SUGARBEETS AND THE IDAHO ECONOMY 

Neil Meyer, Marisa C. Guaderrama and John J. Gallian

 INTRODUCTION

Sugarbeets have been grown in Idaho since 1903.  It is an important cash crop in all irrigated areas of the Snake River Valley.  In 1998, sugarbeets generated a gross farm income of approximately $200 million, or slightly more than 6% of gross farm receipts in Idaho.  An additional $271 million was generated by processing refined sugar and dried pulp from the beets. 

If the current sugar policy were unilaterally dismantled and other countries which subsidize the production of sugar did not lower their support levels, the sugar beet industry in Idaho would most likely not survive.  This discussion addresses the effect of the loss of the sugarbeet industry on production and prices of other crops both in Idaho and nationwide.

Opponents of the sugar provision of the farm bill argue that the U.S. should not have a sugar program that benefits only a handful of growers at the expense of all consumers.  This argument ignores complex relationships in agriculture.  Loss of the sugar industry would be a severe blow to all farmers in Idaho, all communities where processing occurs and to the State, in general, due to loss of employment, income and a reduction in tax revenue.  In addition, loss of the sugar industry would severely impact growers of other crops in other states. 

SCENARIOS FOR SUGAR SITUATION

The effect of not planting sugar on other areas of Idaho agriculture is difficult to predict.  Here two possible situations are examined.  First, lets look at the situation for each of the commodities that can potentially use current sugar production area.

Wheat:  Wheat in recent years has been heavily supported outside the market.  If the price goes too low, various government programs such as Market Loss Assistance (MLA), Loan Deficiency Payment (LDP) and the Production Flexibility Payment (PFP) support prices.   Also the operating costs to plant and grow these crops are considerably less which is important for producers with limited cash and credit availability.  Price was assumed to not be affected because it is a commodity with a world market.

Barley:  All the factors that apply to wheat also apply to barley.  In addition the potential for additional malt barley production was assumed not to exist.   Barley competes as a feed grain in a world market therefore production increases in Idaho would not effect the price.

Potatoes:  Potatoes require significant operating costs, larger than sugar beets, to produce.  Also production requires specialized equipment.  As a result for this analysis it is assumed that only current potato producers would expand production.  Many would be limited in expansion by cash flow, rotations and equipment limitations.  The demand price elasticity is assumed to be 0.2, which means for each 1% increase in supply, the price declines 5%.  Two scenarios are described.  First with Idaho being part of a national market the price change resulting from supply increases affects all potatoes.  In this case, the proportional increase supply would be smaller and the effect on overall price would be less.  In the second case of a local Idaho market the proportional change in supply would be greater therefore the price depressing effects of increased supply would also be greater.

Dry Beans:  Dry beans are part of a world supply.  The increase in beans would not be large enough to affect world prices.  Therefore prices of dry beans were assumed to be unchanged with the increased production. 

Corn Grain:  Corn grain is a feed grain and part of a world supply of feedstock.  The increases resulting from more acres in Idaho would not affect world prices.  Therefore prices are unchanged for this analysis.

Corn Silage:  Corn silage must be grown near where it will be used because of bulkiness in transport.  It is always a local market.  Loss of sugar beets would permit more land to be available for silage production.  The question is "are their enough users in the area who are willing to expand use?"  For this analysis we assumed there are a limited number and the price paid would be unchanged.

  Onions:  Onions are a small market, which is strongly influenced by changes in supply or demand.  We assumed a price decrease of $2.25/cwt for the increased acreage.  The assumption was made after discussion with the Growers Association staff.

Alfalfa Hay:  Recent growth in the dairy industry has opened the demand for high quality local hay.  We assumed that local demand would purchase local hay production at current prices. 

In the following table, eight crops are considered that comprise nearly two-thirds of the 3,057,436 acres of irrigated crop acres in Idaho.  All are commonly grown in the rotation with sugarbeets.  These are wheat, barley, potatoes, dry beans, corn grain, corn silage, and onions.  Table 1 identifies the total Idaho acreage, production and value in 1998.  Sugarbeets were harvested from about 203,000 acres.  The average gross income per acre from all of these crops was $416.

 Table 1. Acres harvested, total production and total value for selected crops in Idaho, 1998. 

The estimated increase in acres of eight other crops if sugarbeets were not grown are shown in Table 2.  The acreage previously in beets would be distributed among other crops.  Because beets are grown on the most productive land, essentially all of the land taken from beets would be planted to crops such as potatoes, beans, grain, forages and onions.  The differential effects, assuming national or local/regional markets, are shown in Table 3.

Table 2.      Estimated acreage increase of selected crops without sugarbeets based on 1998 harvested acres reported by the Idaho Statistics Service, Boise. 

The estimated change in price received for these selected crops based on the acreage increase are given in Table 4.  Because of increased production, price declines are anticipated for potatoes and onions based on previously published price elasticity of demand.  Wheat and barley prices were not changed because they are more affected by the national markets and acreage changes in Idaho would exert only a small influence.

Table 3.  Changes in potato and onion production due to sugarbeet production changes. 

Table 4.      Estimated change in prices received for selected crops due to acreage increase from loss of sugarbeets.

Table 5 again gives the estimated acres of these crops without sugarbeets, plus the estimated total production and three scenarios for estimated total value.  “Total Value I” shows gross return to various crops assuming no price declines, 1998 average prices and average per acre production.  Note that average gross returns per acre change from $416 (Table 1) with sugarbeets, to $472 (Table 5) without. 

The second scenario