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SUGAR AND SWEETENERS OUTLOOK
U.S. Sugar, September 2010
(September 14, 2010) Estimated U.S. sugar supply for fiscal year (FY) 2010 is increased 141,000 short tons, raw value (STRV), due to higher production and imports. Louisiana cane sugar production is increased 35,000 STRV based on an expected early start to the 2010/2011 crop harvest in September. Imports are increased 105,000 STRV, with 135,000 STRV more from high-tier tariff imports and Mexico more than offsetting an increased shortfall under the raw sugar tariff rate quota (TRQ) of 30,000 STRV. Deliveries for human consumption in FY 2010 are increased 145,000 tons to reflect the stronger-than-expected pace of these deliveries in recent months. The FY 2010 estimate is now 10.700 million STRV. Deliveries for re-export sugar-containing products are increased 25,000 STRV to 195,000 STRV, while deliveries for livestock feed use are reduced 5,000 STRV to 15,000 STRV. Both of these adjustments are based on pace-to-date. Miscellaneous use is estimated at -125,000 STRV. Ending stocks as the difference between total supply and use are estimated at 1.510 million STRV. The implied ending stocks-to-use ratio is 13.7 percent.
Projected U.S. sugar supply for FY 2011 is increased 101,000 STRV from that of August, due to higher beginning stocks (21,000 STRV) and higher beet sugar production (80,000 STRV). Beet sugar production is increased to 4.890 million STRV based on a higher forecast of U.S. sugar beet production by the National Agricultural Statistics Service (NASS). Although NASS's sugar beet area harvested was reduced slightly, the forecast yield increased 2.1 percent from that of August to 28.9 tons per acre. This yield forecast, if realized, would be a record--about 8 percent higher than the previous record yield of 26.8 tons per acre in the 2008/09 crop year. The sugar import forecast for FY 2011 is unchanged. Deliveries for human consumption for FY 2011 are projected at 10.775 million STRV, a modest 0.7-percent increase over deliveries for FY 2010. Other deliveries are forecast at 185,000 STRV, and the forecast for miscellaneous use is zero, an increase of 100,000 STRV from August. With no change in expected exports (150,000 STRV), total use is increased 175,000 STRV from August. Ending stocks are forecast at 1.084 million STRV, implying an ending stocks-to-use ratio of 9.8 percent.
Mexico's 2009/10 beginning stocks are increased by 136,000 metric tons, raw value (MTRV) to match beginning stocks data reported by the Mexican Government. Analysis of similarly source data for sugar and high fructose corn syrup (HFCS) deliveries supports the increase in 2009/10 sugar deliveries for human consumption by 42,000 MTRV to 4.812 million MTRV. HFCS deliveries are estimated at 1.450 million metric tons, dry basis, an increase of 250,000 metric tons. Exports are increased by 90,000 MTRV based on pace-to-date analysis of U.S. sugar imports from Mexico. Ending stocks are estimated at 777,000 MTRV, implying an ending stocks-to-consumption ratio of 16.1 percent.
Aggregate sweetener consumption in Mexico for 2010/2011 is forecast close to that for 2009/2010 at 53.3 kilograms per capita. HFCS deliveries are expected to stabilize in the range seen in the summer months of 2009/2010, implying a 2010/2011 total of 1.700 million tons, dry basis. The implication for expected sugar deliveries is a reduction of 194,000 MTRV from 2009/2010 to 4.618 million MTRV. With no other changes from August (except for beginning stocks), ending stocks are forecast at 859,000 MTRV.
On September 10, 2010, the U.S. Department of Agriculture (USDA) released its latest supply and use estimates for fiscal year (FY) 2010 and projections for FY 2011 in the World Agricultural Supply and Demand Estimates (WASDE) report.
The National Agricultural Statistics Service (NASS), in its September 2010 Crop Production report, made revisions to its forecast of 2010/2011 sugar beet yields and production. National sugar beet yield is forecast at a record 28.9 tons per acre, 3.17 tons per acre more than last year and 2.15 tons per acre more than previous record yield in 2008/2009. Compared with last month, yields are increased in the largest producing States: Minnesota, up 1.0 ton to 28.0 tons/acre; North Dakota, up 1.0 ton to 28.0 tons; and Idaho, up 0.7 ton to 32.2 tons per acre. Good growing
conditions in the Red River Valley have led to an early August start of the harvest, with about 5 percent of the harvest completed prior to August 29. Growers in Michigan have also started an earlier-than-usual harvest.
