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USDA Sugar and Sweeteners Outlook


17 January 2012

USDA Sugar Outlook: Decrease in Sugar Exports in MexicoUSDA Sugar Outlook: Decrease in Sugar Exports in Mexico

The USDA projects 2011/12 sugar production in Mexico at 5.000 million metric tons (mt), a decrease of 330,000 mt from last month's projection.
USDA Sugar and Sweeteners Outlook

U.S. Sugar January 2012

The forecast is based on lower than expected harvest progress through January 7, 2012 and consequent implications for the rest of the harvest cycle. The USDA lowered its forecast of Mexican sugar imports from 449,000 mt to 310,000 mt. The decrease is attributable to a lower import pace-to-date from the two tariff-rate quotas (TRQs) opened earlier in the year by Mexico and scheduled to close by the end of January. Lower estandar sugar prices in Mexico contributed to the lower than expected fill level. The USDA did not change its forecast of sugar deliveries or ending stock levels. The USDA lowered its forecast of Mexico sugar exports by 469,000 mt to 892,000 mt in order to balance sugar use with the sugar supply reductions.

The USDA projects fiscal year (FY) 2012 U.S. sugar imports at 2.893 million short tons, raw value (STRV), a reduction of 563,000 STRV. Almost all of this reduction is attributable to lower expected sugar imports from Mexico. Along with lower expected cane sugar production (15,000 STRV less from Texas), the USDA projects a 578,000 STRV decrease in ending stocks. The projected level is 620,000 STRV, implying an ending stocks-to-use ratio of 5.3 percent.

Pursuant to Presidential Proclamation 8771 of December 29, 2011, the Harmonized Tariff Schedule (HTS) of the United States will be modified in 2012. For sugar, the relevant modification takes place in chapter 17 with respect to the raw cane sugar codes. Raw sugar codes occurring presently under HTS 1701.11 will be deleted and replaced by new codes under HTS 1701.13 and 1701.14. Non-centrifugal raw cane sugar constitutes codes within HTS 1701.13 and is described in a new chapter subheading Note 2. Centrifugal raw cane sugar constitutes codes within HTS 1701.14.

Mexico Sugar and High Fructose Corn Syrup

Production

The U.S. Department of Agriculture (USDA) projects 2011/12 sugar production in Mexico at 5.000 million metric tons (mt), a decrease of 330,000 mt from last month's projection. The forecast is based on harvest progress through January 7, 2012, with details shown in table 1.

The USDA projects the total-year area harvested at 718,255 hectares, the same as forecast by Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar (CNDSCA) in Mexico City. If realized, this harvested area would be 7 percent more than last year and would be a record high for Mexico. According to the CNDSCA, 124,366 hectares have been harvested through the first week of January, or 17.3 percent of the expected year total. This harvest percentage is ahead of the harvests of 2008/09 and 2009/10 but behind the strong early harvest progress of last year.

This year's interim sugarcane yield is 74.176 mt per hectare. In the harvest data shown for other years, the ratio of the interim yield to the final yield is calculated at 1.160, meaning that on average for the last 3 years, the interim harvest yield through the first week of January has been about 16 percent higher than the final realized yield. If this average were to hold, the 2011/12 sugarcane yield would be 63.923 mt per hectare, somewhat lower than the corresponding yields for the last 3 years. In spite of the lower yield, the greater area expected to be harvested this year implies a larger total expected sugarcane production of 45,913,140 mt.

Sugar produced through January 7, 2012, is estimated at 913,953 mt, implying a sucrose recovery ratio of 9.91 percent. This ratio is the lowest since 2006/07. Historically, the cumulative recovery ratio increases from this point on through the end of the harvest season. Since 2005/06, or for the last 6 years, the early January interim recovery ratio has averaged 0.909 of the final ratio. If this average were to hold, then the final ratio would be 10.894 percent.

