Sugar beet growers in Idaho say they have watched tons of Mexican sugar pour across the U.S. border, driving down sugar prices and squeezing their margins. They want trade agreements changed to restrict the amount of sugar that can travel north.
While exports from other sugar-producing countries are limited by the U.S. government through an allocation process, Mexico was given unlimited access to the U.S. sugar market through the North American Free Trade Agreement. In NAFTA's early years, when sugar prices were low, there wasn't much incentive to export sugar to the U.S.
But the economics changed beginning in 2010. Now Mexico is sending huge amounts of sugar into the U.S., flooding the market and driving U.S. prices lower.
The Idaho industry needs sugar prices to increase soon for sugar beets to remain viable, said Duane Grant, chairman of the grower's co-op, the Snake River Sugar Co. The co-op operates Amalgamated Sugar Co., which processes sugar at its plants in Nampa, Paul and Twin Falls.
Amalgamated joined the other U.S. grower-owned beet processing companies and most of the U.S. sugar-cane processors in filing anti-dumping and countervailing-duty allegations against the Mexican government in late March. Their lawsuit, filed with the International Trade Commission, says Mexico has operated at a loss to drive U.S. producers out of business. It contends Mexican sugar is being sold into the U.S. at dumping margins of 45 percent or more.
The lawsuit claims unfair trading practices by Mexico will cost the U.S. sugar industry $1 billion this year. U.S. sugar prices have fallen by 50 percent since 2011 while sugar imports from Mexico have risen sharply in recent years. In 2013, imports from Mexico accounted for 18 percent of the U.S. sugar supply, up from 9 percent the previous year.
IDAHO SUGAR REVENUES PLUMMET
Idaho cash receipts for sugar beets fell 37 percent during the past two harvest seasons. The Snake River co-op has dipped into cash reserves to pay growers a break-even price after the past two harvests, Grant said. Both years, the co-op sold tons of sugar to the U.S. government in lieu of repaying government loans. Grant wouldn't say how much the co-op paid to farmers to offset their losses.
"At some point we'll run out of reserves, because we don't own the printing press," Grant said. "If the market has not recovered by the time where the market can return at least a break-even point, then we'll see growers begin to migrate away from sugar beets."
Grant said the lawsuit is expensive, but growers joined it because it is the best shot at a price increase large enough to keep Idaho sugar beets afloat.
According to the USDA, Idaho growers expected to plant 167,000 acres of sugar beets this year, down from 175,000 acres in 2013 and 183,000 acres in 2012. That trend is similar across the country, with growers planting 4 percent fewer acres.
BAILOUTS HELP SECTOR, CONFECTIONERS SAY
Acreage devoted to sugar production in Mexico has increased 66 percent since NAFTA went into effect, while U.S. sugar cane acreage has fallen 11 percent.
"If the Mexican sugar industry was gaining market share in the United States because it was more efficient than U.S. producers, that would be one thing," said Phillip Hayes, spokesman for the American Sugar Alliance, "but they are inefficient and are simply making advances because of unfair trading practices."
Candy makers disagree.
"This petition by the U.S. sugar producers is nothing more than a diversionary tactic to distract from the real cause of distortion in the U.S. sugar market - the U.S. government's sugar bailout program, not Mexico," said Alison Bodor, executive vice president of the National Confectioners Association. "The growers have not been injured by imports, and they have the incredibly protective and generous sugar program to thank for that."
U.S. SUGAR PROGRAM
The U.S. Department of Agriculture spent $278 million in fiscal year 2013 to support prices through the sugar program, which had operated at no cost for a decade because sugar prices were above the established floor price.
The USDA purchases surplus sugar when prices fall below a set price. But with prices expected to remain low, the Congressional Budget Office has estimated USDA will spend $390 million on sugar supports between fiscal year 2015 and fiscal year 2024.
That estimate was released in April and was followed by an announcement that the U.S. Department of Commerce will investigate Mexico's sugar industry. Around 20 percent of the Mexico sugar industry is owned and operated by the Mexican government.
DETERMINATIONS ON DUMPING
NAFTA explicitly permits the filing of anti-dumping and countervailing-duty cases, and NAFTA countries have filed 114 such cases against each other. Mexico has filed 31 cases against the United States, and the U.S. has filed 30 against Mexico, not counting the pending sugar petitions.
The Commerce Department determines whether dumping is occurring, and if so how much. The International Trade Commission, a quasijudicial agency of the federal government, determines whether the industry is hurt by the imports. If both the department and the commission reach affirmative determinations, Commerce will issue an anti-dumping-duty order to offset the dumping or a countervailing-duty order to offset the subsidy.
The commission made a preliminary ruling in May agreeing with the industry. The Commerce Department is expected to make a preliminary ruling about Mexican subsidies and dumping later this summer. Preliminary duties could be levied then. Final rulings by the commission and the department may not come until 2015.
Statesman business reporter Zach Kyle contributed.