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USDA Sugar and Sweeteners Outlook


14 February 2014

USDA Sugar and Sweeteners Outlook - 14 February 2014USDA Sugar and Sweeteners Outlook - 14 February 2014


USDA Sugar and Sweeteners Outlook

On February 13, 2014, the U.S. Department of Agriculture (USDA) released its long-run projections for the U.S. farm sector for the next 10 years. Included in these projections are those for the U.S. sugar sector through 2023/24. The two primary influences on the U.S. sugar market in the projections are large supplies of sugar in Mexico available for export to the United States and continued low world sugar prices through 2019/20. These two influences increase the likelihood of USDA purchases of sugar for resale to ethanol producers through 2019/20.

Mexico’s harvested area for sugarcane grew in recent years in response to high returns and is expected to top out at 844,000 hectares in 2014/15. After that, declines in Mexican sugarcane returns lead to lower area. Nonetheless, sugar production averages 6.317 million tons, raw value (MTRV) in 2014/15-2023/24, about 17 percent higher than the average for 2007/08-2011/12. Mexico’s consumption of high fructose corn syrup (HFCS) is expected to resume growth after a lull in 2012/13 due to unusually high corn prices. By 2023/24, annual HFCS consumption is projected at 2.735 million metric tons, dry weight—about 85 percent more than forecast for 2013/14—and will comprise about 41 percent of combined sugar and HFCS consumption in Mexico.

The combination of Mexico’s improved sugar production prospects and declining sugar consumption make more Mexican sugar available for export. Annual exports to the U.S. market are expected to average 1.768 million MTRV, or 1.949 million short tons, raw value (STRV). This projection contrasts with the estimated average for the first 6 years of the full implementation of the sweetener provisions of the North American Free Trade Agreement Area (NAFTA) period of 1.364 million STRV. Over the long term, imports from Mexico are expected to constitute between 10.6 and 16.9 percent of annual U.S. sugar supply, or, on average, 12.8 percent. The corresponding average for the first 6 years after NAFTA implementation is estimated at 10.3 percent.

World sugar prices are projected to average 17.74 cents per pound between 2014/15 and 2019/20, levels that would not provide support for the U.S. sugar sector. This lack of support increases the likelihood of sugar purchases by the Commodity Credit Corporation (CCC) of USDA for resale to ethanol producers, especially in 2014/15, 2017/18, and 2018/19. These quantities sum to 568,000 STRV. Beyond 2019/20, world sugar prices are projected to be higher, and the likelihood of USDA having to purchase sugar for resale to ethanol producers is diminished.

On February 10, 2014, the USDA published in the World Agricultural Supply and Demand Estimates (WASDE) its latest sugar supply and use projections for the United States and Mexico for fiscal year 2012/13 and projections for 2013/14. The USDA reduced its projection of 2013/14 cane sugar production by 53,000 STRV based on revised production forecasts made by processors in Florida, Texas, and Hawaii. Along with a downward revision of its estimate of beginning sugar stocks by 3,500 STRV, 2024/14 ending stocks are projected at 1.825 million STRV, down 56,500 STRV from last month. The implied ending stocks-to-use ratio is projected at 14.9 percent.

The USDA reduced its projection of 2013/14 Mexico sugar production by 345,000 Mt to 6.350 million Mt. Harvest data through the beginning of February imply sharply reduced prospects for sucrose recovery and diminished prospects for sugarcane yields. Based on pace to date, the USDA also reduced its projection of sugar consumption by 100,000 Mt to 4.306 million Mt. These changes combine to imply reduced 2013/14 sugar exports of 2.399 million Mt, down from 2.622 million Mt projected last month. Because of increased margins between U.S. and world raw sugar prices, the USDA expects no change in Mexico sugar exports to the United States, implying that Mexico will instead reduce its exports to other export destinations.

