USDA Sugar and Sweeteners Outlook
19 October 2012
USDA Sugar and Sweeteners Outlook - October 2012
US Sugar October 2012
On October 11, 2012, the U.S. Department of Agriculture (USDA) released its latest
U.S. and Mexico sugar supply and use estimates for fiscal year (FY) 2012 and
projections for FY 2013 in the World Agricultural Supply and Demand Estimates
(WASDE) report. The USDA increased its estimate of beet sugar production for FY
2012 by 75,000 short tons, raw value (STRV) to 4.825 million STRV due to the early
start to the sugarbeet harvest in the Red River Valley and Michigan producing regions.
The USDA projects FY 2013 beet sugar production at 5.105 million STRV, unchanged
from last month, and increased its estimate of FY 2012 cane sugar production by 27,000
STRV to 3.575 million STRV due to stronger-than-expected September 2012 production
in Louisiana.
The USDA made changes to estimated FY 2012 imports on the basis of U.S. Customs
Bureau data through the end of September that were available prior to the publication of
WASDE. The USDA increased its forecast of FY 2013 imports by 8,649 STRV, mostly
from Mexico, and also increased its forecast of FY 2013 exports by 25,000 STRV to
275,000 STRV, with most expected to go to Mexico for its product re-export program.
The USDA made no changes to U.S. sugar deliveries for either FY 2012 or FY 2013.
However, the USDA is estimating that sugar miscellaneous use will come in at -75,000
STRV. The USDA estimates ending stocks for FY 2012 at 1.703 million STRV,
implying an ending stocks-to-use ratio of 14.6 percent. The projection for FY 2013 is
1.558 million STRV, implying an ending stocks-to-use of 13.1 percent.
The USDA only made small changes to its Mexico supply and use balance for 2011/12
and 2012/13.
Sugar in the NAFTA
On October 11, 2012, the U.S. Department of Agriculture (USDA) released its latest U.S. and Mexico sugar supply and use estimates for fiscal year (FY) 2012 and projections for FY 2013 in the World Agricultural Supply and Demand Estimates (WASDE) report.
US Sugar Production
The USDA increased its estimate of beet sugar production for FY 2012 by 75,000 short tons, raw value (STRV) to
4.825 million STRV. With the early start to the sugarbeet harvest in the Red River Valley and Michigan producing
regions, sugar production in August amounted to a record high of 178,619 STRV. The amount of sugar produced
from beets sliced (i.e., excluding sugar produced from desugaring stored molasses) in August 2012 exceeded the
amount produced in August 2010 (the previous high) by 18 percent. FY 2012 production through August has
amounted to 4.371 million STRV. Because of the close similarity of the pre-October portion of sugarbeet harvest
between the 2010/11 and 2012/13 seasons, the USDA expects about the same amount of sugar production from beet
slicing in September 2012 as in September 2010, or about 430,000 STRV. That amount, plus a conservative
September 2012 estimate of sugar from desugared molasses, produces the USDA estimate of 4.825 million STRV.
The USDA projects FY 2013 beet sugar production at 5.105 million STRV, unchanged from last month. The USDA
projects that September 2013 production will be closer to the historical trend, rather than exceeding the trend as in
September 2012. The USDA also recognizes that the 2012/13 sugarbeet crop forecast by USDA’s National
Agricultural Statistics Service (NASS) at 35.597 million tons may exceed the sugarbeet industry’s processing
capacity. Press reports indicate that a major processor in the Red River Valley is considering plowing-under up to 10
percent of its sugarbeet crop due to capacity constraints.
The USDA increased its estimate of FY 2012 cane sugar production by 27,000 STRV to 3.575 million STRV as a
result of stronger-than-expected September 2012 production in Louisiana. Non-USDA sources estimate Louisiana’s
production at between 48,000 and 49,000 STRV. Although NASS increased its forecast of harvested sugarcane area
by 7,000 acres, the USDA left its forecast of FY 2013 cane sugar production unchanged at 3.645 million STRV.
Because NASS does not forecast the split between sugarcane for sugar and sugarcane for seed, an increase of 7,000
acres is too small to justify a cane sugar increase. Until NASS makes its first forecast of the split in December, the
USDA assumes the same percentage distribution between the two uses as in 2011/12.
