Declining sugar
prices concern
isle firms
A grower on Kauai says
By Russ Lynch
it could shut down if the
situation doesn't improve
Star-BulletinHawaii sugar growers are worried about falling prices for raw sugar and one company, Kauai's Gay & Robinson Inc., said today it could go out of business if prices don't improve.
"If prices do not strengthen, G&R is looking at a $4-$5 million reduction in revenues for the year 2000, putting it at risk for its survival," Alan Kennett, president and general manager, said in a written statement.
"This year we're forecasting a very modest profit of about $100,000," and his company can't afford to have its results get any lower, he elaborated in an interview this morning.
Two things have affected prices, he said. First, the U.S. Agriculture Department didn't get around to announcing its annual sugar import quota until this week, while the last quota ran out at the end of September. That disrupted the supply of sugar and the resulting confusion led to lower prices.
Meanwhile, Kennett said, prices also were being pushed lower as U.S. growers of other crops, seeing low prices for their own commodities, turned to sugar instead. A record beet and cane sugar crop is expected this coming year, and that will hold prices down, growers fear.
The import quota was reduced by 2.6 percent, to 1,135,000 metric tons for the year that started Oct. 1 from 1,165,000 in the previous year. Although a reduction in imports is supposed to prop up domestic prices, growers worry that there will still be too much sugar on the market.
Kennett said Gay & Robinson produces about 50,000 tons of raw sugar a year worth about $367 a ton, at today's price of 22 cents a pound.
The company doesn't get all of the 22 cents, since 3.65 cents comes off to cover freight and a discount to California & Hawaiian Sugar Co., which processes all the Hawaii sugar at its Crockett, Calif., refinery. That leaves the company with 18.35 cents.
The way prices are now, Kennett said, showing 17.6 cents a pound for the sugar to be sold in the 1999-2000 year, Gay & Robinson will end up with less than 14 cents a pound, or about $272 a ton.
That's where the drop of up to $5 million in revenues comes from.
Top officials of Alexander & Baldwin Inc., Hawaii's biggest sugar grower through its 37,000-acre Hawaiian Commercial & Sugar Co. on Maui, were on the mainland seeing securities analysts and were not available for comment. But a spokeswoman at the company's Honolulu headquarters said A&B is also concerned about prices.
Like other Hawaii growers, A&B sells its sugar to C&H, but it is in a different position because A&B owns 40 percent of the refining and marketing company.
In the past, refiners have generally welcomed low prices for raw sugar, but in this case the market disruption is affecting them more than the price.
C&H got stuck when the end of September came and went with no import quota announcement. "In our case, 60 percent of our sugar is bought as quota sugar, so effective Oct. 1, we couldn't buy any sugar," David Koncelik, C&H chief executive officer, told Bloomberg News earlier this week.
C&H, which for many years refined only Hawaii sugar, has had to turn more to foreign sources as Hawaii plantations cut back or closed.
Kennett said Gay & Robinson wants to be in business long-term and is planning to build its own refinery when C&H's current purchase contract runs out in 2003. The price outlook makes that future uncertain, he said.
