subsidy keeps state's sugar from souring

Times Staff Writer

In a dim corner of the Palace Restaurant during a slow noon hour, Neil Fanoe, Clarence (Toots) Vosti and Tondre Alarid railed against the political and economic forces that seem to conspire against their livelihoods.

The three men have a combined total of 120 years of experience as sugar beet farmers and are awaiting word from Washington whether 1985 will be their last harvest for the gnarled root that is processed into refined white sugar.

The topic is heated now because the farm bill--the nation's agricultural blueprint--is undergoing review. One of the issues involved is whether the federal government should continue to establish a minimum price for sugar. The debate over farm legislation continues in the Senate this week and ultimately awaits action by President Reagan. To date, the House of Representatives already has voted by a sizable margin to set raw sugar prices at 18 cents a pound for the next five years.

Far from the action on Capitol Hill, but center stage in the area that virtually introduced sugar beets to California, the three farmers discussed why sugar's fate teeters on a precipice.

Over steaks in a restaurant in the heart of the Salinas Valley, blame for the state's troubled sugar beet production was placed at the feet of the soft-drink companies, the manufacturers of artificial sweeteners, heavily subsidized imported sugar and shortsighted consumer groups.

And there's certainly enough blame to go around when the discussion turns to the decline in the demand for sugar, recently called by Public Voice, a Washington-based consumer advocacy group, the "most important additive in the nation's food supply."

The sugar industry continues to reel from the constant negative publicity it receives as a result of being linked to dental cavities. It has also been painted as the villain in advertisements for artificial sweeteners throughout the past 25 years.

Another blow was delivered when the giant soft-drink companies began sweetening beverages with a mixture of sugar and corn syrup, thus dramatically reducing demand. Finally, sugar beets and cane are raised in many parts of the world, particularly in less-developed countries, and most other nations are willing to accept considerably less money for their crop than their U.S. counterparts. (Currently, the United States imports about one-third of the sugar used in this country.)

Under this umbrella of problems, the growers await word on whether the Senate or President will allow the fixed price of sugar to fall substantially from its current level of about 19 cents a pound. Worse, in the view of these farmers, would be a federal decision to permit the world market to dictate prices. Either of these actions is likely to destroy the domestic sugar industry, the three Salinas-area farmers are convinced.

Furthermore, each predicts that U.S. consumers can expect across-the-board price increases on the incredibly wide array of processed foods that include sugar if the domestic supply evaporates.

"If Congress does not pass a favorable farm bill, then we are out of business," said Vosti, 63, a short, stocky man with 47 years' experience as a beet grower.

A few sugar processors and consumer groups don't buy Vosti's argument. Opponents state that past legislation has benefited only a relative handful of big growers and the multinational corporations that operate the refineries.

A leading critic of sugar price supports is Public Voice, which is active in pressuring Congress to lift the U.S. sugar price guarantee and allow the sweetener's price to float in a free market.

Public Voice representatives acknowledge there will be changes in the domestic industry as a result of free-market pressure, but that only inefficient growers and processors will be forced out of business if price guarantees are eliminated.

"Should the federal government be in the position of supporting inefficient businesses?" asked Ellen Haas, Public Voice executive director. "If a small factory fails, then we don't keep them propped up. So, if the (U.S.) sugar industry is inefficient and (sugar is) a non-essential food (then) . . . why do we continue to provide benefits to such a small number of farmers?"

Haas said that there are only 12,000 growers raising sugar beets or cane in this country. Keeping the federal price guideline at its current level is worth, on the average, about $250,000 to each of them.

Public Voice calculates the subsidy per farmer by estimating that artificially high sugar prices have meant that U.S. consumers paid about $3 billion more for the sweetener than would be necessary under world market conditions.

"I think the current situation is outrageous and costly. It puts the burden on consumers rather than on a small group . . . of comfortable, financially stable farmers," Haas said.

Lowering the price supports would, indeed, have a dramatic and immediate effect on both prices and supplies. Consider the disparity between the world market price of sugar and the domestic version: Whereas the U.S. food industry pays about 19 cents a pound for raw sugar, the rest of the world is purchasing the sweetener for less than 5 cents because of the current global glut.

Reluctant to Admit Price Drop

However, sugar farmers are reluctant to admit food prices would drop if the cost of a major ingredient declined by 75%.

"(If sugar prices are forced down) then a slight difference in the (retail) price of granulated sugar will be the only savings the average consumer will see," said Fanoe, director of a Salinas Valley beet growers association.

