Ron Sterk

By far the largest issue looming in the sugar and corn sweetener markets is the renegotiation of 2014 anti-dumping and countervailing duty suspension agreements between the United States and Mexico. Both sides have set June 5 as the deadline, with the United States vowing to resume duties totaling nearly 80% on sugar exports from Mexico and Mexico vowing to press for an anti-dumping investigation into high-fructose corn syrup exports from the United States if the deadline is missed.

What is at stake is about 8% this year and 16% next year of the sugar supply needed by U.S. consumers, retailers and food and beverage manufacturers, and nearly 30% of U.S. HFCS production that is exported annually to Mexico.

While specifics of each country’s position have not been revealed, it appears the primary sticking points involve the mix of raw and refined sugar the United States imports from Mexico and the polarity, or level of sucrose in the sugar (purity). Trade sources indicated the United States has proposed an 80% to 85% raw sugar and 15% to 20% refined sugar mix of imports from Mexico, while Mexico offered a 70% raw and 30% refined split, with possible hope of landing on a split of 75% to 80% raw and 20% to 25% refined, far different than the 53% refined and 47% raw sugar under the current suspension agreements.

U.S. and Mexico trade
What is at stake is about 8% this year and 16% next year of the sugar supply needed by the U.S. and nearly 30% of U.S. HFCS production that is exported annually to Mexico.

The initial suspension agreements defined refined sugar as that with 99.5% polarity and above. That level of purity allowed Mexico to export sugar slightly below 99.5% polarity then defined as “other” sugar at lower prices to U.S. “melters” who used it for direct consumption (no further refining), thus bypassing traditional U.S. cane refiners, some of whom found themselves with insufficient raw sugar supply. U.S. producers and some refiners claimed this was another instance of Mexico “dumping” lower-price sugar on the U.S. market, which both the original duties and the suspension agreements were meant to prevent.


Trade sources indicate the United States is seeking to define refined sugar as that with 99.2% and higher polarity in the new agreements, designed to increase the supply of raw sugar for U.S. cane refiners.

Another hurdle is any revisions to the suspension agreements must be approved by U.S. sugar producers who initiated the anti-dumping case in 2013.

All of this is occurring amid tight sugar supplies. The U.S. Department of Agriculture in its May World Agricultural Supply and Demand Estimates report projected record-high imports from Mexico in the 2017-18 marketing year that begins Oct. 1. At the same time, the U.S.D.A. expects sugar supplies for both the United States and Mexico to be tight next year, with supplies in the U.S. market especially tight for the remainder of this year.

U.S. Sugar Sources chart

Should the two countries fail to reach new suspension agreements, Mexico’s sugar market would be thrown into disarray along with U.S. sugar and corn sweetener markets, possibly to a degree never seen before. The United States would have to scramble to find sugar from other sources, likely through increases in tariff-rate quota imports, because imports from Mexico would be too expensive with nearly 80% duties. Mexico would have to sell more sugar onto the lower-price world market. And Mexico surely would press ahead with its investigation into U.S. exports of HFCS, which ultimately may result in large duties that would leave the United States with a significant excess of HFCS until corn refiners could adjust production.

Both U.S. and Mexican officials admit they need each other to make their sugar markets work. The United States limits deliveries of domestically produced sugar to 85% of projected total sugar needs, leaving 15% for imports. In fact, imports typically make up a larger percentage because U.S. cane sugar falls short of its allotment. About half of the imports typically come from Mexico and half from numerous other countries under World Trade Organization agreements, along with a couple of other free trade agreements. And Mexico needs the U.S. market to export its excess sugar production at a higher price than possible on the world market.

While the sugar and corn sweetener industries continue to push for resolution (and most still expect new agreements will beat the deadline), some see the stakes much higher, suggesting the sugar trade issue is a precursor to the much-larger renegotiation of NAFTA. If that’s the case, it may explain the reluctance of both countries to give as much as the other asks to reach new sugar trade agreements.