2007 SUGARCANE OUTLOOK

MICHAEL E. SALASSI
Professor (Agricultural Economics)

BENJAMIN L. LEGENDRE
Professor (Sugar Research Station)

National Situation and Outlook

United States cane sugar production for FY 2007 is projected at 3.537 million short tons, raw value (STRV), which is about 19.7 percent higher than the previous year. Total sugarcane harvested for the 2006/2007 crop was estimated at 27.852 million tons from an estimated total acreage harvested of 856,300 acres. In the two major production states, sugarcane harvested acreage in 2006 was up in Florida by 10,000 acres and down in Louisiana by 15,000 acres. The United States average sugarcane yield was estimated at 32.5 tons per acre, up from 28.8 tons in 2005/06.

United States sugar beet acres planted for FY 2007 (2006 crop year) was estimated at 1.367 million acres, up about 5.1 percent from the previous year. The national sugar beet yield was estimated at 25.9 tons per acre, up slightly from 22.1 tons in 2005. Sugar beet production was forecast as 33.765 million tons, up 23.0 percent from last year. Beet processors’ forecast of FY 2007 beet sugar production is 5.078 million short tons, raw value (STRV), representing an increase of 14.3 percent from the previous year.

The January 2007 WASDE report shows total United States supply of sugar at 12.416 million STRV. This total sugar supply was comprised of 1.698 million STRV in beginning stocks, 8.615 STRV of production, and an estimated import level of 2.103 million STRV. This United States sugar supply level is approximately 2.0 percent higher than a year earlier.

On the demand side, sugar use is projected to increase slightly in FY 2007 over the previous year. Total United States sugar use for FY 2007 is projected at 10.615 million STRV, up 1.3 percent from a year earlier. Total domestic deliveries of sugar are projected at 10.415 million STRV. Domestic food use is forecast at 10.250 million STRV.

Ending stocks for the current fiscal year (FY 2007) is estimated to be up slightly, primarily the result of increased beet and cane sugar production and higher imports in 2006/07. The January WASDE report estimated United States ending sugar stocks at 1.801 million STRV, up from 1.698 million STRV in the previous year. These projected ending stock levels result in a stocks-to-use ratio of 17.0 percent, compared with 16.2 percent in FY 2006.

Price Outlook

Raw sugar prices during the 2006 calendar year fluctuated around 22 cents per pound and were generally about 2 cents above 2005 prices throughout the year. United States raw sugar prices averaged 23.61 cents per pound in January 2006 and were still in the 23-cent range in June. These high prices were the result of a perceived shortage in the domestic market. Little of the 2005 sugar crop was sold at these prices. As grinding began in 2006, raw prices dropped below the 22-cent level and ended the year at 21.74 in December.

United States raw sugar prices for 2007 delivery are currently trading at somewhat lower levels in January 2007, primarily due to excess supply currently existing in the market. Nearby raw sugar futures prices (No. 14 contract on the New York Board of Trade) are currently trading at levels just over 20 cents per pound. Futures contract prices for months in the 2007 sugarcane grinding season are 21 trading in the 20.2 cent-per-pound range. Although 2007 production of beet and cane sugar will have an effect on market prices throughout 2007, current price projections are lower than desired compared to previous years.

Louisiana Situation and Outlook

In 2006, sugarcane was grown on 433,577 acres in 24 Louisiana parishes (counties). This figure represents a decrease of 28,933 acres or 6.3 percent when compared to the 2005 crop. In 2006, Louisiana had 661 sugarcane producers, down 33 producers, or 4.8 percent, from 2005. An estimated 403,402 acres (a decrease of 22,107 acres or 5.2 percent) were available for harvest for sugar, assuming 6.5 percent of the total acres were used for seed cane purposes. In the past, this figure was 8.0 percent.

Approximately 60,000 tons of cane (3,094 acres) were left standing in the field in the Lacassine area of western Louisiana as a new syrup factory slated for operation in that area was not ready in time to process the entire 2006 crop prior to the closure of the factory receiving the syrup for crystallization into “raw” sugar. Because of the cane left in the field in the western area of the state, the actual acreage of sugarcane harvested for sugar was approximately 400,308 acres. The United States Department of Agriculture, Farm Service Agency, also reported that there were 2,346 failed acres across the state.

The 13 factories (12 raw sugar factories and 1 syrup factory) processed 12,434,452 tons of cane (an increase of 1,648,177 tons or 15.3 percent when compared to 2005). The sugar that was produced from the Lacassine syrup factory was crystallized at one of the 12 raw sugar factories. Total production by the 12 raw sugar factories was 1,260,986 short tons of sugar (96 pol) (an increase of 90,687 short tons or 7.7 percent). Accordingly, the average yield of cane produced per total acre (to include acres used for seed, abandoned and failed) was 28.7 tons (an increase of 5.4 tons or 23.2 percent). The average yield of cane produced from each harvested acre amounted to 31.1 tons (an increase of 5.5 tons or 21.5 percent).

The yield of commercially recoverable sugar produced per total acre averaged 5,817 pounds (an increase of 756 pounds or 14.9 percent). And sugar produced per harvested acre was approximately 6,300 pounds (an increase of 754 pounds or 13.6.3 percent). The average sugar recovery at the 12 factories was 10.14 percent or 203 pounds of sugar (96 pol) per ton of cane; this was a decrease of 15 pounds of sugar per ton of cane or a decrease of 6.9 percent when compared to the 2005 crop.

