USDA Sugar and Sweeteners Outlook

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19 September 2012

USDA Sugar and Sweeteners Outlook - September 2012

US Sugar September 2012

The Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar (CNDSCA) in Mexico estimates sugar production in 2012/13 at 5.253 million metric tons. Sugarcane area for 2012/13 is forecast at 687,286 hectares (ha), about 2.3 percent below the record area harvested in 2011/12. Sugarcane yield for 2012/13 is forecast at 67.86 mt per ha, slightly higher than yields for the last 2 crop years but well below the yields for the period 2000/01 through 2007/08. Sugar recovery for 2012/13 is forecast at 11.26 percent. This forecast is higher than last year’s low 10.92 percent but significantly below the 11.75 percent of 2010/11.

On September 10, 2012, the Office of the Secretary of Agriculture announced the Fiscal Year (FY) 2013 raw and refined sugar tariff-rate quotas (TRQs) and the Overall Allotment Quantity (OAQ) for sugar marketing in FY 2013. The FY 2013 TRQ for raw cane sugar is set at 1,231,497 short tons, raw value (STRV), or 1,117,195 metric tons, raw value (MTRV), the minimum to which the United States is committed under the World Trade Organization (WTO) Uruguay Round Agreement on Agriculture. The USDA established the FY 2013 refined sugar TRQ at 129,250 STRV (117,254 MTRV). Of this quantity, 106,825 STRV (96,910 MTRV) is reserved for the importation of specialty sugars. The USDA established the FY 2013 OAQ at the minimum quantity of 9,711,250 STRV. This quantity corresponds to 85 percent of estimated FY 2013 sugar consumption.

On September 12, 2012, the U.S. Department of Agriculture (USDA) released its latest U.S. and Mexico sugar supply and use estimates for FY 2012 and projections for FY 2013 in the World Agricultural Supply and Demand Estimates (WASDE) report. Changes in the FY 2012 supply and use balance, mostly trade, were made on the basis of pace-to-date. Overall FY 2012 imports were decreased by 139,600 STRV. Also, an increase in exports was offset by a decrease in product re-export deliveries. The ending FY 2012 stocks-to-use ratio is estimated at 13.5 percent, a drop of 1.2 percentage points from last month. Changes in the FY 2013 supply and use forecasts stemmed from lower beginning stocks and increased imports of refined specialty sugar of 105,000 STRV above minimum WTO requirements. The ending FY 2013 stocks-to-ratio is projected at 12.3 percent.

Sugar in the NAFTA

In mid-August 2012, the Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar (CNDSCA) in Mexico published its first forecast of Mexican sugarcane and sugar production for the upcoming 2012/13 crop year. On September 10, 2012, the Office of the Secretary of Agriculture announced the Fiscal Year (FY) 2013 raw and refined sugar tariff-rate quotas (TRQs) and the Overall Allotment Quantity (OAQ) for sugar marketing in FY 2013. On September 12, 2012, the U.S. Department of Agriculture (USDA) released its latest U.S. and Mexico sugar supply and use estimates for FY 2012 and projections for FY 2013 in the World Agricultural Supply and Demand Estimates (WASDE) report.

First Estimate of 2012/13 Mexico Sugarcane and Sugar Production

The CNDSCA made its first production forecast for the 2012/13 crop year that starts on October 1, 2012 and runs through September 30, 2013. 2012/13 sugarcane in Mexico is forecast at 46.642 million metric tons (mt) and 2012/13 sugar is forecast at 5.253 million mt. The forecast is based on surveys of the 57 factories that are expected to produce sugarcane and sugar during 2012/13. Table 1 shows results by factory and by regional groupings of these factories.

Sugarcane area for 2012/13 is forecast at 687,286 hectares (ha), about 2.3 percent below the record area harvested in 2011/12. Figure 1 shows that area is expected to expand modestly in both the largest producing Gulf area and the smallest producing Northwest area in Sinaloa State. All other areas show modest decreases.

Sugarcane yield for 2012/13 is forecast at 67.86 mt per ha, slightly higher than yields for the last 2 crop years but well below the yields for the period 2000/01 through 2007/08, which were all above 70 mt per ha. Figure 2 shows that the largest regional increases over past year are in the Northeast and the Gulf regions. As seen in figure 3, cumulative 2012 rainfall through the first week of September in the Northeast is well above the low total for the corresponding period last year and slightly above the average for the 5 preceding years. This year’s rainfall in Veracruz State, where most Gulf regional factories are located, is well above the average for the 5 preceding years and the same period last year. Yields in other regions are close to those of either the year before or 2 years before.