Long-Term Projection of U.S. and Mexico Sugar Supply and Use through 2024/25

The U.S. Department of Agriculture (USDA) annually prepares and publishes long-run projections for the U.S. farm sector for the next 10 years. The report is released in February, immediately prior to USDA’s annual Outlook Conference. Projections cover agricultural commodities, agricultural trade, and aggregate indicators of the farm sector, such as farm income and food prices. Projection results are used in the preparation of the President’s Annual Budget.

The Sugar and Sweetener Outlook of USDA’s Economic Research Service (ERS) prepares supply and use projections for U.S. sugar.1 These projections are reviewed and cleared by USDA’s Interagency Commodity Estimates Committee (ICEC) for sugar. Projections are based on the assumption of extension of current policies through the entire projections period. The Sugar and Sweetener Outlook analytic framework works out the implications for supply and use from the expected states of the physical and economic environment in the policy setting. Although the distinction is subtle, supply and use projections are not forecasts but are base points against which to analyze the effect of policy changes or other exogenous influences on the sugar and sweetener sector.

The most important factors affecting U.S. sugar supply and use over the long-term projections period are the U.S. sugar program, the availability of sugar imports from Mexico, and the level of sugar prices in the world market. The following sections develop this background, and then the framework for analysis is described and results and implications are discussed.

Factors Influencing the Baseline: U.S Sugar Policy

The U.S. sugar program relies on supply control mechanisms of domestic marketing allotments, price support instruments, and import restrictions to keep U.S. sugar prices above world levels. The main features are shown in table 1. The 2008 Farm Act made marketing allotments permanent at a level to be not less than 85 percent of estimated sugar deliveries for human consumption. Allotments are split between refined beet sugar at 54.35 percent and raw cane sugar at 45.65 percent. Aggregate production in excess of allotment quantities cannot be marketed for domestic human consumption or forfeited for repayment of loans (described below) received from Commodity Credit Corporation (CCC).

Under USDA’s non-recourse loan rate program, sugarbeet and sugarcane processors have the option of repaying 9- month CCC-originated loans by forfeiting the sugar pledged to the CCC in lieu of cash. Forfeiture repayment is likely when the market price of sugar is below the sum of the loan rate, interest expense, and transport adjustments (the “minimum price-to-avoid forfeiture”–calculated at 20.94 cents/pound (lb) for raw cane sugar in 2012/13). The raw sugar loan rate is 18.75 cents/lb. The refined beet sugar loan rate is specified to equal 128.5 percent of the raw cane sugar loan rate. In order to discourage forfeitures, the 2008 Act introduced the Feedstock Flexibility Program (FFP), which requires the CCC to divert sugar from food use to ethanol producers at the beginning of September, if needed, to keep sugar prices above levels at which sugar processors might otherwise forfeit sugar under loan to the CCC. Operationally, the CCC purchases sugar at prices offered by processors and resells the sugar to ethanol producers at prices they offer to pay. The difference between the purchase expenditures and sales receipts is a CCC cost to the U.S. Government budget.

The 2008 Farm Act states that the raw and refined sugar tariff-rate quotas (TRQs) be established at the beginning of the marketing year at the minimum levels required to comply with international trade agreements approved by the U.S. Congress, with an exception for imported specialty sugar. During the first half of the fiscal year (October 1 – March 31), the 2008 Farm Act states that the sugar TRQ must be increased above the minimum levels by the Secretary of Agriculture if a sugar shortage occurs due to an emergency situation such as a natural disaster, war, or other catastrophic event. The 2008 Farm Act states that after April 1, the sugar TRQ can be increased by the Secretary to provide an adequate supply, but only to a level that does not threaten sugar forfeitures to the CCC.

Factors Influencing Baseline: Sugar Imports from Mexico

The sugar provisions of the North American Free Trade Agreement (NAFTA) removed all duties and quantitative restrictions on sweetener trade between Mexico and the United States as of January 1, 2008. For the fiscal years 2007/08-2012/13, annual sugar imports from Mexico to the United States averaged about 1.301 million short tons, raw value (STRV). The share of Mexican sugar imports of domestic consumption has grown from 6.7 percent in 2007/08 to 18.5 percent in 2012/13. For 2013/14, imports from Mexico are projected at 1.745 million STRV, about 15.2 percent of projected U.S. sugar consumption.

