KAUMAKANI — Falling sugar prices have led to multi-million-dollar losses on crops shipped and still in the ground at both of the island’s sugar plantations. The price of raw sugar closed Monday at 17.52 cents per pound, “which is just
KAUMAKANI — Falling sugar prices have led to multi-million-dollar losses on crops shipped and still in the ground at both of the island’s sugar plantations.
The price of raw sugar closed Monday at 17.52 cents per pound, “which is just disastrous for us,” said Alan Kennett, manager of Gay & Robinson Inc.
Prices for raw sugar had been hovering around 22 cents per pound, a break-even point for plantations like G&R, he said.
“We never anticipated prices being as low as this. Right now, it’s very discouraging.” G&R’s cost to produce a pound of sugar is between 18 and 18.5 cents. Handling and freight charges are about 3.65 cents a pound. At the current selling price of 17.52 cents a pound, G&R is making about 13.87 cents a pound, well below the 22 cent break even amount.
A recent shipment of 5,000 tons of sugar from G&R will yield the company $400,000 less than anticipated as a result of the low sugar prices.
“So it’s really, really troubling,” Kennett said.
Kennett is concerned, but he said the dive in sugar prices doesn’t immediately signal the end of sugar growing on the island.
“I don’t think we’re at that point yet,” Kennett said.
Amfac President Gary Grottke could not be reached for comment.
G&R’s 1999 crop was 50,342 tons of sugar, at 14.13 tons per acre—the best yield in the industry.
“So, we’re the highest-yielding sugar company in the world,” Kennett said, “and we’re struggling to make it.” Each cent-per-pound drop in the price means a loss of $1 million for G&R, based on its anticipated crop. That means at the current selling price, the losses in revenues for G&R for the year 2000 could be in the neighborhood of $4.5 million.
Kennett said prices for the near-term don’t show signs of improving. Forecasts show the best price being just under 20 cents a pound for the next 15 months.
Kennett has just returned from Washington, D.C., where he met with U.S. Sens. Dan Inouye and Dan Akaka, and U.S. Reps. Neil Abercrombie and Patsy Mink.
Inouye has drafted a letter to U.S. Department of Agriculture Secretary Dan Glickman requesting Glickman do everything in his power to help boost the price of raw sugar.
Other sugar-growing states are making similar requests of their delegations, Kennett noted.
“We believe the price will come back, but to what extent we don’t know,” he said.
A federal loan program would yield G&R more money per pound than current market prices. Under such a program, the plantation could take a loan out on, say, 2,500 tons of sugar.
“The government would pay me 16.77 cents (per pound),” versus around 13.87 cents per pound for current market prices after freight and handling expenses have been deducted, he said.
But it’s too late to take advantage of the program this year because the crop has already been shipped. “There’s nothing I can do about it. I’m just having to eat that big loss,” Kennett said.
“I’m in trouble. I may as well use the loan program next year where I can. And that’s not good. I need a higher price than that,” he said.
“Right now, it’s very discouraging when we look at these prices. Very discouraging.”
