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Florida Land Deal Could Doom Big Sugar

Posted on: Tuesday, 22 July 2008, 14:52 CDT

A $1.75 billion land purchase deal to save the Florida Everglades could also spell the end of the state’s influential sugar barons. 

Governor Charlie Crist announced the deal last month, saying that Florida would purchase U.S. Sugar Corp, one of the country’s largest privately held agricultural companies, and use a portion of its 187,000 acres in the northern Everglades to restore endangered wildlife habitat.

"This is a dream come true for every Everglades advocate in the state," David Guest, a lawyer with the environmental group Earthjustice told Reuters.  The group has fought for years to keep sugar growers from depositing fertilizer-tainted water into the Everglades.

The land deal has yet to be negotiated, and depends upon cooperation of another major sugar producer.  But if it happens, the plan could end Florida’s often-seedy sugar history.

Florida’s growers have never truly operated in a free market environment, but have instead been long protected, as with other U.S. farmers, from global competition. According to experts, growing cane sugar in Florida would never have been possible if the state government hadn't drained the Everglades from the start.   Furthermore, the cane would have disappeared long ago, they say, had the federal government not employed the Army Corps of Engineers to micromanage the landscape, maintaining optimum conditions for growers, who have profited at the expense of domestic consumers, farmers in developing countries and the environment.

But the new plan would put U.S. Sugar out of business after six years, passing control of nearly half the 400,000 acres of sugar cane over to the state.  About 16,000 acres would then be converted into water storage reservoirs, treatment marches and a flow-way reconnecting Lake Okeechobee to Florida Bay and the Everglades. 

To complete the deal, the state must also negotiate with the Cuban-born Fanjuls, owners of Flo-Sun and whose name is synonymous with Big Sugar. If U.S. Sugar is acquired, the Fanjuls would be the state’s last major sugar growers. 

The new land deal would aim to use as many as 35,000 of their 180,000 acres of sugar cane for the same Everglades restoration effort.

The plan puts the reclusive Alfonso Fanjul, Flo-Sun’s CEO,  back in the spotlight for the first time since his company's takeover in 2001 of Britain’s Tat & Lyle Plc’s North American sugar business, including its Domino brand.

A passing tour of the company's Florida Crystals Corp. operations near the southern edge of Lake Okeechobee provides a clear view of some of what the Fanjuls have at stake.  Sugar-cane fields can be seen as far as the horizon around the Florida Crystals mill and refinery. Additionally, the packing and distribution center shows how they control both a dynamic manufacturing process as well as most of the branded sugar sold in major supermarkets such as Wal-Mart Stores Inc.

Politically savvy, Alfonso Fanjul and his brother Jose are legend in Washington D.C. for their defense of a U.S. program that sugar and confectionary users want disassembled.  The program is an extension of policies put in place at the close of the U.S.-British War of 1812.  The policies essentially protect U.S. sugar cane and sugar beet growers from true market pricing and competition through an arrangement of import quotas and loans dating back to 1981.  Although the program pays no direct subsidies as with other crops, it nevertheless guarantees growers like the Fanjuls an inflated price through restricting supply.

Little of the program has changed under recent laws governing U.S. agriculture for the next five years.   However, U.S. sugar growers have been gradually accepting more liberalized trade after remaining trade restrictions with Mexico ended earlier this year.   And U.S. sugar imports could grow if negotiators finally close a deal in the World Trade Organization's in Doha this summer.

Gaston Cantens, spokesman for Florida Crystals, told Reuters the company sees the end of U.S. Sugar as a potential opportunity to increase its U.S. market share, which could double if it took over the U.S. Sugar Corp mill.   However, Cantens did not rule out a potential acquisition of Florida Crystals as well, should the state government fail to draw the Fanjuls into its Everglade restoration plan. Should they shut down, Big Sugar would be booted out of the Florida Everglades altogether, although the Fanjuls would still have their sugar business in Europe and the Dominican Republic, where they also run Casa de Campo, one of the Caribbean's most luxurious resorts.

A Reuters report quoted a veteran Florida sugar analyst who estimates the state could probably have the Fanjuls' land for around $1.7 billion.

"We'd have to cross that bridge if we got there," Michael Sole, head of Florida Department of Environmental Protection, told Reuters.

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Image Caption: New mechanical harvesting equipment doubles efficiency by cutting two rows instead of one. (U.S. Sugar Corp)

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On the Net:

• U.S. Sugar Corp
• Flo-Sun

Source: redOrbit Staff & Wire Reports

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