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USDA Sugar and Sweeteners Outlook


15 May 2014

USDA Sugar and Sweeteners Outlook - 15 May 2014USDA Sugar and Sweeteners Outlook - 15 May 2014


USDA Sugar and Sweeteners Outlook

NAFTA Sugar May 2014

On May 9, 2014, the U.S. Department of Agriculture (USDA) published in the World Agricultural Supply and Demand Estimates (WASDE) its latest sugar supply and use projections for the United States and Mexico for fiscal year 2013/14 and its first projections for 2014/15.

The USDA projects 2014/15 beet sugar production at 4.750 million short tons, raw value (STRV), about the same as 2013/14. Area planted is based on National Agricultural Statistics Service (NASS) forecasts from 2014 Prospective Plantings and trend yields are used to forecast overall production. The USDA projects 2014/15 cane sugar production at 3.745 million STRV. Because there is no NASS forecast of area harvested until the end of June, the USDA assumes the same area harvested for sugar as in the previous year. Sugarcane and sugar yields are estimated from trend, and these are applied to area for the production forecasts. Total sugar production for 2014/15 is projected at 8.495 million STRV, a slight increase over last year of 15,000 STRV.

The USDA forecasts 2014/15 total tariff-rate quota (TRQ) sugar imports at 1.262 million STRV. TRQ imports are forecast at minimum levels to be consistent with U.S. obligations to the World Trade Organization (WTO) and sugar provisions of Free Trade Agreements (FTA). Because the USDA has not announced a TRQ for additional specialty sugar, it is set at zero for now. Shortfall is projected at 200,000 STRV, the same level as in 2013/14. The USDA projects 2014/15 imports from Mexico at 1.421 million STRV, down 424,000 STRV from 2013/14. This forecast is highly tentative. Re-export program imports for 2014/15 are forecast at 400,000 STRV, reflecting a return to normal refiner re-export balance activity after last year’s unusual USDA exchange of sugar owned by its Commodity Credit Corporation (CCC) for program-related export credits.

The USDA expects a 100,000 STRV increase in 2014/15 deliveries for human consumption for a total forecast of 11.700 million STRV. Ending stocks for 2014/15 are projected at 1.099 million STRV. The implied ending stocks-to-use ratio is 9.1 percent. Although very early, this low stocks-to-use level points to tight market conditions in 2014/15.

The USDA projects 2014/15 Mexico sugar production at 6.500 million mt. This forecast is highly tentative and is based on analysis by the Foreign Agricultural Service (FAS) post in Mexico and its contacts with sources in the Mexican sugar industry. The USDA forecasts 2014/15 consumption at 4.306 million metric tons (mt), the same level as in 2013/14. Ending stocks are forecast at 22 percent of domestic consumption. The export forecast is calculated as a residual and is set at 2.036 million mt. This forecast is 362,800 mt lower than that estimated for 2013/14.

Sugar and Sweeteners in the North American Free Trade Area

On May 9, 2014, the U.S. Department of Agriculture (USDA) published in the World Agricultural Supply and Demand Estimates (WASDE) its latest sugar supply and use projections for the United States (table 1) and Mexico (table 7 below) for the October/September fiscal year 2013/14 and its first projections for 2014/15.

U.S. Sugar: Production

The USDA made several changes to 2013/14 sugar production. On the basis of processor-reported production estimates, the USDA increased its estimate of Florida cane sugar by 20,000 short tons, raw value (STRV) to 1.760 million STRV. Cane sugar production in other States remained the same as last month. The USDA reduced its 2013/14 beet sugar production estimate by 184,000 STRV to 4.800 million STRV. The USDA accepted beet sugar processors’ estimate of September/August production at 4.692 million STRV, but estimated new crop production occurring in September at average levels instead of accepting the processors’ very optimistic estimate of record September production of 533,286 STRV. Sugarbeet planting in Idaho, Michigan, and the Red River Valley was only 23 percent complete as of May 4 and far below the 2009/10-2013/14 average of 56 percent, dimming early-season production prospects.

The USDA projects 2014/15 beet sugar production at 4.750 million STRV, about the same as 2013/14. Table 2 shows the assumptions behind the forecast for the five sugarbeet-growing regions. Area planted is based on National Agricultural Statistics Service (NASS) forecasts from 2014 Prospective Plantings. Overall area is forecast at 3.6 percent below last year. Several years of recent State-level ratios of harvested-to-planted area are averaged to forecast area harvested. Aggregate harvested area is forecast at 1.119 million acres, about 5.4 percent below last year. On a regional level, harvested area in the Red River Valley (the largest producing region) is down 7.8 percent and area in the Northwest (the second largest) is down 8.0 percent. State-level sugarbeet yields are forecast as the Olympic average (simple averaging that excludes maximum and minimum values) of yields since 2006/07. The implied national sugarbeet yield is 26.8 tons per acre, about 1 ton per acre lower than last year. National sugar yield (beet sugar per acre) is estimated as a function of the national sugarbeet yield and trend, and the estimate is multiplied by national area harvested to produce the sugar production forecast. (National levels are used because regional beet sugar production data are not published by the USDA.) The 2014/15 forecast, therefore, is 4.737 million STRV, rounded up to 4.750 million STRV.

