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USDA Sugar and Sweeteners Outlook


18 September 2013

USDA Sugar and Sweeteners Outlook - September 2013USDA Sugar and Sweeteners Outlook - September 2013


USDA Sugar and Sweeteners Outlook

On August 15, 2013, the Farm Service Agency (FSA) of the U.S. Department of Agriculture (USDA) announced that purchase invitations have been extended to solicit bids to the Commodity Credit Corporation (CCC) through the Feedstock Flexibility Program (FFP). FSA stipulated that sugar offered by raw cane or refined beet sugar processors must be already pledged as collateral for a CCC loan with a maturity date of August 31, 2013. On August 30, the CCC announced its purchase of 14,235,000 pounds (7,118 tons) of refined beet sugar from a processor in Nebraska for approximately $3.6 million. CCC then re-sold the sugar to a bioenergy producer for approximately $0.9 million, resulting in a net expenditure to CCC of $2.7 million.

At the end of August, raw cane sugar processors in Louisiana forfeited 140,750,000 pounds (70,375 tons) of sugar to the CCC and a beet processor in North Dakota forfeited 30,000,000 pounds (15,000 tons). The remaining sugar under loan and due for repayment at at the end of September is valued at $281.5 million. Difficult marketing options for certain firms may make additional forfeitures appear likely. The CCC is currently evaluating options to avoid September forfeitures.

On August 30, 2013, the USDA announced the initial fiscal year (FY) 2014 overall sugar marketing allotment (OAQ) at 9,843,000 short tons, raw value (STRV). The OAQ is equal to 85 percent of the estimated human consumption for the crop year of 11,580,000 STRV as forecast in the August 2013 World Agricultural Supply and Demand Estimates (WASDE). In accordance with the 2008 Farm Act, the USDA allocated the FY 2014 beet sugar allotment of 5,349,671 STRV (54.35 percent of the OAQ) among sugarbeet processors and the cane sugar allotment of 4,493,330 STRV (45.65 percent of the OAQ) among sugarcane States and processors within the States.

On September 13, 2013, the Secretary of Agriculture established the 2013/14 raw sugar tariff-rate quota (TRQ) at 1,117,195 MTRV, the minimum amount to which the United States is committed under the World Trade Organization (WTO) Uruguay Round Agreement. The Secretary also established the refined sugar TRQ at 122,000 MTRV. Of this quantity, 101,656 MTRV is reserved for the importation of specialty sugars.

On September 12, 2013, the USDA published in the WASDE its latest sugar supply and use projections for the United States and Mexico for 2012/13 and projections for 2013/14.

The USDA revised 2013/14 sugar production forecasts on the basis of new sugar crop forecasts made by the National Agricultural Statistics Service (NASS) on September 12. The 2013/14 beet sugar forecast was increased 150,000 STRV to 4.950 million STRV, up 3.0 percent from last month. The 2013/14 cane sugar forecast was increased by 100,000 STRV to 3.753 million STRV, due to higher expected sugarcane yields in Louisiana.

The USDA increased overall 2012/13 import estimate by 106,168 STRV to 3.226 million STRV because of increased imports from Mexico and a reduced TRQ shortfall estimate. Although the USDA reduced its projected 2013/14 imports from Mexico by 38,000 STRV, overall 2013/14 imports are projected to increase 172,232 STRV to 3.400 million STRV. The increase is attributable to a 100,000 STRV reduction in expected 2013/14 TRQ shortfall and 110,231 STRV of specialty sugar included in the recently established 2013/14 refined sugar TRQ.

The USDA increased its estimate of 2012/13 sugar deliveries to 11.550 million STRV, an increase of 80,000 STRV relative to last month’s estimate on the basis of pace to date. The forecast of next year’s deliveries was increased by 20,000 STRV to 11.600 million STRV.

The USDA calculates ending stocks residually: 2.215 million STRV for 2012/13 and 2.333 million STRV for 2013/14. Corresponding ending stocks-to-use ratios are 18.45 percent for 2012/13 and 19.46 percent for 2013/14. The ratio for 2013/14 in particular presages a continuing oversupply of sugar in the domestic market.

U.S. Sugar Program: Policy Actions and Results

Feedstock Flexibility Program

As reported last month, on July 29, 2013, the final rule for the establishment of Feedstock Flexibility Program (FFP) to be administered by the Commodity Credit Corporation (CCC) was made effective. Through FFP, the Secretary of Agriculture purchases sugar and then sells it to produce bioenergy as a means to avoid forfeitures  of sugar loan collateral under the Sugar Program. The FFP regulations are required by the Food, Conservation, and Energy Act of 2008 (“2008 Farm Act”) amendments to the Food Security and Rural Investment Act of 2002 (“2002 Farm Act”).

Under the Sugar Program, domestic sugarbeet or sugarcane processors may receive loans from CCC, pledging their sugar production as collateral for any such loan, and then satisfy their loans either by repaying the loan on or before loan maturity or by transferring the title for the collateral to CCC immediately following loan maturity. (This is commonly also referred to as ‘‘sugar loan forfeitures.’’)

The Farm Service Agency (FSA) administers the Sugar Program for CCC. The program is required to be operated, to the maximum extent practicable, at no cost to the Federal Government by avoiding forfeitures to CCC. If domestic sugar market conditions are such that market prices are less than forfeiture levels (determined by FSA), then current law requires CCC to use FFP to purchase sugar and sell this sugar to bioenergy producers to avoid forfeitures. Current law provides USDA authority for these programs through the 2013/14 sugar crop year (which runs from October 1, 2013 to September 30, 2014). Recent indications in the sugar market suggest that forfeitures may occur in crop year 2012/13.

On August 15, 2013, the FSA announced that purchase invitations have been extended to solicit bids to the CCC through the FFP. FSA stipulated that sugar offered by raw cane or refined beet sugar processors must be already pledged as collateral for a CCC loan with a maturity date of August 31, 2013. The invitation solicited responses by raw cane sugar processors in Louisiana of 138,750,000 pounds (69,375 tons) and by beet sugar processors in North Dakota of 45,000,000 pounds (22,500 tons) and in Nebraska of 15,000,000 pounds (7,500 tons).

On August 30, the CCC announced its purchase of 14,235,000 pounds (7,118 tons) of refined beet sugar from the processor in Nebraska for approximately $3.6 million (table 1). CCC then re-sold the sugar to a bioenergy producer for approximately $0.9 million, resulting in a net expenditure to CCC of $2.7 million. To comply with the Federal Government sequestration order, the amount of sugar purchased for the FFP was reduced by 5.1 percent below the amount that was offered (15,000,000 pounds).

Although the ethanol sale is a small proportion of what processors were willing to offer, the USDA cited transport and volume issues as limiting ethanol producer interest. The short time period in which processors had to act may have been an issue as well. The firm that purchased the sugar intends to experiment with the amounts that can be optimally mixed with its grain mash. The firm does not believe that additional infrastructure or  ngredients (yeast or enzymes) will be necessary. The firm expressed its willingness to purchase more, depending on price and the results of its testing.

Sugar Forfeitures

Raw cane sugar processors in Louisiana forfeited 140,750,000 pounds (70,375 tons) of sugar to the CCC, and a beet processor in North Dakota forfeited 30,000,000 pounds (15,000 tons), for loans payable at the end of August. Although the firms were not identified, there seems to be a close correspondence between where the sugar was forfeited and the sites listed for the FFP offers, as well as the amounts forfeited and offered. The CCC expended $34.569 million for the forfeited sugar.

Published by USDA Economic Research Service

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