Beet Sugar

SIC 2063

Companies in this industry

Industry report:

This entry includes establishments primarily engaged in manufacturing sugar from sugar beets.

Sugar beets are one of the world's main sugar sources and an important source of sugar for the United States where more than 1.3 million acres of sugar beets are grown in 12 states. Reduced raw cane sugar imports hurt U.S. refiners in the 1980s, and the sugar industry turned to sugar beets to make up the difference. The United States processes more sugar from domestically grown sugar beets (55 percent) than from domestically grown sugar cane (45 percent). According to the U.S. Department of Agriculture's (USDA) Agricultural National Statistical Service in a September 2010 report, beet sugar production for fiscal year 2010-2011 was over 33 million tons, up nearly 12 percent from the previous year.

Background

The beet sugar industry traces its origins to ancient Babylon, Egypt, and Greece, where sugar beets were grown. In 1744, a German chemist discovered that sugar from sugar beets was the same as sugar from sugar cane. About 50 years later, another German chemist developed a method for extracting sugar from the beets. Sugar mills soon were built in Europe and Russia, and by 1838, sugar beets were being processed in the United States. The first successful commercial beet sugar mill was built in Alvarado, California, by U.S. businessman E.H. Dyer.

Unlike sugarcane, which is processed into raw sugar (see SIC 2061: Cane Sugar, except Refining) to be marketed to cane refiners (see SIC 2062: Cane Sugar Refining), beets are processed directly into refined sugar. Beet sugar is produced from the root of the sugar beet plant, which is shipped to factories to be washed and cut into thin slices called cossettes. The cossettes are soaked in diffusers to remove the sugar. The resulting pulp is dried and mixed with molasses to make cattle feed. The sugar-water mixture goes through a series of purification processes in which lime, carbon dioxide, and filtration remove impurities. Finally, the liquid is reheated until evaporation leaves a crystallized sugar product. Sugar products manufactured from sugar beets include dried beet pulp, beet sugar, molasses, granulated sugar, liquid sugar, invert sugar, powdered sugar, and syrup.
The U.S. government has provided price supports to the U.S. sugar industry for almost 200 years. Many consumer groups and commentators are critical of the U.S. program that protects the sugar industry. According to some analysts, these price supports for sugar keep U.S. sugar prices at double or triple the rate of world prices and prevent the importation of less expensive sugar. When market conditions deteriorated in 1993 and 1994 for the second time in history, industry leaders asked the USDA to help stimulate prices by imposing an allotment system to balance beet sugar supply and demand.

Eventually, beet farmers themselves upset the balance "by bringing refined sugar directly to market through huge 'beet factories' that are often owned by nonprofit cooperatives. The government spent $468 million last year trying to keep prices at a target of 22.5 cents a pound, but the flood of beet sugar has driven prices as low as 21 cents," according to Forbes in May 2001. As a result, cane sugar companies like Imperial Sugar, which are not allowed to import less expensive raw sugar from foreign companies and must pay the government-supported price of 22.5 cents per pound, struggled to make a profit. Beet sugar refiners themselves also faced unprecedented competition as beet sugar continued to flood the market.

California's sugar beet industry best exemplifies the results of the problems of the 1990s and early 2000s. Plagued by drought, disease, and other problems, the state's once vibrant sugar beet industry essentially never recovered. Crop yields in 1993 were down significantly. Between 1990 and 1996, the land devoted to sugar beet cultivation was cut about 50 percent to around 90,000 acres. Two of California's eight sugar beet processing plants closed between the 1993 and 1994 harvests. In the 1994 season, growers for Spreckels Sugar Co., which had been founded in 1898 and was once the state's leading beet refiner, began reporting yields more than 20 percent lower than the previous year. Coupled with rock bottom prices and an over-abundance of beets in other states for the second consecutive year, lower production proved to be a disaster for Spreckels, which did not survive. Spreckels's assets and debts were purchased in 1996 by Imperial Holly. By 2002, California was planting only 50,000 acres of sugar beets.

Many cane refiners also invested in sugar beet processing firms in the 1980s as the sugar beet market share (including imports) climbed from 30 percent in the 1970s to 40 percent in 1988. However, the sugar beet market felt the effects of plummeting per capita beet and sugar consumption beginning in 1970, when it stood at roughly 102 pounds. By 1980, per capita consumption stood at about 60 pounds, and by 2002, it had fallen to 45 pounds. The corn sweetener market has claimed much of sugar's market share. The value of refined beet sugar shipments declined from $2.61 billion in 1997 to $2.49 billion in 2001.

