U.S. Sugar Producers Receive Good News from Mexico
FARGO, N.D. (AP) — Questions about low sugar prices, dry growing conditions, discolored product and a bloated North American market due in large part to Mexican exports had American Crystal Sugar Co. officials reeling in recent weeks.
But CEO David Berg told employees this week on the company blog about plans by Mexico's soft drink industry to buy more of its own cane sugar so less of it will be sold elsewhere, an issue that has frustrated U.S. executives, particularly in the last year.
While it's difficult to tell what the announcement will mean for sugar prices, Berg wrote "it has to be considered good news" in an ongoing attempt by U.S. sugar producers to keep Mexico from flooding the market.
Berg was not available Wednesday to comment on the new report, but said in a Tuesday interview with The Associated Press that Mexico's uncontrolled exports have been a "frightening experience" in the last year.
Mexico increased sugar shipments to the U.S. from 6 to 8 million metric tons in the last growing season after harvesting a large batch planted a few years ago when "people felt good about eating sugar," Berg said.
"All things considered there was room for Mexican sugar, until this year, when their production just popped," Berg said. "We were in balance before. We're not in balance now. We're plainly in surplus."
The U.S. sugar program has several rules that allow the national industry to manage the supply and support prices. But the North American Free Trade Agreement doesn't allow exports from Mexico to be controlled, Berg said, "so we just sit here and watch it come in."
In an email to several U.S. sugar officials, Humberto Jasso Torres of the Mexican Soft Drinks Association said Tuesday its decision to buy an extra 400,000 metric tons of sugar will alleviate the current oversupply in North America.
"The Mexican government was not involved in this announcement, and is expected to continue the policy of respecting the free will of soft drink producers to choose whichever sweetener they deem more convenient," he said.
Nick Sinner, president of the Red River Valley Sugarbeet Growers Association, said Wednesday he can't predict the ramifications of the association's decision.
"I want to take them at their word that this in fact is going to happen," Sinner said. "We have been sending the message out there continually to Mexico: Don't kill the market. We need some self-discipline."
The last several months have been difficult for American Crystal, based in Moorhead, Minn., and other sugar producers, as the lack of moisture has hurt the growing progress of sugar beets and sugar prices hit a three-year low.
Also, American Crystal, a cooperative that accounts for 38 percent of the nation's sugar from beets and 15 percent of overall sugar production, recently had some of its product rejected by major candy and cereal companies because the sugar was not white enough.
The off-color sugar was the result of an aging cooler that was not able to handle increased production and beets with a higher than normal sugar content.
Berg said he was embarrassed by the rejection, but that the off-color sugar can still be sold to other customers.
"I'm not saying it's a tiny, inconsequential deal. It's not the way we want to run things," Berg said. "But it wasn't like somebody stumbled and made a batch of horribly bad sugar."
In about a week, American Crystal plants in North Dakota, Minnesota and Iowa will begin production for the first time since union employees were locked out in 2011. The work force is now a mix of longtime union and replacement workers.
"It's kind of a blended family and I'm confident it will blend just great," Berg said.