DENVER — Sugarbeet growers and cooperatives in the U.S. are expected to have a stronger financial year ahead, with improved production and high prices for the 2020-2021 crop ushering in a recovery from the stressful growing season last year. Many growers and processors suffered through significant financial strains due to extreme weather, market uncertainty and severe crop production losses that plagued the 2019-2020 marketing year.
A new report from CoBank’s Knowledge Exchange Division details the market forces and production dynamics that suggest the industry is well-positioned for a financial rebound, as consumer demand for sugar remains high.
“Assuming we return to reasonably normal harvest weather this fall, expectations are for a much bigger crop to be harvested for the 2020-21 season,” said Tanner Ehmke, manager of CoBank’s Knowledge Exchange. “With processors contracting refined sugar at much higher prices, fortunes are expected to turn favorable for growers and processors in the marketing year ahead.”
The U.S. sugarbeet harvest last fall marked the fifth biggest year-over-year decline on record, dropping 14% to 28.6 million short tons. Production in three major sugarbeet-producing states, Minnesota, North Dakota, and Nebraska, fell more than 20%. Abandonment rates nationwide skyrocketed to the highest level since the Great Depression with 13.5% of U.S. planted acres not harvested due to ongoing wet weather issues. Yields also fell to the lowest level in five years due to late planting and poor harvest conditions.
Many U.S. sugarbeet growers financed their spring crop planting with crop insurance indemnity payments and financial aid from USDA while processors struggled with less throughput and lower extraction rates amid high fixed costs.
Wet field conditions this spring have hampered planting efforts for sugarbeet growers. However, total acreage planted is expected to increase over last year and drive production higher. USDA’s Prospective Plantings report forecast U.S. sugarbeet acreage at 1,138,500 acres for 2020, an increase of 6,500 acres compared to 2019.
Ultimately, total acreage will likely be revised upward with farmers expected to make up for lower yields to fulfill their shares of contracted beet production with processors. USDA is currently predicting the 2020-21 sugarbeet crop harvest to increase 18% year-over-year, landing at 33.7 million short tons, assuming a return to normal harvest weather this fall.
With demand remaining strong and refined sugar supplies tightening, the price of Wholesale Refined Beet Sugar has surged to 44 cents per pound, up from 35 cents per pound last fall and the highest since 2012. Raw sugar prices, though, have held steady at around 25 to 27 cents per pound for over the past two years.
COVID-19 has had minimal impact on total demand for sugar in the U.S. While total sales to sugar buyers in the food service sector has suffered due to the loss of customers, retail sales to consumers during the pandemic has skyrocketed.
“With processors contracting an expected large crop in today’s strong price environment, cooperatives are expected to be in a much-improved financial position, enabling them to reinvest proceeds to make plant upgrades and disburse more back to coop members,” said Ehmke.
The full report, “Sugar Outlook: Sweeter Times Ahead for Sugarbeet Growers and Processors,” is available on cobank.com.
CoBank is a $158 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.