NASS forecasts 2010/2011 sugar beet production at 33.060 million tons, 11.8 percent more than in 2009/2010. With national area harvested forecast at 1.144 million acres below last year's 1.149 million acres, all the gain in sugar beet production is the result of yield growth. In the WASDE, beet sugar production for FY 2011 is projected at 4.890 million short tons, raw value (STRV)--440,000 STRV more than estimated for FY 2010 and 80,000 STRV more than the FY 2011 projection in last month's WASDE.
NASS made few revisions to its projection for 2010/2011 sugarcane production. Overall, area harvested is forecast at 876,200 acres, a 0.8-percent reduction from last month. U.S. sugarcane yield is forecast at 34.5 tons per acre, a 0.6percent increase. Sugarcane production is forecast at about 100,000 tons less than last month, or 0.3 percent less at 30.209 million tons. In the WASDE, overall cane sugar production was left unchanged at 3.525 million STRV. The only change for cane sugar production in the WASDE was an increase of 35,000 STRV in Louisiana for FY 2010 due to 2010/2011 production occurring in September, the last month of the fiscal year.
On August 19, 2010, the USDA announced that sugar entering the United States under the FY 2011 raw sugar import tariff-rate quota (TRQ) will be permitted to enter U.S. Customs territory beginning September 1, 2010, a month earlier than the usual first entry date of October 1. In addition, the USDA announced that sugar entering the United States under the FY 2010 raw sugar TRQ will be permitted to enter U.S. Customs territory until October 31, 2010, a month later than the usual last entry date. These actions are in response to increased tightness in the U.S. raw sugar market, and are authorized under the Additional U.S. Note 5(a) (iv) of Chapter 17 of the U.S. Harmonized Tariff Schedule. This announcement does not change the level of any U.S. sugar import TRQs, and will apply only to raw cane sugar (not refined sugar).
In spite of this announcement, the USDA lowered its estimate of sugar entering under the TRQ for FY 2010 by 30,000 STRV to 1.844 million STRV. This reduction was made after careful analysis of existing supply conditions in countries eligible to ship sugar to the United States. The announcement is not expected to affect TRQ entries in FY 2011ùstill projected at 1.409 million STRV.
Based on reliable information, the USDA has increased its estimates of FY 2010 sugar imports from Mexico by 100,000 STRV to 630,000 STRV and at the high-tier tariff by 35,000 STRV to 210,000 STRV, drawn in by higher-than-expected U.S. prices. Sources indicate that high-tier tariff imports amounted to 173,000 STRV through the end of August. High-tier tariff imports averaged about 49,000 STRV for the last 3 months. With only September left in the fiscal year, about 37,000 STRV is needed to reach the total fiscal year estimate.
Analysis from the Foreign Agricultural Service (FAS) of sugar imports from Mexico indicates that the large increase in July (total of 82,500 STRV) was followed by even a larger total in August of at least 120,000 STRV. Over 50 percent of these July-August imports were sugar for further processing by refiners. Imports of about 80,000 STRV are expected in September.
Deliveries, Refining Loss, And Stocks
Deliveries for human consumption in FY 2010 are increased 145,000 tons to reflect the stronger-than-expected pace of these deliveries in recent months. Sweetener Market Data (SMD), published by the Farm Service Agency (FSA), shows deliveries for human consumption at 8.800 million STRV through the end of July. Assuming deliveries of 950,000 STRV for each of August and September would bring the fiscal year total to 10.700 million STRV. Although the Sugar and Sweetener Team of the Economic Research Service (ERS) has questioned estimates of direct consumption imports in the SMD, the two agencies seem to agree on the delivery totals for this fiscal year.
Deliveries for FY 2010 re-export sugar-containing products are increased 25,000 STRV to 195,000 STRV, while deliveries for livestock feed use are reduced 5,000 STRV to 15,000 STRV. Both of these adjustments are based on pace-to-date. Miscellaneous use is estimated at -125,000 STRV. Miscellaneous use is estimated at -113,110 STRV at the end of July according to the most recent SMD. Ending stocks--the difference between total supply and use--are estimated at 1.510 million STRV for FY 2010. The implied ending stocks-to-use ratio is 13.7 percent.
Deliveries for human consumption for FY 2011 are projected at 10.775 million STRV, a modest 0.7-percent increase over deliveries for FY 2010. Other deliveries are forecast at 185,000 STRV, and the forecast for miscellaneous use is zero, an increase of 100,000 STRV from last month. With no change in expected exports (150,000 STRV), total use is increased 175,000 STRV from last month. Ending stocks are forecast at 1.084 million STRV, implying an ending stocks-to-use ratio of 9.8 percent.