The amount of sugar available for export to the United States is influenced by sugar production and the quantity of high fructose corn syrup (HFCS) consumed in Mexico.

After a period of high returns, Mexico sugarcane area expanded to a record 780,253 hectares in 2012/13 (fig. 1). Combined with good crop yields, 2012/13 production was 6.975 million metric tons (mt), 36.5 percent above the average for preceding 5-year period. The Comite Nacional Para El Desarrollo Sustentable de la Caña de Azucar (Conadesuca) in Mexico projects 2013/14 area at 819,000 hectares, although production is forecast lower at 6.695 million mt because of lower crop yields.

As seen in figure 1, reductions in area harvested have occurred in only 4 of the 14 years shown and have been small relative to years when expansion has occurred. Even when crop returns are low or negative, reductions in total area are not large because sugarcane is a perennial crop that spans at least 5 years in most growing areas. Withdrawal of area is gradual at best, whereas increases can occur quickly when profit expectations are high. The implication is that with the recent area growth, Mexico sugar production is likely to average above the levels of the first 5 years of the NAFTA period, at least for the first several years of the baseline projections period.

HFCS consumption has grown from 653,000 mt, dry weight, in 2007/08 to 1.721 million mt in 2011/12. Consumption growth stalled in 2012/13 at 1.567 million mt because of lower sugar prices and higher HFCS prices due to suppliers’ higher net corn costs in production. Although HFCS consumption is forecast at only 1.490 million mt in 2013/14, growth is likely to return quickly to its upward trend now that corn prices have descended to much lower levels than last year.

Factors Influencing the Baseline: World Sugar Prices

Before 2009/10, U.S. and world raw sugar prices were largely unrelated, but since then, movements in both price series have been closely allied.2 Figure 2 shows the two series plus the U.S. raw sugar loan-rate level. Before the start of the NAFTA period (that is, prior to January 1, 2008), the correlation between U.S. and world raw sugar prices was .0516. Over the NAFTA period through the end of 2013, the correlation has risen to 0.862. More sophisticated statistical analysis shows that movements in the U.S. raw sugar price have been strongly influenced by movements in world prices in the NAFTA period.

Before the NAFTA period, the expectations regarding the ending stocks-to-use ratio had a significant effect on the third-quarter average U.S. raw sugar price. During the NAFTA period, however, expectations regarding ending stocks-to-use have more strongly influenced the margin between U.S. and world prices. All this means that U.S. raw sugar prices move in the same direction as world prices, but the gap or margin between the prices is strongly influenced by the U.S. supply-use balance, as measured by the ending stocks-to-use ratio.

Figure 2 also shows that over much of the NAFTA period, world prices have been above the U.S. raw sugar loan rate, making the possibility of loan forfeitures very unlikely. Starting in January 2013, world prices fell below the loan rate and remained below for the entire year. Record-high 2012/13 U.S. sugarbeet production and record-high sugar imports from Mexico kept the margin between U.S. and world prices at right around 3 cents/lb, meaning that the resulting domestic raw sugar price was below the minimum level to avoid loan forfeitures. These loan forfeitures occurred in spite of CCC sugar purchases for resales to ethanol producers (FFP) and livestock feed producers and for exchanges with refiners for re-export program credits and certificates-for-quota entry (CQEs).

Low world prices, at or below the loan rate level, have become a necessary condition for loan forfeitures to take place. For baseline analysis, a forecast of these world prices over the projection period is necessary. ERS’s Sugar and Sweetener Outlook has developed a methodology for forecasting these prices. The approach uses data from the Foreign Agricultural Service (FAS) sugar Production, Supply, and Distribution (PSD) database to replicate supplyuse dynamics in major sugar producing and trading countries and regional aggregates. The approach emphasizes sugar-ethanol trade-offs in Brazil, the world’s largest sugarcane producer.4

Any set of projections is very much dependent on initial conditions and assumptions derived from historical experience. Projection-making imposes an order on developments that can never be known with even the slightest precision. Nonetheless, charting out the implications of changes in policy requires a framework for evaluation. World price projections are crucial for the framework. In this sense, world price projections are not forecasts, but are merely the extension of presently perceived realities into the future by economic logic.