The gross farm value of $268,917,170 for sugar and molasses (a decrease of $23,636,576 or 8.1 percent from the 2005 crop), in spite of the increase yields of tons cane per acre and commercially recoverable sugar per acre, have continued to plummet since the 2002 crop year when the state experienced two tropical systems prior to and during the harvest season and experienced losses in excess of 35 percent. Losses of this magnitude were again experienced by the industry in 2005 caused by Tropical Storm Cindy and hurricanes Katrina and Rita.

The main reason for the lower gross farm value in 2006 has been the steady decline in the prices paid for raw sugar while, at the same time, molasses prices have remained high. The gross farm value reported above represents 60 percent of the value of the sugar and 50 percent of the value of the molasses produced, with the remaining percentage going to processing and marketing. The total value of the sugarcane crop to Louisiana 22 growers, processors, and landlords at the first processing level is actually $453,269,527.

The onset of allotments, the gradual reduction in sugarcane acreage, the residual effect of the tropical systems that occurred during 2005, especially in those areas that experienced salt water tidal surges, the keeping of older stubble, the reduced yield in the older stubbles of the leading variety, LCP 85-384, the persistent drought in several of the cane producing parishes, the subfreezing temperatures that occurred throughout the sugarcane belt the first week or more of December and the unprecedented late season rain fall are, undoubtedly, responsible for reduced yields in 2006 even though the current crop was the best in yield of commercially recoverable sugar per acre since the 2003 crop. Even with the reduction in gross farm value, sugarcane still ranks first amongst row crops grown in the state.

The total area planted to sugarcane of 433,577 acres for the 2006 crop was the smallest area since 1998 when 425,000 acres were planted. Although the residual effect of the 2002 and 2005 tropical systems were minimal on the 2006 crop, many producers still had to plough out unproductive fields of LCP 85-384 in the spring of 2006. Approximately 72 percent of the 2006 crop was still planted to LCP 85-384, which has shown a significant decline in yield each year since the 2002 crop.

Further, data obtained during the last three years have shown this variety is very susceptible to common brown rust which was shown to reduce the yield of LCP 85-384 by as much as 7 tons of cane per acre in the heavier infected areas. The amount of plant cane continued to rebound in 2006 with approximately 29.8 percent, which undoubtedly, helped to boost overall yields. Only 41.8 percent of the 2006/07 crop was second stubble and older; however, 88 percent of the older stubble was planted to LCP 85-384.

Due to weather conditions, the 2006 crop year was one of contrast. Temperature, as a degrees Fahrenheit average for all state reporting stations, was above normal for six of the 12 months, especially during the months of January (+6 degrees), March (+2 degrees), and April (+5 degrees). Only in February was the temperature below normal by more than 1 degree when it was 3 degrees. For the remainder of the year, the average monthly temperatures did not deviate from normal by more than 1 degree.

Rainfall, as an average for all state reporting stations, was below normal for eight of the 12 months and above normal for only four months (February, July, October and December); however, two of those months were during the grinding season, when the industry would like to see below-normal rainfall. Generally speaking, with the warm and dry winter and spring weather, the crop was off to an excellent start; however, much of the state had droughty conditions that persisted well into the summer resulting in below normal growth of the crop in several areas, especially western Iberia Parish and most of Pointe Coupee and northern Iberville parishes.

Fortunately, adequate rainfall in July helped provide moisture for growth for the remainder of the state. No tropical systems affected the crop; however, several periods of thunderstorms and heavy rainfall during the months of October and December caused much of the crop to lodge and made harvesting difficult. Then, during the first nine days of December, most of the sugarcane belt experienced subfreezing temperatures that ranged from lows of 25 F in Terrebonne and Lafourche parishes in the South to 19 F in 23 the Iberville, Pointe Coupee, Avoyelles and Rapids parishes in the North. Fortunately, most of the cane was harvested with the exception of the Lacassine area, albeit with lower sugar recovery as a result of deterioration caused by the freeze damage and loss of sugar caused by the excessive trash because of the wet weather.

Because of the low field yields, especially in older stubble, and/or the cost of operating the combine system, many growers reverted back to harvesting by the whole-stalk or “soldier” system in an effort to reduce cost. Growers who had the capability to harvest by the whole-stalk system also had an advantage following the freeze when it was recommended that the top 12-18 inches of the top of the stalks be removed because of freeze damage. The whole-stalk harvester has a positive topper, whereas the combine harvester has a stand-alone topper that can only remove tops in erect cane.

Rust did not appear to be much of a factor in reduced yields during 2006, and many producers reported that yields of LCP 85-384 rebounded even in the older stubble crops. However, most producers have begun to plant the newer varieties, namely, Ho 95-988, HoCP 96-540, L 97-128, L 99-226 and L 99-233, which have superior yield in both tons of cane per acre and commercially recoverable sugar per acre when compared to LCP 85-384. There was only limited planting of LCP 85-384 in 2006. Sugar prices are at their lowest level in many years (<$20/cwt). Although field yields were much improved in 2006, growers and millers may still have cash flow problems because of the low sugar prices. On the other hand, molasses prices are averaging over $0.40 per gallon and are expected to remain firm until the end of the pricing period for the 2006 crop.