Overall Allotment Quantity Set for FY 2011
On August 19, 2010, the Commodity Credit Corporation (CCC) announced the initial FY 2011 overall sugar marketing allotment quantity (OAQ) of 9,235,250 STRV and the corresponding sugar beet and sugarcane sector allotments and allocations. The FY 2011 OAQ is the same level as last year. In addition, the CCC announced that it will not implement the Feedstock Flexibility Program (FFP) or the Louisiana Proportionate Share Program for FY 2011. These programs are not needed because of the expected firm domestic sugar market in FY 2011. The CCC also established a beet allocation for a new beet processor that acquired an existing factory with production history.
The CCC distributed the FY 2011 beet sugar allotment of 5,019,358 STRV (54.35 percent of the OAQ) among sugar beet processors and the cane sugar allotment of 4,215,892 STRV (45.65 percent of the OAQ) among sugarcane States and processors as required by the 2008 Farm Bill. Pursuant to 359d(b)(2)(H) of the Agricultural Adjustment Act of 1938, as amended, the CCC recognized the sale by Minn-Dak Farmers Cooperative (MDFC) of its beet-processing factory in Worland, WY, to Wyoming Sugar Growers LLC (WSG). As a result, 0.8373168 percent of the total beet sugar marketing allotment and the associated production history will be transferred from MDFC to WSG, effective October 1, 2010.
The CCC also announced final revisions to sugar beet and sugarcane processor marketing allocations under the FY 2010 Sugar Marketing Allotment Program. Revisions stem from the USDA's reassignment of remaining surplus cane sugar allotment to a 300,000-ton raw sugar tariff-rate quota (TRQ) increase, which was announced on July 6, 2010, and a reassignment of surplus beet and cane sugar allotments to raw cane sugar imports expected from non-TRQ sources. In all, the final FY 2010 beet and cane sector allotments are reduced to 4,849,358 and 3,515,892 tons, respectively.
Sugar Beet Ruling By Federal District Court
On August 13, 2010, Judge Jeffrey S. White of the Federal District Court in San Francisco revoked USDA's approval of the unregulated production of genetically modified (GMO) sugar beets. The Judge indicated that the USDA had not adequately assessed the environmental consequences of allowing the unregulated use of the GMO seed for commercial root and seed cultivation. The Judge was particularly concerned that the unregulated status was threatening the option of farmers to grow non-GMO sugar beets. Although the Court's ruling returns GMO sugar beets to regulated status, the ruling does not apply to GMO sugar beet root and seed crops that were planted by August 13, 2010, which means that GMO sugar beet root crops already planted may be processed and sold as sugar. The GMO sugar beet seed crop that has already been planted may be harvested and stored.
Secretary Vilsack stated in a September 1, 2010, press release that USDA is working to create an environment where all types of producers have the option to produce any type of cropùconventional, organic, or biotech. The press release noted that the Court's ruling does not preclude the appropriate exercise of administrative discretion by USDA's Animal and Plant Health Inspection Service (APHIS) to authorize the future planting of GMO sugar beets pursuant to USDA's regulatory authority. To further the goal of coexistence among the different types of production systems, APHIS is taking steps in response to the Court's ruling. First, APHIS is issuing permits to sugar beet seed producers to authorize "steckling" (i.e, seedlings) production this fall under strict permit conditions that would not allow flowering of the stecklings. These stecklings are needed to produce GMO sugar beet seed to be planted in spring 2012. Second, APHIS indicated that it has received and is evaluating a request for a partial deregulation of GMO sugar beets. To assist in the evaluation of this request, APHIS is developing an appropriate environmental analysis to indentify the impacts of authorizing future seed and root crop plantings under a combination of permits, administrative orders, or other regulatory measures. Any regulatory measures taken would include mitigating restrictions consistent with those proposed to the Court as interim measures while APHIS completes the environmental impact statement (EIS) for the petition for determination of nonregulated status for GMO sugar beets. APHIS anticipates making decisions on appropriate interim regulatory measures associated with the partial deregulation request by the end of the year. APHIS also indicated that it continues to place a priority on the expedited completion of the EIS, a process that is anticipated to take 2 years.
Mexico Sugar And High Fructose Corn Syrup
The U.S. Department of Agriculture (USDA) has revised estimates of Mexico sweetener supply and use based on examination of estimates made by the Comite Nacional Para el Desarrollo Sustentable de la Cana de Azucar (CNDSCA) in Mexico.1 The first adjustment is to increase sugar beginning stocks for 2009/2010 by 136,000 metric tons, raw value (MTRV) to 624,000 MTRV. The CNDSCA estimates come from sugarcane processor surveys considered to be reliable. (For 2008/2009 sugar supply and use, the USDA has reduced "Other Deliveries" by 136,000 MTRV to make 2008/2009 ending stocks equal to 624,000 MTRV).Beginning in 2009/2010, the CNDSCA collects and publishes monthly delivery data for sugar (estandar, refinado, and total) and for high fructose corn syrup (HFCS). Table 1 shows CNDSCA estimates for the first 10 months of 2009/2010. Based on these data, the USDA has projected sweetener deliveries for August and September, the final 2 months of the marketing year. The data show steadily increasing deliveries of HFCS throughout the year.