Falling domestic consumption cost the U.S. sugar industry approximately $250 billion in 2001 alone. Between 1999 and 2003, domestic sugar sales fell from 10.11 million short tons to 9.67 million short tons, causing production to fall as well. Sugar beet acres planted fell from 1.42 million in 2001 to 1.36 million in 2002, while acres harvested declined from 1.36 million to 1.33 million over the same period.

According to the U.S. Census Bureau, industry shipments in 2003 were valued at $2.82 billion, dipping slightly to $2.73 billion in 2005. There were a total of 6,788 employees, 5,903 of whom were production workers. Between 2003 and 2005, sugar beet production fell in every region from a total output of 30.7 million tons in 2003 to 27.5 million tons in 2005. Sugar beet output has varied from a low of 18.6 short tons per acre in 1993 to a high of 26.1 tons per acre in 2007. The wholesale beet sugar price also varied from an average of 20.80 cents a pound in 2000 to an average of 33.10 cents a pound in 2006.

Sugar beet acres planted fell from 1.36 million in 2006 to 1.26 million in 2007, resulting in acres harvested declining from 1.3 million to 1.24 million. Of the 11 states growing sugar beets, the majority were grown in Minnesota and North Dakota where 738 million acres were harvested. Early projections called for 1.08 million acres designated specifically for sugar beet planting in 2008, the lowest in more than a decade.

Current Conditions

In 2008-2009, 1.091 million acres of sugar beets were planted in the United States, of which 1.005 million acres were harvested. Yield was 26.8 tons per acre, and production totaled 27 million tons. In 2009-2010, the beet sugar industry planted 1.173 million acres and harvested 1.153 million acres. Yield was 25.5 tons per acre, and total production was 29.5 million tons. Estimates projected the 2010-2011 crop to plant 1.182 million acres and harvest 1.133 million acres. USDA's National Agricultural Statistical Service estimated the yield at a record 28.9 ton per acre and total production at 33.06 million tons.

Minnesota led the nation as the producer of sugarbeets, producing approximately 37 percent of the total crop, followed by Idaho, North Dakota, Michigan, and California. Beet sugar processing is dominated by farmer-owned cooperatives. In the late 2000s, nearly nine out of ten beet sugar processing facilities were cooperatives.

The 2008 Farm Bill developed a program that would use the nation's excess sugar supply to produce ethanol. Researchers at Iowa State University found that sugar beets are a viable biofuel. However, according to a 2009 study by the Food and Ag Policy Research Institute at the University of Missouri, sugar will likely not be diverted toward ethanol production unless sugar is in oversupply or prices are unusually weak.

On August 13, 2010, a federal judge in San Francisco revoked USDA's previous approval of the unregulated production of genetically modified sugar beets. The court overturned the approval on the basis that the USDA had not adequately studied the environmental impact of the genetically modified beets. In addition, the court expressed concern regarding the ability of growers of nonmodified beets to compete with growers of genetically engineered types. The seed in question is genetically modified to resist Monsanto's Roundup glyphosate herbicide. Plaintiffs--environmental groups the Center for Food Safety and Earthjustice--argued that the resistance could spread to other crops, causing the increased use of herbicides.

The USDA's Animal and Plant Health Inspection Service (APHIS) deregulated use of the sugar beet seed in the mid-2000s, which by 2010 made up 95 percent of the U.S. crop. Although the 2010 crop already in the ground was not affected by the ruling, farmers were concerned about where they would buy seed for the following season. Vic Jaro, CEO of the sugar cooperative, Amalgamated Sugar Co. LLC, told the Idaho Business Review in August 2010, "At the end of the day, what we are hoping is that APHIS will determine what measures, what standards, will be in place that will allow the planting of a Roundup-ready sugar beet crop for 2011 and beyond during the period they are completing an environmental-impact study." Although the APHIS was likely to eventually approve the genetically modified sugar beets, the process to conduct an environmental impact study was expected to take up to two years to complete.

Industry Leaders

Leading beet sugar producing companies were American Crystal Sugar Company, Amalgamated Sugar, Imperial Sugar, Western Sugar Company, and Holly Sugar. American Crystal, which was formed in 1899 and converted to a cooperative in 1973, was owned by more than 3,000 growers in North Dakota and Minnesota. American Crystal, headquartered in Moorhead, Minnesota, reported sales of $1.2 billion in 2009.

Amalgamated Sugar, headquartered in Boise, Idaho, was first formed in 1915 and became a cooperative in 1997. The company posted 2009 sales of $656.7 million. Imperial Sugar, headquartered in Sugar Land, Texas, was the largest refined sugar supplier in the United States. Imperial Sugar filed for Chapter 11 bankruptcy protection in 2001 while it paid down its mounting debt by divesting certain assets. Sales in 2009 were $522.6 million.

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