Figure 3 shows the Sugar and Sweetener Outlook world price projections covering the period 2014/15 through 2024/25. Projections can be grouped into two periods. From 2014/15 to 2019/20 (the first 6 years), prices fluctuate and average 17.74 cents/lb. Over the remainder of the projections period (the 5 years between 2020/21 and 2024/25), prices are increasing year-over-year and average 20.74 cents/lb. The long-term trend of higher prices derives from increased sugar demand based on higher world Gross Domestic Product (GDP) growth and increased Brazilian ethanol demand, which is based on expected strong future growth of automobile sales. The nearer term problem is that the transition to the growth trend is strongly influenced by present economic conditions that are working themselves out to reach the trend.

Figure 4 presages the influence of differing levels of world prices on domestic policy. The (nearly) horizontal line represents the minimum price-to-avoid forfeiture. The line called “base” combines the world price projections with a minimum U.S.-world raw sugar price margin of 3 cents/lb. The line called “alternative” is similarly constructed, but with world prices projected 10 percent lower in all of the projection years. The figure implies forfeiture concern when the price lines are below the minimum price forfeiture line. For the base, there are three instances of this occurring: 2014/15, 2017/18, and 2018/19. For the alternative, there are six consecutive instances up through 2019/20.

Framework for Making Long Term Projections – Price Determination

Although projected third-quarter U.S. raw sugar prices are a function of the domestic supply-use balance as measured though the ending stocks-to-use ratio, there are two paths to the actual derivation. These paths are related to whether or not U.S. prices are supported by world sugar prices, as discussed above. (Table 2 explains the price projection formulation in detail.)

The price is calculated as the maximum of: (1) world price plus the price margin whose minimum value is 3 cents/lb; or (2) inverse function of ending stocks-to-use (estimated econometrically), whose value must be equal to or greater than the minimum price-to-avoid forfeiture. The price margin of the first option is itself a function of the ending stocks-to-use ratio (also estimated econometrically, but with far fewer observations than the inverse function of option 2).

 

Figure 5 illustrates the two approaches for two cases: one where the world price is equal to 20 cents/lb and the other where the world price is only 14 cents/lb. The price curves slope downward, indicating that the margin becomes smaller as the stocks-to-use becomes larger. At about a 20- percent stocks-to-use ratio the lines flatten, as the margin has reached its minimum 3 cent/lb level. This minimum value is maintained by assuming that TRQ shortfall increases as exporters having allocated-access to the U.S. market divert shipments to markets where returns are higher. This type of diversion occurred in 2012/13 for many exporters that had better profit prospects in other markets. In the projections framework, it is assumed that up to 50 percent of the established TRQ can contribute to the shortfall. If that 50-percent level is insufficient to reach the 3 cent/lb margin level, then it is assumed that Mexico will divert a portion of its sugar exports to third-country markets. This type of diversion was seen in 2012/13 and is projected for 2013/14 as well.5

The other price curve shows an inverse relationship between the U.S. raw sugar price and ending stocks-to-use when there is weak price support from the world market. The curve flattens out at a stocks-to-use between 18 and 19 percent. It is here that the domestic price reaches the minimum price-to-avoid forfeiture. That minimum price is uniquely related to a maximum privately owned stocks-to-use ratio. Implied stocks above the maximum are either forfeited to the CCC or purchased by the CCC for resale to ethanol producers. This type of curve represented pricedetermination in the early- and pre-NAFTA period.

For any particular stocks-to-use ratio, the price is read off the curve in the top-most position. When the world price is 20 cents/lb, the price is read off only the “20-cent curve” because it lies everywhere above the “loan-rate support” curve. The lowest domestic price here is 23 cents/lb. If the world price is 14 cents/lb, the price is read off the “14- cent curve” for stocks-to-use below about 16.5 percent and off the “loan-rate curve” for higher ratio values.

