Michigan Sugar Helped by Katrina

LANSING - Sep 1/05 - SNS -- Hurricane Katrina has already made an impact on one sector of Michigan agriculture, and more sectors of the state's agriculture industry could soon feel aftereffects, too.

On Tuesday, the U.S. Department of Agriculture (USDA) announced it would increase the amount of domestic sugar allowed to enter the market as a result of market disruption caused by Hurricane Katrina.

The announcement allows the Michigan Sugar Co., a grower-owned cooperative, to clear its storage facilities of more than 50 million pounds of "blocked stock" sugar.

In a news release, USDA said Hurricane Katrina was the latest in a series of events that has "severely tightened the sugar market and threatened the domestic production of sugar-containing foods."

"The sugar market," according to USDA, "has progressively tightened across Fiscal Year 2005 due to unexpected strong demand, reduced cane sugar production caused by previous hurricanes, and expected weather-reduced September 200 5 beet sugar production in the upper Midwest."

The agency said freeing up "blocked stocks" is intended to boost refined sugar quantities immediately available to ameliorate already-tight domestic market conditions, exacerbated by the forced closure of two major sugar refineries by the hurricane. The refineries in the New Orleans area produce about 5,500 tons of sugar daily.

Empathizing with victims of Hurricane Katrina, Jerry Coleman, vice president of marketing for the Saginaw-based Michigan Sugar, said market forces have created a situation where what's bad for one party is a boon for another. "This is good for the state of Michigan, and this is good for our growers," said Coleman of selling the "blocked stock" sugar.

The USDA action allows Michigan Sugar to clear out sugar that has been in storage since its production in the 2003 and 2004 crop years. The sugar will go into making various baked goods and other food products. Coleman said the company won't have any trouble finding buyers, and sales should be completed by Sept. 30.

And while prices paid to sugar growers should increase as the business climate changes from a buyer's market to a seller's market, Michigan sugar growers won't get rich - not when their own fuel costs to harvest this year's crop are "through the roof," Coleman said. Michigan Sugar is also facing record high prices for natural gas to run its processing facilities and sky rocketing freight costs.

"It's not all peaches and cream," he said.

Bob Boehm, manager of the Michigan Farm Bureau Commodity and Marketing Department, said Hurricane Katrina's destruction will likely have a "ripple effect" - good and bad - throughout the agriculture industry.

For instance, he said a large percentage of Midwest grain relies on the Mississippi River to reach the Gulf of Mexico, where the grain is exported for various uses. Disruption to Gulf shipping will likely put pressure on railway s, the next cheapest form of transportation for bulk commodities.

If the weather continues to cooperate, there's a strong likelihood that Michigan corn and soybean growers will harvest crops with average to above-average yields - a situation that could exacerbate transportation and storage concerns. Fortunately, though, unfavorable weather during the planting and growing seasons has dramatically cut back the projected corn crop of Illinois, Ohio and Indiana.

"On the plus side, none of the bordering corn-producing states are expecting bumper crops that normally would tax the handling system," said Boehm.

Historically, corn in Michigan normally averages 120 to 130 bushels an acre, and soybeans, 27 to 40 bushels an acre.

"Overall, the 2005 corn and soybean crops look decent," Boehm said. "In some areas that have had rain plus the heat units necessary for crop maturity, farmers may have record yields." Those good growing areas have been reported in central Michigan, as well as the Saginaw Valley and Thumb.

Should cargo ships opt for the St. Lawrence Seaway instead of the Mississippi route, they'd likely take port in Toledo, Ohio, providing a convenient opportunity to fill ships with Michigan-produced grain.

Of concern, though, is the shipment of agricultural fertilizers and fuel. According to Boehm, many fertilizer manufacturers are based near the Gulf where they have access to natural gas and/or imports of petroleum and petroleum- based products from other countries. Normally in the fall, barges carrying fertilizer travel northward on the Mississippi River to deliver fertilizers that farmers intend to use in the spring.

"Fertilizer and fuel prices and supplies were already a major concern for producers, and Hurricane Katrina only adds to the challenges farmers face in having access to these products, both from a logistical as well as an economical standpoint," said Boehm.