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 is shown in “Total Value II” of Table 5.  Here the price declines using a 3% change in national production of potatoes given in Table 3.  Gross farm income per acre increases from the $416 with beets to $446  without beets and using national and Idaho prices, and is a 6.7 percent increase.  This scenario assumes that all potatoes are for fresh use and will be in a national market.  The increase is because gross revenue per acre for potatoes exceed that of sugar beets.

The third scenario in Table 5 “Total Value III”, which is the most likely scenario, assumes the increase in potatoes and onions are all used in the local market for processing.  This scenario shows a greater impact on Idaho’s agricultural commodities.  Gross farm income per acre decreases from $416 with beets to $390 without beets, for a 6.3 percent decrease.

Table 5.      Estimated acres harvested, total production and total value for selected crops in Idaho without sugarbeets. 

To point out the relationship among crops nationwide, a simplified, conservative example using potatoes is given in Table 6.  Assuming that the sugarbeet industry is lost only in Idaho and the nationwide potato price decline is a result of the estimated 37,667 potato acreage increase in Idaho alone, there would be a significant reduction in cash receipts to potato growers in other states where potatoes are grown.  The losses in the nine top potato producing states range from $175.3 million in Washington to $25.6 million in Colorado.

Table 6.      Estimated reduction in cash receipts to potato growers in states other than Idaho with loss of the Idaho sugarbeet industry. 

If the sugarbeet industry were to fail due to a change in national policy, it is unlikely that such failure would only occur in Idaho.  The estimates in Table 5, therefore, are probably very low compared with the market depression that would result from a nationwide loss of the industry. 

The top five sugarbeet producing states in the U.S. comprise 79% of the total acreage.  These same five states have 50% of the U.S. potato acreage and 72% of the dry bean acreage.  Loss of sugarbeets could result in significant price effects on potatoes in sugarbeet producing states, and a destabilization of all U.S. agriculture for many years.

REFERENCES

Gallian, John J., and Russel V. Withers. 1988.  Sugarbeets and the Idaho Economy.  University of Idaho, Moscow.

IASS, IDA. 2000.  1999 Idaho Agricultural Statistics.  Idaho Agricultural Statistics Service, Boise.

Agricultural Statistics Board, NASS.  2000.  Crop Production 1999 Summary. United States Department of Agriculture.

Neil Meyer, Extension Economist, Department of Agricultural Economics and Rural Sociology, University of Idaho, Cooperative Extension System, PO Box 442334, Moscow, ID  83844-2334, Phone: (208) 885-6335.

Marisa C. Guaderrama, Research Associate, Department of Agricultural Economics and Rural Sociology, University of Idaho, Cooperative Extension System, PO Box 442334, Moscow, ID  83844-2334, Phone: (208) 885-6335.

John J. Gallian, Extension Sugarbeet Specialist and Associate Professor of Plant Pathology; Department of Plant, Soil & Entomological Sciences, University of Idaho, Twin Falls Research and Extension Center, PO Box 1827, Twin Falls, ID  83303-1827, Phone: (208) 736-3633.

______________________________

Presented at the Snake River Sugarbeet Conference on January 11-12, 2001.