Sugar recovery for 2012/13 is forecast at 11.26 percent. This forecast is higher than last year’s low 10.92 percent but significantly below the 11.75 percent of 2010/11. Figure 4 shows the regional rates compared with those of the last 2 years. All forecast recovery rates except for that of the Central region are higher than last year. All forecast rates except for that of the Pacific region, however, are lower than the rates in 2010/11.

Mexico Sugarcane Area: 2012/13 Forecast Compared with Estimated 2010/11 and 2011/12, by Region

Source: Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar (CNDSCA).

Mexico Sugarcane Yield: 2012/13 Forecast Compared with Estimated 2010/11 and 2011/12, by Region

Source: Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar, (CNDSCA).

Cumulative Precipitation Through First Week of September 2012 Compared with Average of 5 Preceding Years (normal) and 2011

Source: USDA, WAOB, Agricultural Weather Assessments.

Mexico Sugar Recovery: 2012/13 Forecast Compared with Estimated 2010/11 and 2011/12, by Region

Source: Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar (CNDSCA).

Mexico Sugar Production: 2012/13 Forecast Compared with Estimated 2010/11 and 2011/12, by Region

Source: Comite Nacional Para El Desarrollo Sustentable de la Cana de Azucar (CNDSCA).

Figure 5 shows regional sugar production forecasts. Although production levels in the Gulf and Northeast regions are forecast to recover from last year’s poor production showing, production in the Northeast is well below the level of 2 years earlier. Except for the low-producing Northwest region, production levels in the other regions are expected to be lower than last year.

U.S. Sugar Tariff-Rate Quota and Overall Allotment Quantity Announcements

The FY 2013 TRQ for raw cane sugar is set at 1,231,497 short tons, raw value (STRV), or 1,117,195 metric tons, raw value (MTRV). This is the minimum to which the United States is committed under the World Trade Organization (WTO) Uruguay Round Agreement on Agriculture, pursuant to Additional U.S. Note 5 to Chapter 17 of the U.S. Harmonized Tariff Schedule (HTS) and Section 359k of the Agricultural Adjustment Act of 1938, as amended. Raw cane sugar under this quota must be accompanied by a certificate of quota eligibility (CQE) and may be entered under subheadings 1701.13.10 and 1701.14.10 of the HTS until September 30, 2013.

In addition, USDA is establishing the FY 2013 refined sugar TRQ at 129,250 STRV (117,254 MTRV). Of this quantity, 106,825 STRV (96,910 MTRV) is reserved for the importation of specialty sugars as defined by the U.S. Trade Representative (USTR). The total refined sugar TRQ includes the 24,251 STRV (22,000 MTRV) minimum to which the United States is committed under the WTO Uruguay Round Agreement on Agriculture, of which 1,825 STRV (1,656 MTRV) is reserved for specialty sugar.

The FY 2013 specialty sugar TRQ will be opened in five tranches. (Because the specialty sugar TRQ is first-come, first-served, tranches for specialty sugar are needed to allow for orderly marketing throughout the year.) The first tranche, totaling 1,825 STRV (1,656 MTRV), will open on October 12, 2012. All specialty sugars are eligible for entry under this tranche. The second tranche will open on October 26, 2012, and be equal to 38,851 STRV (35,245 MTRV). The remaining tranches will each be equal to 22,050 STRV (22,003 MTRV), with the third opening on January 11, 2013, the fourth on April 11, 2013, and the fifth on July 11, 2013. The second, third, fourth, and fifth tranches will be reserved for organic sugar and other specialty sugars not currently produced commercially in the United States or reasonably available from domestic sources.

Section 359c of the Agricultural Adjustment Act of 1938, as amended, requires that the OAQ be established at not less than 85 percent of the estimated quantity of sugar for domestic human consumption for the fiscal year and that fixed percentages of the OAQ be assigned to the beet sector and cane sector. The OAQ for FY 2013 is being established at the minimum quantity of 9,711,250 STRV. Based on the required beet sector and cane sector percentages of 54.35 and 46.65, respectively, the sugarbeet sector is allotted 5,278,064 STRV and the sugarcane sector is allotted 4,433,186 STRV for FY 2013.