The NASS sugarbeet crop year runs from September to August, while the USDA sugar fiscal year runs from October to September. Table 3 shows the combined sugarbeet and beet sugar production data based on the NASS crop year and makes a comparison with the fiscal year beet sugar total. (The 2011/12 crop year is adjusted to count beet sugar produced in August 2011 from sugarbeets sliced in August.) As can be seen, the differences can be large: 302,000 STRV in 2011/12 and -254,000 STRV in 2012/13. For the 2014/15 projection, the USDA makes no distinction between the crop and fiscal years, meaning that production for September 2015 is assumed to be at the same level as September 2014.

The USDA projects 2014/15 cane sugar production at 3.745 million STRV. Because there is no NASS forecast of area harvested until the end of June, the USDA assumes the same area harvested for sugar as in the previous year. Sugarcane and sugar yields are estimated from trend, and these are applied to area for the production forecasts. The largest difference from a year earlier is more production in Florida, up 90,000 STRV to 1.850 million STRV. Forecast production in Louisiana, Texas, and Hawaii is close to last-year levels, but as a sum is down 25,000 STRV. As the growing year progresses, more information will be available to make adjustments to yield and area forecasts.

Total production for 2014/15 is projected at 8.495 million STRV, a slight increase over last year of 15,000 STRV.

U.S. Sugar: Imports and Exports

Sugar imports entering under the 2013/14 raw sugar tariff-rate quota (TRQ) have summed to 383,667 metric tons, raw value (MTRV), or 422,920 STRV, through the end of April. TRQ entries in April totaled 99,414 MTRV, a highest one-month total since the beginning of the fiscal year. The USDA reduced its estimate of raw sugar TRQ shortfall by 45,359 MTRV, or 50,000 STRV (table 5). New shortfall is estimated at 181,437 MTRV, or 200,000 STRV. Estimated shortfalls from both Argentina and Paraguay were zero and 3,300 MTRV, respectively, and shortfall from the Dominican Republic was 20,000 MTRV. With this revision, raw sugar imports through the end of April are 41 percent of their expected total for the year. Average monthly imports through the rest of year should average 121,715 STRV, or about 101 percent higher than the average for the first 7 months (60,416 STRV) .

The USDA forecasts 2014/15 total TRQ sugar imports at 1.262 million STRV. Table 6 shows the component detail. TRQ imports are forecast at minimum levels to be consistent with U.S. obligations to the World Trade Organization (WTO) and sugar provisions of Free Trade Agreements (FTA). Because the USDA has not announced a TRQ for additional specialty sugar, it is set at zero for now. Shortfall is projected at 200,000 STRV, the same level as in 2013/14.

The USDA raised its estimate of 2013/14 sugar imports from Mexico by 100,000 STRV to 1.845 million STRV. Imports through the end of April have been strong at 1.337 million STRV. Imports through the end of the year are expected to average 101,500 STRV. The USDA projects 2014/15 imports from Mexico at 1.421 million STRV, down 424,000 STRV from 2013/14. This forecast is highly tentative and is discussed in greater detail in the Mexico section below.

Re-export program imports for 2014/15 are forecast at 400,000 STRV. This is a substantial increase over the estimate for 2013/14 of 110,000 STRV, but it reflects a return to normal refiner re-export balance activity after last year’s unusual USDA exchange of sugar owned by its Commodity Credit Corporation (CCC) for program-related export credits. With high-tier tariff imports forecast at 10,000 STRV, total 2014/15 imports are forecast at 3.093 million STRV.

The USDA expects sugar exports to total 250,000 STRV. This level is the same as that estimated for 2013/14, excluding a one-time large export not expected to be repeated. Most U.S. sugar exports go to Mexico for use in their sugar-product export program IMMEX (Industria Manufacturera, Maquiladora y de Servicios de Exportación).

U.S. Sugar: Deliveries and Ending Stocks

Sugar deliveries for human consumption continue their strong pace in 2013/14. Deliveries for the first 6 months total 5.599 million STRV, about 1.3 percent greater than last year’s corresponding period total. Cane sugar deliveries continue their strong performance at 2.977 million STRV, up 5.7 percent compared with last year and about a half percentage point above the current Sugar and Sweetener Outlook forecast of a 5.1-percent year-over-year increase. Beet sugar deliveries are only 1.9 percent below last year’s pace but above the 3.5 percent reduction forecast by the Sugar and Sweetener Outlook. Although direct consumption imports (DCI) by non-reporters to USDA’s Sweetener Market Data (SMD) are down 10.5 percent compared with last year, these deliveries display considerable month-to-month volatility. All these data imply no change to USDA’s 2013/14 deliveries for human consumption of 11.600 million STRV.

