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- Economic Considerations Associated with Destroying Large Acreages of Sugarcane and Converting Land into Alternative Uses
Kurt Guidry, Gravois, Kenneth, Deliberto, Michael
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The Louisiana sugar industry is one of the most economically important agricultural industries in the state annually generating more than $1.2 billion in revenue from the production of sugarcane that is processed into raw sugar and molasses. When indirect and induced contributions associated with the industry are considered, it has a total economic impact of more than $2.3 billion. A continuing concern of the industry is the conversion of land in sugarcane production into residential and industrial uses and, more recently, solar panel installations. While most situations have involved relatively small acreages with impacts primarily limited to the producer level, the much larger acreages being discussed with solar panel installations creates concern of both industry wide impacts as well as impact to associated economies and communities.
The LSU AgCenter has long had a methodology and set of procedures to quantify the impacts of land removal from sugarcane production and to suggest appropriate levels of compensation for the different industry segments. Given the small acreages in most situations, however, previous analysis has mostly focused on impacts at the producer level with other impacts believed to be so insignificant that their inclusion had limited to no value. However, given the potential for the involvement of much larger acreages, there is a need to expand the methodology and procedures to now include those impacts that previously were considered insignificant. In situations in which sugarcane crops are destroyed and the land placed into alternative uses, LSU AgCenter methodology would suggest that the appropriate estimate for crop value (the suggested level of compensation) is equal to the estimated unrealized revenue associated with the crop and any unrecovered costs. This report outlines a set of suggested procedures to develop these estimates and establishes a case example to help illustrate those procedures. And while it is impossible to establish a set of estimates that would adequately reflect all situations, the case example can provide a point of reference for reasonable crop value estimates for the “average” situation.
Sugarcane is a perennial crop with a typical production crop cycle consisting of plant cane (year 1), first stubble, year 2), third stubble (year 3), and third stubble (year 4). Based on established LSU AgCenter methodology and procedures, calculations for the case example showed that the net present value of the estimated crop value for the mill ranged from $760.75 per acre for third stubble acres to $3,387.55 per acre for plant cane. The net present value of the estimated crop value for the producer/landowner ranged from $1,252.04 per acre for 3rd stubble acres to $5,237.75 for plant cane.
Economic Impacts Associated With Displacement of Large Sugarcane Acreage - Correctedpdf / 0.43MB