The sugarcane sector allotment is allocated to the sugarcane States according to provisions in the sugar program, as follows: Hawaii--245,499 STRV; Florida--2,250,786 STRV; Louisiana--1,741,236, and Texas--195,665 STRV. Company allocations will be announced in a press release before September 30, 2012.

September 2012 WASDE Report

There were few changes made to the U.S. supply and use estimates/projections. FY 2012 production is still estimated at 8.298 million STRV, comprised of beet sugar at 4.750 million STRV and cane sugar at 3.548 million STRV. Beet sugar production through the end of July has totaled 4.192 million STRV, leaving about 558,000 STRV to be produced in August and September. New crop sugar will have to total between 450,000 to 500,000 STRV in these months to meet the FY 2012 beet sugar estimate. Making this total seems very likely given the early start to sugarbeet harvesting in the Red River Valley, Michigan, and the Great Plains.

Forecast FY 2013 sugar production is unchanged from last month at 8.750 million STRV–5.105 million STRV for beet sugar and 3.645 million STRV for cane sugar. The National Agricultural Statistics Service (NASS) increased its sugarbeet production forecast only 0.7 percent from last month to 35.583 million tons and decreased it sugarcane production forecast 1.1 percent to 31.008 million tons. Most of the sugarcane change was due to a lowering of expected yield in Louisiana from 31 tons per acre last month to 30 tons per acre. Due to heavy cane lodging in the eastern Louisiana cane belt resulting from Hurricane Isaac, 30 percent of the crop was reported in poor to very poor condition in the September 4 NASS Crop Progress. However, in the September 11 Crop Progress, NASS revised this to only 12 percent of the crop. Dry weather during the upcoming harvest season would largely mitigate any lasting effects of the hurricane on the crop.

Changes in the FY 2012 supply and use balance, mostly trade, were made on the basis of pace-to-date (table 2). Estimated raw sugar TRQ shortfall was increased by 168,654 STRV to 240,304 STRV. Many countries that have TRQ allocations diverted their exports to other markets (like the European Union) that were offering better prices than those in the U.S. market. 25,000 STRV of sugar imports from Colombia for calendar year 2012 are now expected to enter after September and therefore will be recorded as entering in FY 2013. Sugar imports from Mexico are estimated at 1.080 million STRV, a reduction of 58,423 STRV from last month. The reduction was made because imports through the end of August are estimated by the Foreign Agricultural Service at 976,700 STRV, making last month’s estimate unlikely to be met. Other changes include an increase of 100,000 STRV in program reexport imports to 650,000 STRV and an increase of 4,000 STRV of high-tier tariff imports to 14,000 STRV. An increase of 25,000 STRV in U.S. sugar exports to 275,000 STRV was offset by a 25,000 STRV reduction in deliveries to food manufacturers participating in the re-export sugar-containing products program.

Ending FY 2012 stocks are estimated at 1.589 STRV, implying a stocks-to-use ratio of 13.5 percent.

Changes in the FY 2013 supply and use forecasts stemmed from lower beginning stocks of 141,000 STRV and increased imports of refined specialty sugar of 105,000 STRV above minimum World Trade Organization requirements.

Table 3 shows all components of FY 2013 U.S. sugar imports. Raw sugar TRQ shortfall is still projected at 165,347 STRV and imports from Mexico are projected at 1.159 million STRV, the same as last month.

For Mexico, 2011/12 exports were reduced by 50,000 mt, reflecting the pace of sugar exports to the U.S. market. 2012/13 production was reduced to 5.250 million mt in line with the first production estimate made by the CNDSCA, discussed earlier in this report.

Sugar-Containing Products

The year-over-year increase in sugar in food and beverage imports since FY 2008 has leveled off this year. Table 4 and figure 6 show that sugar in imported products during the first 9 months of FY 2012 is at about the same level as in the corresponding period last year. These imports declined in FY 2008 due to the U.S. economic recession, but began increasing in line with overall economic activity in FY 2009. Sugar in imported beverages and bread-pastrycake products is up this year but down in the other product categories (fig. 7).

Sugar in exported food products is estimated at 622,193 tons, continuing the upward trend since FY 2008. The FY 2012 9-month export total is 7.5 percent more than last year and 28.4 percent more than in FY 2008. The gap between sugar in imported and exported products is less than 300,000 tons.

Sugar delivered to U.S. food manufacturers under the re-export sugar-containing products program is not a major factor in the export growth. The program sugar is only about 20 percent of the total sugar in products exported over the 5-year period, and the correlation between the program sugar and exported sugar is only 45 percent.