The positioning of the stocks-to-use ratio is dependent on a trading equilibrium with Mexico that links the U.S. raw sugar price to the peso-denominated estandar sugar price in Mexico. This relationship is explained below.

Framework for Making Long Term Projections – U.S. Sugar

The domestic refining margin is a function of ending stocks-to-use and exogenously determined cane sugar refiner capacity utilization. The third-quarter beet sugar spot price is equal to the sum of the third-quarter raw price plus the margin. An annual beet sugar price is estimated as a weighted average of current and previous year third-quarter prices. The return to growing sugarbeets is directly proportional to this annual price. The sugarcane price is proportional to an estimated annual raw sugar price from the current and previous year’s third-quarter price. Sugar crop prices relative to alternative crop prices determine changes in sugarbeet plantings and sugarcane harvested area in all growing areas except Florida. (Area for harvest in Florida is exogenously set.) Sensitivity to real price changes are fairly inelastic, but low sustained returns can lead to processing capacity reductions that can cause large, irreversible area reductions. Sugar yields follow observed trends from sugar crop producing areas.

Sweeteners for consumption are comprised of refined sugar, HFCS, and sugar in net imported products. Per capita sweetener availability over the long term is assumed to be constant at 119 pounds. There is limited substitution between refined sugar and HFCS, dependent on refined sugar prices and cost of producing HFCS. The declining trend in soft drink consumption that has been the primary cause of reduced per capita HFCS consumption since 1999 is assumed to have flattened out.

Framework for Making Long Term Projections – Mexico Sugar

Area for sugarcane production is estimated as a function of changes in the lagged sugarcane prices. (This estimated relationship has better statistical properties than several examined alternatives.) Sugar yield is assumed to increase according to trend. In sweetener consumption, the trend toward increased HFCS use regains its momentum after 2013/14. Domestic HFCS production is set at 480,000 mt, and the rest is imported – almost all from the United States.

An important assumption is that Mexico does not import sugar for consumption. The only sugar it does import is for use in its products re-export IMMEX program.6 Not importing for consumption allows a higher domestic sugar price in Mexico that encourages more sugar from domestic production.

The price of estandar sugar varies inversely with ending sugar-stock levels relative to consumption. An export trading equilibrium is set when the estandar export parity price (price in cents per pound = 1.06 x U.S. raw sugar price + 2.27) is equal to the domestic estandar price. The adjustment is achieved by changes in exports affecting ending stock levels on a one-to-one basis but in the opposite direction. (Example: 100 mt export increase decreases ending stocks by 100 mt, all else constant.) Fewer stocks increase the estandar price and more stocks decrease it. After exports have adjusted to reach the trading equilibrium, ending stocks are calculated as a residual.

The sugarcane price in Mexico varies directly with the peso-denominated estandar price and is adjusted into real terms. Exchange rate and inflation factors are taken from USDA’s international macroeconomic baseline projection.

Results from Base Scenario

There are two scenarios: the base and the alternative. The base assumes world prices as set out in the table accompanying figure 3. The alternative assumes world prices 10 percent below those shown in the table. Table 3 shows U.S. results for both scenarios and table 4 does the same for Mexico. Base results are discussed first.

From a 2014/15 base of 8.783 million STRV, U.S. sugar production is projected to increase to 9.516 million STRV by 2024/25, an increase of 8.5 percent. Beet sugar growth at 12.2 percent to 5.609 million STRV outstrips cane sugar growth of 3.5 percent to 3.906 million STRV. Sugar imports average 3.508 million STRV, constituting about 23.1 percent of total sugar supply. Imports from Mexico average 1.949 million STRV, 71.8 percent higher than average TRQ imports of 1.134 million STRV. TRQs are established at the minimum access levels and are not increased above those levels in any of the projected years.

