Formerly NE North Dakota, now NW MN | The problem didn't come from any policy change. It stems from mexican sugar production increasing something like 38% in one year. Sugar's just as inelastic a market as any other, so now North America is drowning in sugar. My point is, I believe the sugar industry knew that mexico was going to drastically increase acres before the futures charts reflected it.
2012's payment still made 68 bucks. Coop was right to push as many acres as we could handle that year. Now it's all about sending enough beets through to cover fixed costs. We probably won't risk storing beets way out into june, 22 cent sugar just doesn't reward that behavior, but we can't cut acres too much. Then the fixed costs catch up with us. I don't think we're anywhere near the "long run shut down" point, where we can't effectively minimize costs. that would require a change to the sugar program, removal of the LDP-style price floor. Not saying it isn't possible, because it is, but for now it's not (technically) in the works.
Going forward, we will have to try to hit the sweet spot on tonnage. Very little reward for taking the risk storing into may-june. My gut feeling is that 70% is a bit low. I'm thinking for '14 we'll be allowed to plant between 79 and 85%. Wild speculation only.
I'll joke before and I'll chide ya again, It's always been my gut feeling that that 1k bid is you "dipping your toe" into the sugarbeet water. Then again, It could be Tara. He turned down $1 rent, maybe because he wants to own? |
Sugar Round 2