Trade
The USDA made changes to estimated FY 2012 imports on the basis of U.S. Customs Bureau data through the end
of the September that were available prior to October 11 (table 1, post-October 11 revisions are possible.) The raw
sugar tariff-rate quota (TRQ) shortfall was increased by 18,881 STRV to 259,185 STRV. This is a high 15.7 percent
of the allocated TRQ of 1,651,497 STRV. A set of countries that historically account for shortfall, totaling 80,960
STRV, are not even counted in this total because they surrendered their initial TRQ allocations in April 2012. As a
result, a different set of countries indicated that they could fill their original TRQ allocation plus additional
allocations from the April TRQ increase and reallocation but failed to do so. Table 2 provides a list of these
countries and their shortfall amounts. In most cases, these countries exported sugar to other destinations because
price margins indicated a better return than shipment to the United States. This phenomenon is likely when margins
between U.S. and world sugar prices are narrow.
Total sugar imports from Mexico are estimated at 1,026,605 STRV, a decrease of 53,546 STRV from last
month. Re-export imports are increased by 14,125 STRV to 664,125 STRV, and high-tier tariff sugar is increased by 48 STRV to14,048 STRV. Peru has failed to ship its specialty sugar allocation of 2,205 STRV. Other changes
were made to reflect entries that, under Free Trade Agreements, are specified in terms of calendar years and not
fiscal years. These shipments either entered earlier than forecast (counted in FY 2012) or are expected to enter later
than forecast (to be counted in FY 2013, if shipped).
The USDA increased its forecast of FY 2013 imports by 8,649 STRV, mostly from Mexico (table 3), and increased
its forecast of FY 2013 exports by 25,000 STRV to 275,000 STRV. Most of this sugar is expected to go to Mexico
for use in the IMMEX product re-export program.
US Sugar Use and Ending Stocks
The USDA made no changes to sugar deliveries for either FY 2012 or FY 2013. FY 2012 deliveries for
human consumption through August 2012 are estimated at 10.248 million STRV in USDA’s Sweetener
Market Data (SMD). To reach USDA’s estimate of 11.300 Million STRV, 1.052 million STRV needs to
be delivered in September. The September deliveries
average for FY 2010 and FY 2011 is 1.076 million STRV. The FY 2012 deliveries estimate represents
growth over FY 2011 of about 1.0 percent. Growth for FY 2013 is only slightly higher at 1.1 percent,
yielding a total FY 2013 forecast of 11.425 million STRV. Lower sugar prices expected in FY 2013 may
make the additional growth more likely.
The USDA usually does not forecast the SMD “Miscellaneous Use” category. However, the Miscellaneous
Use balance through August is estimated at -84,831 STRV. Most of this deficit is attributable to the sales
less receipts of cane refiners (recorded as a negative number) exceeding in absolute terms that of sugarcane
processors. The total through August is -92,071 STRV, which means that cane refiners received about this
amount from sugarcane processors in excess of what sugarcane processors claim they shipped to the
refiners. Therefore, the USDA is estimating for the complete fiscal year that Miscellaneous Use will
amount to a negative 75,000 STRV.
Before the end of the fiscal year, the USDA estimates/projects ending stocks as the difference in total
supply less total use. The estimate for FY 2012 is 1.703 million STRV, implying an ending stocks-to-use
ratio of 14.6 percent. The projection for FY 2013 is 1.558 million STRV, implying an ending stocks-to-use
of 13.1 percent.
Sugar in Mexico
The USDA made certain changes to its Mexico supply and use balance. Mexican exports of sugar to the United
States were adjusted to equal reported U.S. imports of sugar from Mexico, or 878,604 metric tons (mt). To forecast
total exports, 10,000 mt is added--the amount assumed to be exported to other countries--bringing the estimate to
888,604 mt.
The USDA also changed its estimate of 2011/12 deliveries to Mexico’s sugar-containing product re-export program
(IMMEX) to 311,000 mt in accordance with new information from USDA’s Foreign Agricultural Service (FAS)
post in Mexico City. The USDA also revised the projection for 2012/13 to the same amount. Sugar for the 2012/13
IMMEX expansion is assumed to come from increased sugar imports from the United States under the U.S. Refined
Sugar Re-Export Program. The new 2012/13 import projection is 198,000 mt.
