U.S. 2007-08 sugar supply projected to increase 3%

by Ron Sterk
Share This:

KANSAS CITY — U.S. sugar supply in the 2007-08 marketing year is projected to be about 3% greater than a year earlier based in large part on increased shipments from Mexico, which also remains the key "wild card" in the supply/demand scenario.

Trade sources and analysts expect mostly stable U.S. sugar prices in coming months although a weak tone remains evident in some regions.

Tom Earley, executive vice-president of Promar International, an Alexandria, Va., consulting firm, said he did not see any reason to deviate from previous price forecasts based on the most recent data from the U.S. Department of Agriculture. He previously termed the U.S.D.A. forecasts as "pretty reasonable."

With the minimum price to avoid forfeiture calculated by the U.S.D.A. at 24.28c a lb, processors have little incentive to sell below current price levels of 24@24½c a lb, f.o.b. Midwest, which are about 1@2c below year-ago levels. Indicated sales below forfeiture prices were the result of processors meeting competitive offers to maintain market share, traders said. Sellers generally have not pushed aggressively for additional sales in recent weeks with beet processors said to already have sold as much as 95% of their potential 2007-08 production, and cane refiners comfortably below percentage.

But trade sources also noted sugar has been going into the U.S.D.A. loan program. The earliest that forfeitures could occur is May.

The ample supply, meanwhile, also has encouraged sugar users to seek lower prices, or at a minimum to not be aggressive in filling coverage for 2007-08. Much of the uncovered business involves smaller buyers, traders said.

Total U.S. sugar supply in fiscal 2008 (ending Sept. 30) was projected by the U.S.D.A. in its January World Agricultural Supply and Demand Estimates (WASDE) report at 12,556,000 tons, raw value, up about 3% from 2007. The 332,000-ton increase is only partly offset by a projected 125,000-ton increase in total use (1%). Carryover on Oct. 1, 2008, was projected at 2,006,000 tons, up 207,000 tons, or 11.5%, from a year earlier. The stocks-to-use ratio is 19%, down from 19.4% in December but up from 17.3% a year earlier and 16.2% two years ago.

Key to the increased sugar supply is the U.S.D.A.’s projected 475,000 tons, raw value, of imported sugar from Mexico, up from only 60,000 tons in 2006-07 and compared with 420,000 tons in 2005-06. The increase depends on Mexico having its second largest cane sugar crop ever and increased imports of high-fructose corn syrup (HFCS) from the U.S.

"These import projections contain considerable uncertainty," the U.S.D.A. said in its Jan. 29 Sugar and Sweeteners Outlook. "The 2007-08 harvest is off to a slow start amid labor unrest, and there is no consensus on how much HFCS will be used in Mexico in 2008. Low sugar prices relative to last year may prove to be a disincentive to switch to HFCS," the U.S.D.A. said.

Some traders indicated the delayed harvest might have trimmed as much as 200,000 tonnes from Mexico’s 2007-08 production, projected by the U.S.D.A. at 5,830,000 tonnes, raw value.

Tariffs on sugar trade between the U.S. and Mexico were eliminated Jan. 1 under the North American Free Trade Agreement (NAFTA). While there was much speculation about a potential rush of sugar moving north across the border, some in the trade have termed it a "non event." The slow start to Mexico’s cane harvest, coupled with low sugar prices in the U.S., discouraged shipments.

Adding uncertainty to the U.S. sugar market is the lack of action on a new farm bill by the conference committee that must iron out differences between House and Senate versions. Proposals in both versions generally were supportive for U.S. sugar producers.

Yet another wrinkle was added when sugar producers recently petitioned to add restrictive trade language to the farm bill that would in effect "scrap" the open border between Mexico and the U.S. under NAFTA. Mr. Earley said he does not expect the proposal will make it into the farm bill.

Much of the sweetener industry will be meeting Feb. 10-13 at the International Sweetener Colloquium sponsored by the International Dairy Foods Association in Fort Myers, Fla. Topics include the new farm bill and trade with Mexico.

This article can also be found in the digital edition of Food Business News, February 5, 2008, starting on Page 16. Click here to search that archive.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.



The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.