Sugar and Sweeteners Outlook February 2012

USDA Sugar and Sweeteners Outlook

Reports » USDA Sugar and Sweeteners Outlook » Sugar and Sweeteners Outlook February 2012

15 February 2012

The USDA projects sugar production in Mexico for 2011/12 at 5.0 million mt, unchanged from last month. The USDA increased its projection of imports over last month by 34,000 mt to 344,000 mt.

NAFTA Sugar February 2012

The Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar (CNDSCA) in Mexico recently published revised supply and use data for 2010/11 and the Secretariat of the Economy (Economia) released full marketing year data for sugar exports and imports. The U.S. Department of Agriculture (USDA) revised its Mexico supply and balance estimates as a consequence.

Based on an audit of all sugar mills, the CNDSCA estimates 2010/11 ending stocks at 687,363 metric tons (mt), a 9.5-percent reduction from the previous estimate. These 2010/11 ending stocks become the beginning stocks estimate for 2011/12. Economia reports 2010/11 sugar imports at 289,159 mt and 2010/11 sugar exports at 1,469,379 mt. Based on the new data, the USDA estimates total sugar deliveries for consumption, IMMEX re-export program, and miscellaneous at 4.415 million mt.

The USDA projects sugar production in Mexico for 2011/12 at 5.0 million mt, unchanged from last month. The USDA increased its projection of imports over last month by 34,000 mt to 344,000 mt. At this point in the forecasting cycle, USDA, basing its projection of Mexican sweetener consumption on the same per capita level as the previous year, projects it at 50.158 kilograms. The USDA did not change its estimate of 2011/12 HFCS consumption from 1.635 million mt, dry weight (up from 1.610 million last year). Total human consumption of sugar is therefore projected at 4.132 million mt. Historical optimal ending stock levels of 22 percent of sugar consumption are assumed for 2011/12, implying ending stocks of 909,000 mt. The USDA did not change its 2011/12 projection of sugar for IMMEX, projected at 283,000 mt.

Exports are forecast residually to balance total use with total supply. The projection this month is 707,000 mt, a decrease of 185,000 mt from last month. The implication for the United States is that imports from Mexico are reduced by 219,000 short tons, raw value (STRV) to 814,000 STRV for fiscal year (FY) 2012.

The USDA projects FY 2012 U.S. sugar production at 8.0 million STRV. This amount is comprised of 4.525 million STRV of beet sugar and 3.475 million STRV of cane sugar. The cane sugar projection is increased from last month by 130,000 STRV due to improved production prospects reported by cane sugar processors in Florida. The Foreign Agricultural Service (FAS) revised estimates of U.S. sugar imports for FY 2011 and projections for FY 2012 based on corrected data from the U.S. Customs Service. FAS also modified its forecast of imports under the Dominion Republic-Central American Free Trade Agreement (DR/CAFTA) and its forecast of imports occurring under the sugar re-export import program. Taken together, reduced imports expected from Mexico are more than additional TRQ and re-export program imports -- total expected FY 2012 imports are decreased by 44,000 STRV.

Based on pace-to-date, the USDA increased its forecast of sugar exports by 50,000 STRV to 250,000 STRV and its forecast of deliveries under the sugar-containing products re-export program by 30,000 STRV to 180,000 STRV. Deliveries for human consumption were revised downward by 250,000 STRV to 10.975 million STRV. Ending stocks are projected as the difference between total supply and total use. The projection for FY 2012 is 876,860 STRV, implying an ending stocks-to-use ratio of 7. 66 percent.

Mexico Sugar and High Fructose Corn Syrup

The U.S. Department of Agriculture (USDA) projects sugar production in Mexico for 2011/12 at 5.0 million metric tons (mt), unchanged from last month. The Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar (CNDSCA) in Mexico revised its official estimate of 2011/12 production in January. Table 1 contains details of assumptions behind the USDA and the original and revised CNDSCA projections. As outlined last month, the USDA uses interim production statistics and their average relationship to final end-ofseason values from the recent past to derive its projection of sugarcane yield and sucrose recovery.

The USDA uses the same area projected by CNDSCA, and this allows a projection of sugarcane and sugar production. Because the USDA projection method is stochastic, it places a statistical confidence interval around the parameter estimates (although these are not shown in the table). The CNDSCA, on the other hand, bases its estimates on the aggregation of individual factory estimates provided by most, if not all, sugar mills in operation.

In its revisio n, the CNDSCA reduced its area for suga rcane by a small 1,365 hectares to 716, 890 hectares. All projected sugarcane y ield amounts are close to each other. The CNDSCA revised its estimate of sucrose recovery downward from 11.63 percent to 11.15 percent, much closer to the USDA projection of 10.89 percent. The resulting implication for sugar production is a 4.5-percent reduction to 5.1 million mt.

Figure 1 shows interi m cumulative sucrose recovery rates for 2011/12 and earlier harvest se asons. As can be seen, the 2011/12 recovery rate path is very close to the 20 09/10 recovery path. The final recovery rate for 20 09/10 was 11.13 percent, close to t he revised CNDSCA esti mate. In a recent USDA projection upda te based on production through February 4 (not shown in the table because it did not differ materially from the January projection), the final recovery is projected at 1 0.911 percent with a standard deviation of 0.264. T he CNDSCA estimate falls within a standard deviation of the USDA projection, meaning that their difference is statistically insignificant from zero.