Ending stocks for 2011/12 are estimated as the difference between total supply and total use at 891,314 mt. This
amount becomes the forecast for 2012/13 beginning stocks. The USDA assumes that 2012/13 ending stocks will be
19.5 percent of forecast deliveries for human consumption, or 819,000 mt. The forecast for 2012/13 exports is
adjusted to bring total use in balance with total supply. This amount is 1,009,314 mt. As with the case of 2011/12,
the USDA assumes that Mexico will export 10,000 mt to destinations other than the United States. This implies a
forecast of sugar exports to the United States of 999,314 mt.
The USDA did not make any changes to its 2012/13 forecast of high fructose corn syrup (HFCS) consumption of
1,683,000 mt, dry weight. New price listings by U.S. HFCS manufacturers are expected sometime after the release
of U.S. 2012/13 corn supply and use balance in the October 2012 WASDE. The Mexican Sugar Chamber reports
2011/12 HFCS consumption at 1,723,000 mt, dry weight, an estimate very close to USDA’s estimate of 1,720,000
mt, dry weight.
Sugar Pricing Developments
As detailed in previous editions of the Sugar and Sweetener Outlook, U.S. raw sugar prices (No. 16 contract,
Intercontinental Exchange) are no longer invariant to changes in world sugar prices (No. 11 contract,
Intercontinental Exchange). Market fundamentals and expectations are a major factor in the determination of the
margin between U.S. and world prices. This is a relatively recent phenomenon that started when world raw sugar
prices rose close to and then exceeded U.S. price support levels implied by the operation of the U.S. Sugar Loan
Rate Program.
Figure 1 shows monthly and average quarterly margins starting at the beginning of FY 2010. The margin grew to
high levels in FY 2010 and helped explain the relatively high level of high-tier tariff imports in this period. For FY
2011 through most of FY 2012, the margins have varied between slightly above 6 cents per pound and slightly
below 14 cents per pound. There has been a declining trend in the margin throughout FY 2012 and into early FY
2013. The FY 2012 TRQ increase and reallocation in April 2012 increased the prospects for increased ending year
stocks. Expected supply increases in late FY 2012 and into FY 2013 have been buttressed by expected large beet
sugar production. The margin in the first half of October 2012 has been a very low 4 cents per pound.
Estimating a relationship between the margin and U.S. market conditions is a difficult task, given the recent nature
of the relationship. Table 4 shows quarterly pairings of estimated stocks-to-use ratios from the WASDE and the
corresponding average price margins. The pairings for October-March are excluded because the WASDEs for the
first half of the fiscal year are precluded from showing expected increases in sugar TRQs and, therefore, the
resulting forecasts of ending stocks-to-use may be biased. The pairings are shown graphically in figure 2, with an
estimated regression line showing the negative correlation between the stocks-to-use ratio and the price margin. The
strength of the relationship is very tentative given the paucity of data points but does suggest a result worth
additional research.
US-World Raw Sugar Price Margins, FY 2010-12

Source: Intercontinental Exchange (ICE), Contract No. 11 and 16.
Relationship Between US-World Raw Sugar Price Margin and US Ending Stocks-to-use Ratio, Quarterly Basis, Second Half of Fiscal Year (FY), FY 2010-12

Source: World Agricultural Supply and Demand Estimates
(WASDE); and Intercontinental Exhange, Contract no. 11 and 16.
Figure 3 shows differing levels of world raw sugar futures prices for the first half of 2013 as quoted in the first weeks of August, September, and October 2012. World raw sugar prices have been declining, generally, through most of September. The figure shows, however, that world prices have rebounded in October. LMC International cites weather concerns as an explanation for this buoyancy. For example, late September rain in South/Center Brazil slowed the pace of the harvest and total reducing sugars, along with a forecast for a return of rain in mid-October, lower-than-expected monsoon rains in India, and dry conditions in Thailand. Nonetheless, at this early stage, weather events could turn or have beneficial effects over the longer course of the season. The likely outcome, in spite of the early October price rise, is for prices to fall to levels in the high teens. Still, there is uncertainty.
Comparison of Raw Sugar Average Futures Prices from First Week of August, September, and October, 2012

Source: Intercontinental Exchange, No11 raw sugar contract.
October 2012
Published by USDA Economic Research Service
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