Producers 'cautiously optimistic' about sugar deal with Mexico
MANVEL, N.D.—Ag producers in the Red River Valley are "cautiously optimistic" about an agreement limiting U.S. imports of Mexican sugar, especially after years of depressed sugar beet prices.
"I think it gives us good reason to be cautiously optimistic. There are benefits to it," Scott Johnson, who raises beets near Manvel, said of the agreement. "We got changes, which are going to help us as long as they can enforce them."
The U.S. Department of Commerce announced Tuesday, June 6, an agreement had been reached that would reduce the amount of refined sugar Mexico exports to the U.S. from 53 percent to 30 percent of its overall sugar exports.
However, sugar industry leaders fear the new agreement leaves open a loophole for Mexico to "dump subsidized sugar into the U.S. market and short U.S. refineries of raw sugar inputs," a move that, according to the American Sugar Alliance, has cost farmers and producers more than $4 billion.
The new agreement has failed to win the support of the sugar industry, U.S. Secretary of Commerce Wilbur Ross said Tuesday.
"This loophole takes away the existing power of the U.S. government to determine the type and polarity (purity) of any additional sugar that needs to be imported and cedes that power to the Mexican government," the Alliance said in a statement.
Tuesday's announcement of the sugar trade agreement was meant to fix problems with the 2014 agreement, but U.S. sugar producers claimed Mexico was not obeying the terms of the agreement.
Duane Maatz, executive director of Red River Valley Sugarbeet Growers Association, said Wednesday, June 7, that Mexico was circumventing the refiners and the market, effectively sending the sugar directly to consumers.
"This is a trade enforcement issue," he said, adding Mexico's subsidies allowed producers there to sell sugar for less. "They simply were cheating the rules."
Sugar beet prices have dropped since 2012, when farmers were averaging $69.10 per ton in North Dakota. Last year, Minn-Dak Farmers Co-op in Wahpeton, N.D., cut its gross payment for beets to $35 per ton for the 2015 crop.
Prices for the 2016 crop are still being finalized, Maatz said, but the competition from Mexico doesn't help, he added. Even with a record-breaking average yield of 31.5 tons per acre—some fields reached 38 tons per acre—farmers will be lucky to break even on their beet harvest, he said.
The depressed prices have prompted some beet farmers, including Johnson, to cut back on planting the crop.
"We normally raise 500 to 700 acres," said Johnson, who has been planting beets since 1993. "We only planted 140 acres this year."
The third-generation farmer said it is hard to cut back on beet acreage. Johnson's grandfather and father planted beets, and he said the crop has always been a big part of his family business.
"We just couldn't make the numbers work," he said. "It was hard to see us not doing beets, so we were able to keep some."
The biggest challenge will be enforcing the new limits, Johnson said. He said he just wants prices to return to a point where planting beets is sustainable.
"Hopefully the agreement will take some pressure off the market, which will help prices recover," he said. "I don't anticipate them doubling like they were."
Maatz said the agreement didn't go as far as his association wanted and there are concerns Mexico will try to find more loopholes, but he said his organization is optimistic the agreement will help farmers in the Red River Valley.
"It's certainly better than where we came from," he said. "The concern is, will Mexico live within the rules?
"We need to be very diligent in the implementation of this new agreement and force them to follow the rules," he said.