Ending stocks for 2013/14 are estimated as the difference between total supply (13.972 million STRV) and total use (12.376 million STRV) for 1.596 million STRV. The 2013/14 stocks-to-use ratio is projected at 12.9 percent, reduced from last month’s 13.0 percent.

For 2014/15, the USDA expects a 100,000 STRV increase in deliveries for human consumption, for a total forecast of 11.700 million STRV. Deliveries to sugar-containing product manufacturers for export at 100,000 STRV and to polyhydric alcohol manufacturers at 15,000 STRV are at the same levels as 2013/14. Deliveries to livestock feed manufacturers are projected at 20,000 STRV. Unlike 2013/14, there are no CCC-owned sugar deliveries to either ethanol producers or to livestock feed manufacturers.

Ending stocks for 2014/15 are projected at 1.099 million STRV. The implied ending stocks-to-use ratio is 9.1 percent. Although very early, this low stocks-to-use level points to tight market conditions in 2014/15.

Mexico Sugar and High Fructose Corn Syrup

The USDA made no changes to 2013/14 Mexico sugar supply and use (table 7). The USDA still estimates Mexico sugar production at 6.350 million mt. In analysis similar to that detailed last month, the Sugar and Sweetener Outlook concludes that there is doubt regarding the ability to harvest all area estimated by Mexico’s Comite Nacional Para El Desarrollo Sustentable de la Caña de Azucar (Conadesuca) to be harvested. Conadesuca estimates that 836,197 hectares will be harvested, but stochastic analysis by the Sugar and Sweetener Outlook implies 795,170 hectares. The Conadesuca estimates production at 6.471 million mt, whereas Outlook analysis implies 6.144 million mt, with a large standard deviation of 217,000 mt. Given Conadesuca’s assurances that all is on track to realize its estimate, the USDA did not change its estimate from last month, given that it is only 0.95 standard deviation above the 6.144 million mt point estimate.

The USDA projects 2014/15 Mexico sugar production at 6.500 million mt. This forecast is highly tentative and is based on analysis by the Foreign Agricultural Service (FAS) post in Mexico and its contacts with sources in the Mexican sugar industry. Area and yield should be about the same as 2013/14 and normal weather conditions are assumed.

The USDA forecasts imports for 2014/15 at 226,000 mt. All but 10,000 mt are assumed to be destined for Mexico’s IMMEX program, and most imports are assumed to be sourced from the United States. Total deliveries to the IMMEX program are forecast at 384,000 mt, the same level as 2013/14. The amount not imported for IMMEX comes from domestic production in Mexico.

Sugar deliveries for human consumption have totaled 2.054 million mt, about 20,000 mt more than through the same period last year. The USDA continues to estimate 2013/14 sugar consumption at 4.306 million mt and also forecasts 2014/15 consumption at that same level. The USDA believes that combined sugar and high fructose corn syrup (HFCS) per capita sweetener consumption will be the same in 2014/15 as is estimated for 2013/14; that is, 48.34 kilograms. Because sugar consumption is held constant, increased consumption due to population growth is applied to HFCS. Its consumption level is forecast at 1.420 million mt, dry weight. This projection represents growth of about 60,000 mt.

Ending stocks for both 2013/14 and 2014/15 are set at 22.0 percent of domestic sugar consumption. For 2014/15, the 22.0 percent represents the safe amount for available supply through the start of the next harvest cycle starting in November. The export forecast is calculated as a residual and is set at 2.036 million mt. This forecast is 362,800 mt lower than that estimated for 2013/14.

The USDA did not change its estimate of 2013/14 exports but did increase the share destined for the U.S. market by 85,583 mt (or 100,000 STRV). The reallocation caused estimates to third country markets to decrease to 820,000 mt. Although Conadesuca believes that these exports will total 1.190 million mt (table 8), the USDA believes that this export pace cannot be sustained through the end of 2013/14 and a goodly portion will take place in 2014/15. The same sort of port and infrastructure constraints limiting thirdcountry exports are assumed for 2014/15 new crop exports. Third-country exports for 2014/15 are capped at 820,000 mt, implying exports to the United States at 1.216 million mt (1.421 million STRV).

Conadesuca’s Sugar and HFCS Supply and Use Balances

In March 2014, Conadesuca published its latest balance for 2013/14. Table 8 shows the balance and compares it with the USDA May balance. From an accounting perspective, the primary difference is that Conadesuca excludes IMMEX components. Their belief is that sugar in IMMEX is not intended for domestic consumption and therefore is not necessary for inclusion. The one exception is that deliveries into IMMEX from domestic production are counted but are listed as an export, even though these will not show up in official export trade statistics.

There are differences in levels of supply and use estimates between Conadesuca and the USDA. Production has already been discussed. Conadesuca estimates less sugar for consumption but more for exports to the United States and third-countries. A drawing down of stocks is an important component in Conadesuca’s prediction of more exports. As discussed above, the USDA believes that Mexico is constrained in its ability to export all that it intends before the end of September.

Published by USDA Economic Research Service

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