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SUGAR CONFERENCE: Brazil, Ethanol Hot Sugar Issues, Worldwide Sugar Producers Talk Business in Weeklong Forum
July 27, 2004
By Mikkel Pates, Herald Staff Writer

FARGO - Sugar producers from 30 countries representing 65 percent of world sugar beet and cane production convened Monday in Fargo to begin the weeklong 8th World Sugar Farmers' Conference.

The first event of its kind in the United States kicked off with welcomes from North Dakota Gov. John Hoeven at the Amity Technology beet equipment factory in Fargo and from Minnesota's Lt. Gov. Carol Molnau at the American Crystal Sugar Co. factory in Moorhead.

In his opening address, Rodger Stewart, president of the World Association of Beet and Cane Growers, from South Africa, gave an overview of an industry on the edge of change. Brazil "dominates the global scene" with its size and recent entries into the sweetener market, Stewart said, speaking to the crowd, which included Brazilian farmers.

"Brazil's sugar and ethanol production and marketing plans hold the key to the future direction of the world sugar price and, therefore, the key to many countries' sugar production strategies and profitability," Stewart said.

Brazil's cane production increased from 300 million tons in 1995 to 372 million tons of cane for the current crop an increase of 24 percent.

"From this, 27 million tons of sugar will be produced, of which 16 million will be exported," he said. "In addition, 14 billion liters of ethanol, equating to 25 million tons of sugar, will also be produced."

Held in check

And while Brazil expands, competitors are being held in check by regulations, weather, disease or world sugar prices, Stewart says. Among his examples:

  • Australia: A series of years of poor production caused by disease and drought, during a period of relatively low world sugar prices, has led to poor returns. "In the face of considerable financial hardship for Australian growers and millers, a government-financed package has been negotiated to assist with industry restructure and reform."

  • Thailand: The Thai government has indicated a target production ceiling of 65 million tons of cane well below historic output. "Further, there are encouraging signs that the Thai government is supporting the use of sugar cane in a government-sponsored ethanol initiative."

  • European Union: The alliance faces twin challenges of membership expansion and regulatory reform. In mid-July, the country announced a plan for a move to tradeable quotas and a significant reduction in support prices. "The final agreed sugar reforms in Europe will have differential effects on the industries supplying Europe," Stewart said. "The position of the suppliers to the European preferential markets from African-Caribbean-Pacific will be very much more difficult." Such reforms could increase production in the so-called "least-developed countries." The Sudan and Mozambique are prominent potential beneficiaries in Africa.

    Peader Jordan, a farmer from southeast Ireland attending the conference, said he is on an EU farmers' committee and will fight the plan. Under the plan, the EU would cut production quotas by 16 percent and farm prices by 37 percent, with a 60 percent "compensation for the loss of price." That would sting in a country like Ireland, with its 3,700 growers and 1.3 million tons of sugar beet production.

    "Change is necessary, but it's radical," Jordan said.

    "A three-year period is too short for adjustment," he said. "The majority of farmers either financially or physically can't adjust" to such a policy.

    The Brazilian government and cane processors in that country are "making every effort to increase ethanol's share of the Brazilian fuel pool," Stewart said. "The recent technological advances that have led to the introduction of 'flexi cars,' capable of operating on any blend of petrol and ethanol, is a major boost to ethanol consumption," he said.

    Stewart said the World Trade Organization Doha Round could change domestic agricultural policies of member countries. Increases in sugar production "seem unlikely in most sugar-producing countries," Stewart said.

    In the United States and France, there have been "major sales of sugar beet factories to the supplying growers as traditional corporate ownership of sugar processing is seen to produce unsatisfactory returns with considerable uncertainty and risk in future regulatory regimes," Stewart said.

    At American Crystal Sugar, board chairman Bob Vivatson from Cavalier, N.D., talked about the excellent results farmers have received after Crystal farmers purchased their factories as a cooperative in 1973.

    Crystal president James Horvath cited the tremendous growth in 30 years, noting the co-op produces $830 million in revenues. He said American Crystal has been a part of this rush to farmer-owned processing capacity, with its purchase of sugar marketing allocations, including the Sidney Sugars plant in Montana.

    Vivatson cited the co-op's success, but also noted that "using business criteria of today, it probably wouldn't have been done. But it was done."

    Congress continues

    The event continues through Friday, based at the Fargo Holiday Inn, where the region's sugar organizations have historically held their annual meetings. Among the other conference agenda sessions:

    • Global and U.S. agricultural sugar scene.
    • Trade negotiations.
    • Options for a managed global reform package for sugar.
    • Biotechnology for sugar growers.
    • Trade pacts and regional sugar policies.
    • Biofuels.
    • Sugar beet and sugar cane in food security and sustainable development.
    • The place of the grower in the sugar chain.

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