HFCS deliveries in June-July averaged about 145,000 metric tons, dry basis. The HFCS share of combined deliveries in July constituted 28.72 percent. The USDA projects HFCS deliveries for August and September at 145,000 metric tons and assumes that HFCS deliveries constitute the same share of combined sweetener deliveries as in July, which implies sugar deliveries of 360,000 metric tons, tel quel (actual weight) for each of August and September. Summing across 12 months of the marketing year indicates total HFCS deliveries of 1.450 million metric tons and total sugar deliveries of 4.541 million metric tons, tel quel. Converting into raw value terms yields a sugar delivery total for human consumption of 4.812 million MTRV, 42,000 MTRV higher than the estimate for August. The September HFCS delivery estimate for the 2009/2010 season is 250,000 metric tons higher than the estimate in August.
For 2010/2011, the USDA assumes that HFCS deliveries will average between 140,000 and 145,000 metric tons for a year-long projection of 1.700 million metric tons. Combined sweetener deliveries in 2009/2010 represented a large increase over previous years. Per capita consumption is estimated at 53.26 metric tons. The USDA assumes this same level of per capita consumption for 2010/2011, implying 2010/2011 sugar deliveries for human consumption of 4.618 million MTRV.2 .
The final adjustment to Mexico sugar supply and use for 2009/2010 is to increase exports by 90,000 MTRV to 570,000 STRV. This adjustment is based on the pace of exports to date to the United States. Estimated ending stocks as the difference of total supply and use are 777,000 MTRV for 2009/2010 and 859,000 MTRV for 2010/2011.
1--The CNDSCA has broad authority to implement Government policies for the Mexican sugarcane sector and coordinates a range of activities for the Mexican sugarcane sector. The Director General of CNDSCA is appointed directly by the Mexican President. The CNDSCA includes members from various government secretariats, including SAGARPA (agriculture), Economia, Housing and Public Credit, Environment and Natural Resources, and Labor. Other members include representatives from sugarcane processors and labor unions of sugarcane growers and workers.
2--Total sweetener deliveries equal 6.057 million tons. Less HFCS of 1.700 million yields 4.357 million metric tons, tel quel. Conversion of raw value produces 4.618 million MTRV.
International Sugar Prices Make High-Tier
Sugar Imports Competitive With Domestic Sugar
Global sugar prices have continued to rise through August and into September as weather still leaves a risk of tight supplies in the upcoming months, particularly in Brazil and India. Dry weather at the beginning of Brazil's harvesting season (which begins in March) helped the harvest and caused strong production levels early in the harvest year. However, the same dry conditions could also reduce yields of the sugarcane crop harvested later in the season and late-maturing sugarcane. Some of the decreased yields are expected to be offset by higher sucrose levels in the harvested crop, which typically occur during dry growing seasons. Excessive rains late in the monsoon season in India, the second largest sugar producer in the world behind Brazil, may delay the beginning of the sugarcane harvest in some regions and affect total production for the upcoming marketing year. As a result, global sugar prices have continued to increase after sharp declines in the spring.
U.S. sugar imports outside of the sugar tariff rate quota (TRQ), or high-tier tariff sugar, have been responsive to relative price differentials between U.S. and global prices. Even with the increase in global sugar prices stemming from tight global supplies, U.S. prices have also increased. In recent months, the U.S. domestic raw sugar contract price has been close to, and at times has exceeded, the price for imported raw sugar for U.S. consumers. The imported sugar price is the No. 11 contract on the International Commodity Exchange (ICE) plus the high-tier tariff (15.32 cents/pound) and an assumed marketing margin (1.5 cents/pound).
The narrowing spread between imported and domestic sugar prices has resulted in greater high-tier sugar imports over the past few months. High-tier sugar imports began increasing in April and remained high in May, June, and July. Through July of the 2010 fiscal year (beginning in October 2009), 105,000 metric tons, raw value (MTRV) of high-tier sugar were imported. Over the same period of 2009, only 2,000 MTRV were imported. High-tier sugar imports are expected to remain large with relatively tight domestic supplies, and imported sugar prices are expected to remain competitive with domestic prices.
September 14, 2010
Economic Research Service
USDA, Washington, D.C.
P.O. Box 520526
Independence, MO 64052-0526