Fanoe's family began farming in California during the early 1900s and he has personally grown beets since 1939. He now has about 300 acres devoted to sugar beets, more than any other grower in the Salinas area.

He warns that the food industry will use fluctuating sugar prices as a reason to increase the costs of finished products. There will rarely, if ever, be any adjustment downward. As an example, Fanoe points to 1981, the year when the world market price for sugar hit a high of around 60 cents a pound. Many food companies swiftly hiked prices and have yet to reduce them, he said.

A similar scenario is likely in the event of a bankrupt U.S. sugar industry. The absence of U.S. producers would create a worldwide shortfall of sugar totaling 5 million tons and quickly bring market prices up, Fanoe said.

Nevertheless, some segments of the food industry want the price of sugar lowered and insist the move will bring financial benefits to consumers.

Savannah Foods & Industries Inc. is one of the nation's major sugar processors, and its officials state that price supports should be significantly modified, if not eliminated. Joel C. Williams Jr., a Savannah vice president, rhetorically asks why sugar beet and cane farmers should be spared cuts when all other commodity support programs, such as corn, wheat and soy beans, are in line for less federal assistance.

"This situation is unfair to consumers, refiners and other farm crops. (Sugar farmers) get a return per acre that is four times that of other crops (as a result of price supports)," Williams said. "Supports have encouraged the beet industry to expand. They're encouraged because, no matter how much inefficiency there is, they are all still guaranteed a profit. Well, the present costs of support are not worth paying for only (12,000) farmers."

Touring the fields, this seeming innocuous root appears an unlikely candidate for all the controversy that accompanies the sugar issue.

In the Salinas Valley, the beet fields are mostly out of sight and on the gradual slopes of the coastal range. An always-present afternoon breeze makes the area ideal for produce, and most farmers who dabble in sugar beets also are likely to be heavily involved with growing broccoli, cauliflower, lettuce or wine grapes.

However, the farmers said they believe that if sugar beets become economically unfeasible, then there are few grains, fruits or vegetables that could be used as replacements. Broccoli, which has been a major crop in this area for some time, has been a money loser for two years, Vosti said.

Even though the Salinas Valley has some of the highest beet yields in the nation, the amount of acreage devoted to the crop has dramatically declined in the past two decades. Fanoe said that 2% to 3% of the valley's fertile land, or about 4,500 acres, is now growing beets, down from about 25,000 acres in the 1960s. The high costs of production in the Salinas Valley have caused the beet crop to relocate east to the San Joaquin Valley and south to the Imperial Valley.

Green Tops Closely Cropped

As for the beet harvest, no part of the process faintly resembles the bright, refined white sugar familiar on the dinner table. The leafy, green tops of the beets are closely cropped and removed, leaving only acres of the roots' brown tips sticking up from the dirt.

A mechanical harvester pinches the roots, which vary from 3 to 10 pounds, from the ground and lifts them by conveyor to a truck bin. The bins are taken to a rail yard, where they're shipped in boxcars to Union Sugar Co.'s refinery in Santa Maria.

The cost of transporting the beets more than 150 miles further cuts into the crop's profitability and is another reason for its disappearance from this area. At one time, the Salinas Valley boasted one of the nation's first sugar refineries, located in Spreckles. However, the plant closed four years ago.

Fanoe said he would have joined many of his fellow farmers, who stopped growing sugar beets, had it not been for the introduction of a hybrid seed, which dramatically increased yield.

Improved Seed

"The only reason we can stay in business is because of the improved seed with the higher yield," Fanoe said. "It used to be that 25 tons (of beets) an acre was damn good and now you don't have a good crop unless you get 40 tons or more an acre."

Fanoe estimated that his family operation spends about $1,300 per acre to bring the sugar beet crop from its January planting to its September and October harvest. This year, his land is yielding a surprising 50 tons an acre and he's getting back about $1,700 per acre, a $400-per-acre profit.

Despite the difficulties facing the state's sugar beet growers, Fanoe doesn't expect urban Californians to understand the importance of maintaining a viable U.S. sugar industry.

"I don't think anyone in Los Angeles cares about us. And that's because the average consumer doesn't know that much about sugar beets," Fanoe said.

An official of the California Beet Growers Assn. in Stockton phrased the situation a bit differently.

"Whether people like it or not, sugar is a major part of the U.S. food industry," said Jim Schardt, the association's field representative. "And so, it's important to have a domestic sugar source . . . and not be vulnerable to those who do have sugar in the world."

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