Except for the low ratio of 10.84 percent in 2006/07, the implied 2011/12 ratio would be the lowest since 1998/99.

These parameter values imply a 2011/12 sugar production of 5.00 million mt. In a stochastic version of the model that derived this forecast, the standard deviation of the forecast is 205,550 mt, a fairly large number. This would imply that there is about a 70-percent probability through early January that final production will be between 4.8 and 5.2 million mt. The confidence of any forecast only increases through time and could change in either direction, depending on actual harvest and production results. Table 2 compares the current USDA projection with that of the CNDSCA.

Sugar Prices in Mexico City, Estandar and Refinado
July 2011 - December 2011, Weekly

Imports

The USDA lowered its forecast of Mexican sugar imports from 449,000 mt to 310,000. The decrease is attributable to a lower import pace-to-date from the two 150,000 mt tariff-rate quotas (TRQs) previously announced by the Mexican Government, on June 29, 2011 and on October 20, 2011. The June TRQ allowed imports only through December 31, 2011 and was only 52-percent filled through December 11. The October TRQ allows imports through the end of January but was only 13-percent filled through December 11. The low fill rate is likely correlated with the reduction of Mexican sugar prices after the TRQs were announced (fig. 1). The average Mexico City estandar sugar price in the first week of January was about 39.2 cents per pound, down from 49.1 cents per pound in mid-October. The corresponding refinado sugar price of 46.7 cents per pound is lower than the high of 51.2 cents in early August. The estandar-refinado price margin has widened to a more historical pattern of 7.4 cents in early January, compared with 0.83 cents per pound in the first week of October. Expanded sugar supplies, especially of estandar, have reduced the demand for additional imports.

Not affected in the USDA forecast is the expected amount of sugar that Mexico imports from the United States under the U.S. Refined Sugar Re-Export import program, used primarily in Mexico's sugar-containing products reexport component of its IMMEX program. This amount is projected at about 171,150 mt.

Sweetener Consumption in Mexico, October - November
2009/10 - 2011/12

Sweetener Use

The USDA projects sugar deliveries for human consumption at 4.012 million mt and sugar deliveries for the IMMEX program at 283,000 mt. Deliveries of high fructose corn syrup (HFCS) are projected at 1.635 million mt, dry basis. All of these projections are unchanged from last month.

Figure 2 compares deliveries of sugar and high fructose corn syrup (HFCS) for the first 2 months of 2011/12 with corresponding amounts from 2009/10 and 2010/11. Combined sweetener deliveries are up 3.5 percent over last year but below 2009/10 deliveries by over 6 percent. HFCS deliveries are ahead of last year’s pace by 10 percent and the pace of 2009/10 by over 48 percent. The HFCS share of the 2-month deliveries is 32.8 percent. This share compares with 30.8 percent in 2010/11 and with 20.7 percent in 2009/10.

Ending stocks are projected at 22 percent of projected 2011/12 deliveries for human consumption, or 882,640 mt. This percentage assures sufficient sugar supplies until the start of the next sugarcane harvest cycle. This ending stocks goal is achieved through a reduction of expected sugar exports. Because expected production was reduced by 330,000 mt and imports by 139,000 mt, the implication is that exports are 469,000 mt lower than last month’s projection. The new export forecast is 892,000 mt.

Table 3 shows 2011/12 Mexico sugar supply and use, along with historical data back to 1995/96.

Implications for U.S. Sugar

Because of the decrease in sugar exports in Mexico, the projection of U.S. sugar imports from Mexico are reduced from last month’s 1.581 million short tons, raw value (STRV) to 1.033 million STRV, a reduction of 548,000 STRV. Table 4 shows the Mexico import component along with all other U.S. sugar import sources. This large reduction in projected U.S. sugar supplies is the main factor in the reduction of the ending U.S. sugar stocks to 620,000 STRV, or only 5.3 percent of U.S. projected sugar use.

January 2012

Published by USDA Economic Research Service

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