Deliveries for human consumption increase to 12.725 million STRV by 2024/25, an increase of 6.5 percent, matching more or less the growth in population. The beet sugar portion of the marketing allotment’s OAQ averages 5.649 million STRV, above the corresponding beet sugar production average of 5.485 million STRV. In no year is projected beet sugar production greater than the corresponding marketing allotment. The same holds true for cane sugar, by much wider margins.

Ending stocks average 2.486 million STRV for an average stocks-to-use ratio of 19.59 percent. Although the stocksto- use ratio is high, the average third-quarter raw sugar price of 22.30 cents/lb is supported by the world price in all but 3 of the projection years. Domestic prices show sustained growth above forfeiture levels starting in 2019/20, corresponding to the rise in world prices. The 3 years when loan rates determine the domestic price are 2014/15, 2017/18, and 2018/19. The CCC is shown to purchase sugar from the market for resale to ethanol producers in those years: 207,000 STRV in 2014/15; 183,000 STRV in 2017/18; and 178,000 STRV in 2018/19.

Mexico sugar production averages 6.317 million MTRV over the projection period. Production in 2024/25 is close to this average at 6.353 million MTRV, down by nearly a million MTRV from 2014/15. The large decline from early-period levels is due to large reductions in area: from 844,000 hectares in 2014/15 to 706,000 hectares in 2024/25. As previously discussed, the high returns of the period before the start of the projections period pushed area to record levels, but the large declines in those returns first seen in 2012/13 caused lagged effects not fully realized until several years later.

Although Mexico’s sweetener consumption increases 14.2 percent over the period to 6.789 million mt (actual, dry weight), sugar consumption decreases by 282,000 mt, or 6.7 percent, to 3.921 million mt (or 4.156 million MTRV). HFCS consumption increases in 2024/25 to 2.868 million mt, dry weight. The HFCS share of combined HFCS and sugar consumption is 42.2 percent in 2024/25, up from 29.3 percent in 2014/15.

Sugar exports average 1.850 million MTRV over the projection period, an average of 29.3 percent of production. Exports to the United States average 1.768 million MTRV, or 95.6 percent of the total. Third-country exports occur only in 2015/16 and 2016/17 to help keep the U.S.-world raw sugar price margin from falling below 3 cents/lb. Strong early-period exports result from large production levels. As production declines in the middle-to-later part of the projection period, declines in sugar consumption and lower ending stockholding combine to expand exports from the low 2017/18 total of 1.439 million MTRV to 2.014 million MTRV in 2024/25.

Estandar sugar prices are linked to U.S. raw sugar prices through a trading equilibrium. Both increase, more or less, over the projections period, mirroring the increase in world raw sugar prices.

Results from Alternative Scenario

Results for the lower world price alternative scenario are shown in the lower panels of table 3 (U.S. results) and table 4 (Mexico). The most direct implication of lower world raw sugar prices is lower U.S. raw sugar prices. Figure 6 compares U.S. raw sugar prices across the two scenarios. Just as there are two discernable periods for world prices (lower and variable in the first 5 or 6 years, and higher and growing in the remainder period, as discussed earlier), the same is true for U.S. prices. By 2019/20, world prices in both scenarios are high enough to support U.S. prices above forfeiture levels. World price support for domestic prices in the first 5 years, however, is less likely. Whereas the base scenario had U.S. prices at minimum forfeiture levels in 3 years, 10 percent lower world prices imply prices at minimum forfeiture levels in all of the first 5 years of the projections period. As a consequence, the alternative scenario implies CCC sugar purchases for ethanol producer resale in these amounts: 207,000 STRV in 2014/15; 212,000 STRV in 2015/16; 181,000 STRV in 2016/17; 182,000 STRV in 2017/18; and 89,000 STRV in 2018/19.

