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Sugar's future?

FARGO, N.D. - Bill Hejl started representing the region's sugar industry on a world scale in 2003. That was before the ethanol boom. Today, after traveling nine countries as president of the World Beet and Cane Growers Association, he's become aw...

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FARGO, N.D. - Bill Hejl started representing the region's sugar industry on a world scale in 2003.

That was before the ethanol boom.

Today, after traveling nine countries as president of the World Beet and Cane Growers Association, he's become aware of how the sugar, ethanol and oil are intertwined.

More and more, Hejl is becoming an optimist because ethanol production will sop up more sugar. His summary: Barring a decline in oil prices because of a collapse of the Chinese or Indian economy, or some large discovery of oil - or some amazing hydrogen fuel cell discovery, the price of oil and sugar are going to do very well, thank you.

"My son, John, is a senior at the University of North Dakota and expects to come home to the farm," he says. "I'm feeling better about his future, and the thing that makes me optimistic is biofuels."

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World experience

In 2003, the executive committee of the Red River Valley Sugarbeet Growers Association asked Hejl whether he'd consider running for the president of the world association.

"Kaboom," he says.

The idea is that the U.S. (the Red River Valley) was going host a world association congress, and the tradition is that the country that the next world president comes from the country that hosts the word congress.

Hejl found out that the job involved two trips a year - one to the Paris-based group's London "consultation with the International Sugar Organization" and the other to some other sweet spot in the world. Hejl consulted with his family and got the OK.

He went to the ISO fall consultation in London around Thanksgiving 2003. There were 25 countries represented, and it was an eye-opener.

The Red River Valley had prepared for a world "congress" in Fargo in 2003, but the event was scuttled because of the SARS outbreak. In 2004, the group tried again, and Hejl was proud to host the event in Fargo.

Taking in Brazil

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Since 2003, the association has added 2 million farmers to the membership, as well as seven new countries. The highlight, of course, was hosting the Congress in 2004 and adding Brazil to membership that same fall.

In Fargo, Hejl and the association welcomed Manoel Ortolan, president of Orplana, a cooperative of a 200,000 Brazilian growers. He accompanied by the co-op's treasurer, Maria Christina Pacheco. Organized in 1934, the Orplana co-op owns grocery stores, gas stations, a bank and hospitals and offers insurance for members.

In July 2005, the summer meeting was held in Brazil. There, Hejl wasgolly-wowed by an impressive agricultural resource, including 6 to 9 feed of topsoil on basalt rock.

"It won't move, but you can till it," Hejl says. "It works up great, lovely stuff. And they've been growing cane there for 500 years - continous cane.

"Every magazine article I'd read had talked about poor roads in soybean country, but in sugar cane country, there were brand-new asphalt roads everywhere. And everything was cheap," he says.

He remembers buying pizza and beer for 15 people cost $60.

Sugar and oil link

It was at this Brazil meeting that Hejl saw his first chart that linked oil to sugar. The Brazilians themselves spoke with pride about how they'd subsidized ethanol production since 1978 - ethanol mandates, tax breaks, harvest manipulation for ethanol and on and on.

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While the automobile industry in the U.S. struggles to make flex-fuel vehicles, car manufacturers such as Volkswagen sell cars in Brazil that consume 100 percent ethanol. Hejl believes cold-weather differences between the countries eventually will get solved by technology.

The sugar/oil connection was not an easy shift for word cane and beet growers.

While the group was in Brazil, oil prices were about $50 and heading to $70. Hejl's predecessor, Rodger Stewart of South Africa, had asked for more talk about sugar and less about ethanol.

"He'd made the statement that ethanol will never work in South Africa," Hejl says. "A Brazilian stood up and, 'What are you waiting for? Eighty dollars a barrel?"

The next speaker was the Brazilian minister of agriculture - the equivalent to USDA's Mike Johanns - who talked about just that prospect.

"Oil got to $78 that year, just after Katrina," Hejl says.

The world stage

Hejl says he's one of the few Americans who attends International Sugar Organization meetings.

That's a shame, he says, because the U.S. government, which was a charter member in the organization, dropped out during the Clinton administration to save about $150,00 in annual membership costs.

The ISO, and its economist Peter Baron, happen to be the only quasi-public work tracking the world development and trade of ethanol. Hejl collects graphics from the conferences he attends. When he gets home, he enjoys doing the unit conversions - the math - and looking for patterns in the tea leaves of world agriculture and the various chats.

"Whatever makes money - that's what world beet and cane growers are after," Hejl says.

While Hejl represents the U.S. on the world growers association, he notes that he can't "speak for Americans because I'm not their president."

"I can't say I represent what's best for best for American growers because Steve Williams of Fisher, Minn., is their president," Hejl says. Williams is president of the American Sugarbeet Growers Association, and Hejl is a director on that board.

Sopping up sugar

Hejl sees a tremendous sopping up of extra sugar in the world to meet ethanol demand.

The Brazilians will try to produce for the ethanol market, but there are limits to that. If they're limited, everyone else is limited, too.

"You take the rest of the top 10 sugar exporting countries in the world, add up their exports, and they don't add up to what Brazil exports," he says.

The Brazilian farmers like selling their cane for ethanol because 90 percent of it goes into the Brazilian market and gets the "real" (re-YAL) directly. If it is sold as refined sugar, it must be sold on an ex-

port market at a currency imbalance to dollars.

Hejl has a slide in his presentations that shows how sugar cane is planted - very labor intensive and slow. This kind of investment must be accompanied by investments in factories.

He says that the ISO projected Brazil to increase production by 7 percent per year, but actual increases from 2.7 percent in 2005 to '06 to 13 percent in 2006 to '07 because of favorable weather. At 7 percent, it gets to

574 million tons of cane by 2010. But if the increases remained at 2.7 percent, it would be 6.7 million tons short of projections in five years.

"Sugar cane requires more water to make a ton of sugar than sugar beets do," Hejl says.

Fuel ethanol production was at 39 billion liters in 2005, while world ethanol trade was 3.5 billion liters. That's 925 million gallons of ethanol a day, or about 1.6 days worth of gasoline usage in the United States. Not much.

"Increased ethanol trade will draw cane sugar from the world market and leave sweetener users bidding ever higher prices for sugar," Hejl says.

Hejl shows a chart that shows U.S. ethanol. production catching up to the Brazilian production.

"But the same number of gallons is 50 percent (usage) to the Brazilians and 3.5 percent to us. If you're talking about them fixing our gas problem, it ain't going to happen."

While the long-term picture for sugar seems bright, there could be a short-term surplus.

"There is a surplus of sugar this year, and there's supposed to be one next year," he says.

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