TheCropSite.com- news, features, articles and disease information for the crop industry

USDA Sugar and Sweeteners Outlook


17 July 2013

USDA Sugar and Sweeteners Outlook - JulyUSDA Sugar and Sweeteners Outlook - July


USDA Sugar and Sweeteners Outlook

On June 17, 2013, the U.S. Department of Agriculture (USDA) announced actions to manage the domestic sugar surplus. According to the USDA, legislation requires that the USDA act to stabilize the domestic market. The USDA announcement consisted of two parts. First, USDA announced its intention to purchase sugar from domestic sugarcane or sugarbeet processors and subsequently conduct voluntary exchanges for credits under the Refined Sugar Re-export Program. Later the USDA announced that it would also permit private sector exporters and traders to voluntarily exchange Trade Promotion Agreement (TPA) Certificates of Quota Eligibility (CQEs) granted under the U.S.-Colombia TPA and the U.S.-Panama TPA for Commodity Credit Corporation (CCC) stocks. Second, USDA announced that licensed refiners will temporarily have 270 days—rather than 90 days—to make required exports or sugar transfers under the Refined Sugar Re-export Program. This action increases the pool of available re-export credits, facilitating the exchange.

On July 11, 2013, the U.S. Department of Agriculture (USDA) published in the World Agricultural Supply and Demand Estimates (WASDE) its latest sugar supply and use projections for Mexico and the United States for fiscal year (FY) 2013 and projections for FY 2014. Most changes to the U.S. sugar supply and use balance were traderelated. Because of narrow margins between U.S. and world prices, the USDA lowered projections from last month for World Trade Organization (WTO) tariff-rate quota (TRQ) imports by 26,878 short tons, raw value (STRV) in 2012/13 and by 150,000 STRV in 2013/14. The USDA lowered imports from Colombia by 37,972 STRV due to the CQE for CCC sugar exchange. The USDA lowered imports expected in 2013/14. In addition to lower TRQ imports (150,000 STRV), imports from Mexico are projected 275,760 STRV lower and re-export imports are 275,000 STRV lower due to the export credit for CCC sugar exchange.

The USDA made minor changes to sugar delivery projections and 2013/14 production. Ending stocks for 2012/13 are estimated lower by over 12,000 STRV at 2.219 million STRV. The implied stocks-to-use ratio at 18.8 percent is 0.2 percentage points lower than estimated last month. Ending stocks for 2013/14 are projected much lower than last month at 2.013 million STRV, a decrease of 667,560 STRV. The stocks-to-use ratio is 16.8 percent, down from the 22.4 percent projected last month.

The USDA estimates final 2012/13 Mexico sugar production at 6.990 million mt, an increase of 150,000 mt from June, based on an increased harvested area estimate. The USDA did not change its forecast of Mexico 2013/14 sugar production, which remains at 5.887 million mt. The USDA increased its estimate of 2012/13 Mexico sugar consumption by 235,000 mt to 4.435 million mt based on analysis of more reliable data. The forecast for 2013/14 is 4.500 million mt. Exports in 2013/14 are projected at 1.701 million mt. Of this amount, 1.591 million mt is projected to enter the U.S. market. This forecast is 236,000 mt (275,760 STRV) lower than last month.

U.S. Department of Agriculture Sugar Purchase and Exchange Action

On June 17, 2013, the U.S. Department of Agriculture (USDA) announced actions to manage the domestic sugar surplus. Legislation requires that the USDA act to stabilize the domestic market. The goal is to manage the sugar program while minimizing Federal sugar program expenditures.

The 2012/13 marketing year has seen plentiful domestic sugar supplies and weak processors’ prices. Both the 2012/13 U.S. sugarbeet and Louisiana sugarcane crops have been above average due to very good crop yields and growers’ expansion of area for planting and harvest. Another factor was that earlier in the crop year, a cane sugar refiner in Louisiana experienced technical difficulties. The resulting decline in capacity utilization reduced demand for locally produced raw cane sugar, leading to above-average processors’ stocks. High domestic transport costs resulting from “Jones-Act” legislation reduced refiners’ demand for this sugar outside of Louisiana.1 Just as important have been declines in world raw sugar prices due to abundant world supplies and record sugar production in Mexico. The prospect of strong sugar inflows from Mexico has kept the U.S. raw sugar price (Intercontinental Exchange (ICE) no.16 nearby futures) barely above the depressed world raw sugar price (ICE no. 11 nearby futures) and well below domestic price sugar support levels administered by the USDA.

The USDA announcement consisted of two parts. First, USDA announced its intention to purchase sugar from domestic sugarcane or sugar beet processors and subsequently conduct voluntary exchanges for credits under the Refined Sugar Re-export Program. Exchanging sugar for credits reduces imports into the U.S. and is designed to reduce the sugar surplus. It is a less costly option than loan forfeitures. Since not less than 2.5 tons of import credits will be exchanged per 1 ton of sugar, there will be a minimum net reduction of 1.5 tons of sugar in the U.S. market per ton of sugar exchanged, making this a less costly option than forfeitures. USDA anticipates this action could remove around 300,000 tons of sugar from the U.S. market and cost approximately $38 million, subject to sequester, which is one-third the expected cost of forfeitures. The USDA will continue to monitor current market conditions and projections to determine if additional actions are necessary.

Second, USDA announced that licensed refiners have 270 days—rather than 90 days—to make required exports or sugar transfers under the Refined Sugar Re-export Program. This action increases the pool of available re-export credits, facilitating the exchange announced above. These temporary waivers make no permanent change to Reexport Program rules.

In a subsequent announcement on June 26, 2013, the USDA initiated additional action to manage the domestic sugar surplus complementary to the earlier action. The USDA announced that it would permit private sector exporters and traders to voluntarily exchange Trade Promotion Agreement (TPA) Certificates of Quota Eligibility (CQEs) granted under the U.S.-Colombia TPA and the U.S.-Panama TPA for Commodity Credit Corporation stocks. A valid TPA CQE is required for the import of sugar into the United States under a TPA sugar tariff-rate quota, and thus each TPA CQE represents a given quantity of import access. Exchanging sugar for TPA CQE reduces imports into the United States and is designed to reduce the sugar surplus, a less costly option than loan forfeitures. This additional action was expected to remove around 50,000 tons of sugar from the U.S. market and cost approximately $8 million.

The USDA set out dates for sugar processors to offer sugar currently under CCC loan for purchase by the CCC and for the exchange of the sugar for re-export credits and CQEs. On July 10, 2013, the USDA released details of the purchase and exchange.The CCC purchase is for 91,238 metric tons mt (36,291 mt of beet sugar and 54,946 mt of cane sugar) at a total cost of $43.835 million. The quantity of re-export credits surrendered for the sugar (recorded in metric ton units) totaled 264,705 mt, and the CQEs totaled 34,448 mt. The final column showing the ratios of credits/CQEs to the sugar quantity purchased indicate an average credit/CQE to sugar ratio of 3.279.

The USDA estimated the impact of the purchase and exchange action on the 2012/13 and 2013/14 sugar supply and use balances. The action reduced 2012/13 sugar imports expected from Colombia by 34,448 mt or 37,972 short tons, raw value (STRV). The export credit exchange reduces re-export program imports that were expected in 2013/14 from 400,000 STRV to 125,000 STRV. The USDA maintains that its action, although costly, averted an expected $110.7 million in loan forfeiture costs, thus saving an estimated $66.9 million.

Published by USDA Economic Research Service

DOWNLOAD REPORT:- Download this report here

Share This


Related Reports

Reports By Country

Reports By Category

Our Sponsors