Joint venture refinery bringing hope of good times to Louisiana’s sugar industry

Refinery bringing hope of good times to La. sugar

NEW ORLEANS — After years of fighting storms and flat prices, Louisiana sugar cane growers at the heart of a $2 billion industry are hoping for better financial times as farmers and the food industry unite to get the product from the fields to the consumer in a direct line.

Construction is under way on a $190 million sugar refinery near Gramercy, northwest of New Orleans, that will be able to produce 1 million tons of sugar annually. In a joint venture with two food giants — Cargill Inc. and the Imperial Sugar Co. — growers say the refinery, expected to begin processing in 2011, will give them a steady market for Louisiana cane that will support higher prices.

It’s the first time state growers have been involved in such a field-to-consumer venture. For Cargill, it will provided the company’s first entry into the processed sugar market.

“Sugar is a critical ingredient to the customers we already serve. It enables us to work more effectively with a broader base of customers on ingredient innovations,” Cargill spokeswoman Nicole Reichert said.

Also a partner in the refinery is Sugar Growers and Refiners Inc., a marketing cooperative consisting of 700 Louisiana cane growers and eight cane mills.

“It gives Cargill part of the sugar industry, it gives Imperial a good source of sugar,” said Jessie Breaux, a lifelong cane grower in St. Mary Parish and farm owner for 27 years. “It’s produced in America and its good quality. It’s a great thing for all the growers in the state.”

Under the plan, Minneapolis-based Cargill will be the exclusive marketer of the refinery’s industrial sugar used in food processing. Sugar Land, Texas-based Imperial Sugar, will market the refinery’s bulk sugar. The deal gives both companies a steady supply stream.

Consumers will benefit from the deal because it “represents a secured source of sugar” that Cargill will sell to food processors, as well as retail, on-the-shelf products Imperial is known for, Reichert said.

Cargill has another joint venture with CHS, a Minnesota-based company owned by farmers, ranchers and cooperatives, to provide grain for flour. The venture — Horizon Milling LLC — has 20 mills across the United States.

Growing and harvesting cane is a $750 million annual industry employing 12,000 in Louisiana that turns into about $2 billion in overall economic activity, said Jim Simon, head of the Thibodaux, La.-based American Sugar Cane League.

The refinery is being built just as the Louisiana sugar industry seems to be fighting back from a tough decade marred by major storms — and 20 years of mostly flat cane prices.

Louisiana growers annually produce about 11 million tons of cane that are refined into about 1.4 million tons of sugar. The mill, with its 1 million ton annual capacity, will be able to handle about two-thirds of the crop, giving many growers a strong, regular demand for their product, said Lonnie Champagne, head of the growers-refiners group.

Champagne said the joint venture provides “hope for the next generation” of sugar growers, a profession typically passed through families. Having two committed buyers will “give us the chance to capture some of the value-added price of our product.”

“Something needed to change,” he said. “We’ve been consolidating for 200 years. The technology has been able to keep us in business. But we’re to the point where we need to get higher prices.”

Warren Harang, the owner of a 3,000-acre farm near Donaldsonville and a 40-year grower, said that although prices have been in the same narrow range for years, costs have skyrocketed, including fuel, equipment and labor.

“Whenever you can market your product a little higher up the food chain ladder, it’s a better situation,” Harang said.

Although record rainfall fell in cane country between October and December, the overall 2009 crop was good and prices were about 15 percent higher than recent years, Simon said. Still, the immediate additional profit was eaten up by an average harvest season of 120 days, instead of the usual 100 days as growers dealt with heavy rain and muddy fields, he said.

Simon said Louisiana cane growers planted about 400,000 acres last year, up about 12,000 from the previous year.

“The first decade of the new millennium has been difficult on Louisiana sugar farmers. Hopefully, we’re moving out into better times,” Simon said.

Breaux said the refining project will help — but he would welcome relief from fall rains, tropical storms and hurricanes.

“I’m finished with 100-year events,” Breaux said. “I’ve had all I can handle.”