of that having to do with new technology.”
• Crop Protection — The sugarbeet crop is protected from diseases, weeds, insects and other threats in several ways, Gerstenberger explained. The continually improving genetics of the seed itself is a major contributor. Then there are the enhanced seed coatings. Twelve registered herbicides help control some two dozen significant broadleaf and grassy weeds species, while 11 insecticides labeled for sugarbeets combat 11 different invertebrate insects. Fifteen registered fungicides help growers manage a range of viral and bacterial diseases through their systemic or foliar activity.
• Wind — All beet growers annually face threats from wind, to one degree or another. Spring winds can blow out or cover up seeds; likewise, they also can damage or kill recently emerged plants. Growers often plant cover crops for protection against such winds, but replanting the beet crop is necessary in some instances.
* Reference to a 1985 baseline is used
several times in this presentation because
during the recent farm bill debate,
sugar users made clear their desire to repeal
the sugar loan rate increase contained
in the 2008 farm bill and return it
to the level where it was set in the 1985
farm bill. Producer costs obviously have
• Fertilizer — Gerstenberger explained to the urban New York audience how growers annually test their soils for mineral deficiencies. Using new technologies, they map fields to see exactly where fertilizer is needed, and to what degree, and then apply it on a variable-rate basis as needed. Cost of fertilizers have increased by about 550% since 1985, he noted.
• Water —Water is essential for any crop, but farmers often deal with “too much” or “too little” dilemmas. In Michigan and the Minnesota/eastern North Dakota growing region, where most beet acreage is not irrigated, “too wet in spring” conditions can lead to late planting dates and/or soil crusting prior to emergence. “Too wet in fall” can delay or complicate the harvest. “Too fast” water (hard rains during the growing season) may result in field erosion and/or drowned-out crops. Frequent rainfall events also often translate into delays in applying crop protection products.
In the more-arid western growing regions, where all the beets are irrigated, the cost of irrigating can range from $25 to $100 per acre, Gerstenberger noted. Surface water sources supply some of the irrigation needs;well water the rest. In some areas, farmers increasingly face competition for limited water resources from expanding urbanization.
• Crop Insurance — Beet growers can purchase replant coverage at a fixed price per acre, Gerstenberger explained, and they also buy crop insurance to cover in-season damage to the crop or the entire loss of their crop. In 2013, U.S. sugarbeet producers paid a total of $28 million in crop insurance premiums.
Research, Equipment, Labor, Successor Ownership, Bankers —
Lee briefly outlined the scope of current USDA-ARS sugarbeet research centered on key areas such as seed genetics, insecticides, fungicides, best management practices and beet storage. Six ARS locations — Davis, Calif.; Fort Collins, Colo.; Kimberly, Idaho; Beltsville, Md.; East Lansing, Mich.; and Fargo, N.D. — house scientists working with sugarbeets, he pointed out. Their research receives industry financial support in addition to their ARS funding base.
Speaking to the equipment a beet grower must have to raise this crop, Lee noted that today’s planters can cost upwards of $300,000; one of the current generation of crop sprayers can be as high as $350,000; a defoliator can run for as much as $100,000; and a sugarbeet harvester can be more than $200,000. The self-propelled topper/ harvesters that some growers now use can retail for more than $700,000. Then there are the trucks, of which most farmers need at least two and sometimes several. Precision farming technology is now commonplace, such as tractors with GPS guidance/auto steer and GPS-guided sprayers.
Successor ownership is a major consideration for beet growers, Lee said. It encompasses the transfer of not only land and equipment, but also of one’s shares in the sugar cooperative. Family or neighbors often are the purchasers, but not always. Also, sustaining a sugar cooperative requires a critical mass of other growers, with stability, security and profitability being primary considerations as they decide whether to retain the shares they have, expand the number of shares — or invest for the first time in the co-op.
“We borrow more money in a year than most people do in their lifetime,” Lee pointed out to the Sugar Club audience. Bankers obviously place high priority on projected cash flow as well as risk management measures (e.g., crop insurance). They, too, want market stability in the sugar industry.
Processing & Marketing, Consumer Demand, Trade Policy & Farm Policy —
Twenty-one U.S. beet sugar factories have closed since 1985. Independent investors abandoned the sugar industry in recent decades due to high risks and low returns, Snyder recounted. So, in order to keep their factories operating and the industry intact, growers in several regions formed cooperatives and purchased those assets. “Growers are the last owners of the remaining 22 beet sugar factories,” Snyder noted. There presently are seven beet sugar cooperatives, with their grower-owner numbers ranging from 61 up to 3,000. Hundreds of millions of dollars have been invested in the cooperative-owned sugar factories to keep them updated and efficient.
The “consumer demand” part of the sugar business is another focus area for sugarbeet growers, Snyder noted. “Without increased demand, supply and price problems get worse,” he pointed out. Sugar currently competes against numerous caloric and non-sweeteners, he pointed out, and also is impacted very directly by public policy trends such as dietary guidelines and proposed new taxes on sweeteners. Strong and effective public relations — involving the defense, education and promotion of sugar – is very important to beet growers as well as others in the industry. So to is defending the sugar “brand” through litigation, if necessary.
Beet growers have a huge stake in trade policy as well, the Wyoming producer emphasized. The United States is the world’s largest importer of sugar, he reminded his audience, importing 27-30% of its annual needs. While efficient, U.S. beet producers “cannot compete against the vast array of foreign subsidies and dumped surpluses,” he adds. Cumulative
trade agreement import commitments must not oversupply the U.S. market — and, unlimited and unrestricted
imports of Mexican sugar cannot continue.
Domestic farm policy for sugar needs to serve four purposes, Snyder stated. First, it must provide an adequate price safety net for producer/cooperative owners and their bankers. Second, it must stabilize the market for both producers and consumers. Third, it must respond to unfair foreign trade practices. Fourth, it must, to the best ability, avoid taxpayer costs.
So, to answer the initial question brought forth by this panel presentation — “What Do Beet Growers Need to Survive?” — Snyder summed it up this way:
• Market stability of trade agreements.
• Strong safety net from farm bill provisions.
• Adequate returns from the market (which in turn allow for capital investments for innovation and
efficiency, replacement and maintenance capacity, and the ability to compete with other crops).
• Succession ownership.
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