Conclusion:

Expected Budgetary Effects of the 2008 Act The scenarios described in this chapter constitute the USDA base and alternative long-term sugar supply and use projections for February 2014. One of the chief uses of the long term projections is to estimate Federal Government budget expense from U.S. sugar program operations. In the base scenario, CCC sugar purchases of sugar for resale to ethanol producers is indicated in 2014/15, 2017/18, and 2018/19 for a total of 568,000 STRV. The present value of total net expenditure (quantity purchased/resold times the difference between purchase and sales prices) is forecast at $154.327 million In the alternative scenario of lower world prices, CCC sugar purchases of sugar for resale to ethanol producers is indicated for 2014/15 – 2018/19 for a total of 871,000 STRV. The present value of total expenditures is $242.358 million.

Sugar and Sweeteners in the North American Free Trade Agreement (NAFTA)

Area On February 10, 2014, the USDA published in the World Agricultural Supply and Demand Estimates (WASDE) its latest sugar supply and use projections for the United States and Mexico for fiscal year 2012/13 and projections for 2013/14.

U.S. Sugar

The Farm Service Agency (FSA) made several small revisions to Sweetener Market Data (SMD) for 2012/13 based on corrected data supplied by a sugarbeet processor. Beet sugar production was decreased slightly to 5.076 million short tons, raw value, (STRV), the estimate for deliveries for human consumption was decreased 1,665 STRV to 11.511 million STRV, and the ending stocks estimate was reduced by 3,500 STRV to 2.157 million STRV.

The USDA reduced its projection of 2013/14 cane sugar production in several States based on revised forecasts made by sugarcane millers: Florida – decrease of 53,000 STRV to 1.780 million STRV; Texas – decrease of 5,000 STRV to 135,000 STRV; and Hawaii – increase of 5,000 STRV to 185,000 STRV. The Florida crop has been hurt by rain and freezing temperatures in January. The Texas crop has been challenged all season, and Hawaii production in December was uncharacteristically strong at the end of its calendar-based crop year.

There were no other changes made to the U.S. sugar supply and use balance (table 6). Deliveries for human consumption through December have totaled 2.892 million STRV, about 2.1 percent ahead of last year through the same period. Imports through the end of January have totaled 964,888 metric tons, raw value (MTRV) – 16.2 percent ahead of last year. Although imports entering under the 2013/14 raw sugar tariff-rate quota (TRQ) at 177,528 MTRV are running 38.8 percent behind last year’s pace, imports from Mexico totaling 691,997 MTRV are running above last year by 93.9 percent. The Sugar and Sweetener Outlook estimates that about 71 percent of 2013/14 imports from Mexico have gone to U.S. sugar refiners, compared with 41 percent for the same period last year.

Ending stocks are projected at 1.881 million STRV, implying an ending stocks-to-use ratio of 14.9 percent, down from 15.4 percent projected last month.

Mexico Sugar and High Fructose Corn Syrup

The USDA reduced its projection of 2013/14 Mexico sugar production by 345,000 Mt to 6.350 million Mt. Harvest data through the beginning of February imply diminished prospects for the sugarcane harvest and sharply reduced prospects for sucrose recovery. Figure 7 shows that sugarcane harvested through the first week of February has totaled 20.070 million metric tons (mt). Although this total is much higher than the corresponding period of harvest years before 2012/13, it is running about 18 percent behind last year and 7.3 percent behind the level expected by Mexico’s Comite Nacional Para El Desarrollo Sustentable de la Caña de Azucar (Conadesuca). Based on an average relationship between the interim and final sugarcane yield (fig. 8), the Sugar and Sweetener Outlook projects a final sugarcane yield of 70.219 mt per hectare, with a standard deviation of 0.374. This projection is a bit lower than Conadesuca’s 70.859 mt per hectare. Assuming that Conadesuca’s forecast of area harvested of 819,065 hectares is attainable and likely, the implied Sugar and Sweetener Outlook forecast (November 2013) of sugarcane production is 57.514 million mt. Although this forecast is only 1 percent lower than the Conadesuca forecast, the pace of the harvest will have to pick up substantially to achieve it. Area harvested through the first week of February is 31.0 percent of the total forecast. This level compares with 35.7 percent last year and an average of 33.9 percent for the 4 years prior to last year.

Published by USDA Economic Research Service

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