Figure 2 sho ws 2011/12 regional sugar production through the end of Jan uary compared with corresponding production levels in 2010/11. Overall, 2011/12 production at 1.606 m illion mt is 11.7 per cent less than 2010/11 production through the same date. Production in the Northeast is 29.6 percent less and is 13.4 percent less in the Gulf region, an area mostly comprising the State of Veracruz. Production levels in the other areas are much closer to last year’s levels.

2010/11 Sugar Balance Changes from New Data Revisions

The CNDSCA recently published revi sed supply and use data for 2010/11 and the Secretariat of the Econom y (Economia) released full marketing y ear data for sugar e xports and imports. The USDA revised its suppl y and balance estimates as a consequence. Table 2 reports the new account balance elements, along with historical supply and use back to 1999/2000.

Based on an audit of all sugar m ills, the CNDS CA estimates 2010/11 ending stocks at 687,363 m t, a 9.5-percent reduction from the previous esti mate. These 2010/11 ending stocks become the beginning stocks est imate for 2011/12.

Economia reports 2010/ 11 sugar im ports at 289,159 mt, with 164,316 mt imported from the United States an d 124,843 mt imported from third countries. CNDSCA estimates that 10,000 mt of the sugar imported from the United States was f or consumption. In an earlier-released accounting of Mexico’s sugar-containing product re-export program (IMMEX), CNDSCA estimated that third party imports to the program were 4,558 mt. This implies that 120,285 mt of third part y imports were for consumption. CNDSCA estimates th at 3,963,843 mt of domestic sugar production was delivered f or domestic production. Adding the three supply sources for consum ption indicates total sugar consumption at 4,094, 128 mt. CNDSCA also reports high-fructose corn s yrup (HFCS) consumption at 1,610,072 mt, dry basis. Total sweetener consumption is, therefore, 5,704,200 mt, or 50.158 kilograms per capita. Economia reports 2010/11 sugar exports at 1,469,379 mt. Subtracting this amount and also the ending stock level from a sugar suppl y of 6,390,584 mt (sum of begin ning stocks -- 917,925 mt, production – 5,183,500 mt, and imports), total sugar deliveries equa l 4,233,842 mt. The difference betwee n this am ount and deli veries for consumption equals 139,714 mt. Accepting at present the earlier CNDSCA estimate of sugar deliveries to IMMEX of 319,800 mt, a miscellaneous use category that balances to tal use with total suppl y is estimated at a negative 180,086 mt.

Implications for IMMEX Program Accounting

It is likely that the CNDS CA will re- estimate its I MMEX balances. Based on its 2010/11 sugar supply and use reporting, sugar mills in Mexico delivered 103,331 mt to food and beverage IMMEX- program manufacturers for their use in producing products for exp ort (mainly to the United States). From earlier discussion, im ported sugar going to these manufacturers is estimated at 158,874 mt (154,316 mt from the United States and 4,558 from other countries). Summing produces an estimate of 2010/11 IMMEX sugar of 262,205 mt. This amount is 57,595 less than the current CNDSCA estimate.

Implications for 2011/12 Sugar Supply and Use

Beginning stocks projection for 2011/12 decreased as discussed above, and 2011/12 production remains forecast at 5.0 million mt. The USDA increased its projection of im ports over last month by 34,000 mt to 344,000 m t. This increase stems from an expected increase in U.S. sugar exports ( based on pace to date) of 50,000 short tons, raw value. It is expected that 80 percent of t he increase will be exported to Mexico. Conversion into tel quel metric tons produces the 34,000 mt increase. Total forecast supply equa ls 6.031 million, a reduction compared with 2010/11 of 359,221 mt.

At this point in the forecasting cycle, USDA bases its projection of Mexican sweetener consumption on the same per capita level as the previous y ear – 50.158 kil ograms (discussed above). The U SDA did not change its estimate of 2011/12 HFCS consumption from 1.635 m illion mt, dr y weight (up from 1.610 m illion last year). Total hum an consumption of sugar is therefore projected at 4.132 million mt. Historical optimal ending stock levels of 22 percent of sugar consumption are assumed for 2011/12, implying ending stocks of 909,000 mt. The USDA did not change its 2011/12 projection of sugar for IMMEX, projected at 283,000 mt.

Exports are f orecast residually to balance total use with total supply. The pr ojection this month is 707,000 m t, a decrease of 185,000 mt from last month.

According to press reports, the Government of Mexico is evaluating the need for additional sugar import quotas this year. The am ount commonly reported is 400,000 mt. However, the status o f this am ount is vague. It has been referred to as an “umbrella” quota that would not necessarily be approved for actual imports. Its purpose would be to act as preventative measure against sharp price increases th at could arise if exports to the United States, other countries, or IMMEX are above “acceptable” levels.

USDA Sugar and Sweeteners Outlook