WASHINGTON — Thirteen U.S. senators with the blessing of the Sugar Users Association (S.U.A.) have urged the U.S. Department of Agriculture to increase tariff rate quota (T.R.Q.) levels because of tight U.S. sugar supplies.
At the same time, most domestic sugar producers, both beet and cane, have indicated they still have sugar to sell for the current 2008-09 (October-September) marketing year. And domestic raw cane values have been near or below forfeiture levels since late October 2008, although they moved above those prices last week.
"By increasing current sugar T.R.Q.s for raw and refined sugar, U.S.D.A. can help ensure that confectioners, bakers, ice cream makers and other U.S. food producers have access to an adequate supply ofsugar at a reasonable cost," eight Republican and five Democratic senators said in a March 23 letter to Secretary of Agriculture Tom Vilsack.
"The letter demonstrates strong bipartisan support for taking steps to ensure that the U.S. sugar market remains adequately supplied," Fred Hensler, chairman of the S.U.A., said last week.
"A confluence of factors, including production shortfalls, strong demand and the continued closure of a major domestic refinery following a tragic accident last year, have contributed to a tight U.S. sugar market," the letter said. "We hope that the Department will review current market conditions and make appropriate adjustments to ensure an adequate supply of sugar for the domestic market."
In similar situations in the past, producers have claimed such requests for increased imports were more a matter of domestic users not wanting to pay current prices than of actual shortages.
"We are not aware of a single buyer who cannot find enough sugar," Jack Roney, an economist with the American Sugar Alliance, which represents sugar processors and producers, said recently. "In fact, the sugar companies in America have plenty of sugar to sell and are actively looking for buyers."
Trade sources indicated unsold 2008-09 domestic sugar supplies may be as high as "a few hundred thousand" tons, but most likely less than 500,000 tons.
The T.R.Q., or import quota, was set in September 2008 for the 2008-09 sugar marketing year. At that time the U.S.D.A. said the domestic market likely would need additional sugar supply. Under current legislation, the U.S.D.A., which administers the U.S. sugar program, may not adjust T.R.Q. levels until April 1.
In its March 11 World Agricultural Supply and Demand Estimates (WASDE), the U.S.D.A. projected a sugar stocks-to-use ratio of 9% on Sept. 30, 2009, historically low compared with a typical ratio near 15%. The U.S.D.A. projected 2008-09 total U.S. sugar supply at 11,821,000 tons, raw value, consisting of 1,660,000 tons carried over from the previous year, 7,630,000 tons of domestic beet and cane sugar production and 2,531,000 tons of imports. Total sugar use for the year was projected at 10,840,000 tons, with an ending balance of 981,000 tons on Sept. 30. Revised supply/demand data will be released April 9.
The S.U.A. estimated an additional 750,000 tons of sugar was needed this year. That amount would bring total supply to 12,571,000 tons, resulting in an ending balance of 1,731,000 tons, assuming use is unchanged, and a stocks-to-use ratio of 16%.
"Because of the lead time to purchase, ship and refine raw sugar, a T.R.Q. increase must occur in the very near future in order to avoid supply disruptions later this year," the S.U.A. said.
Domestic sugar producers, however, note that although domestic sugar supply will be short of projected demand, large shipments from Mexico have filled the void so far. Mexican sugar may enter the United States unrestricted under the North American Free Trade Agreement. Traders also contend the U.S.D.A. has, at least publically, significantly underestimated potential Mexican exports to the United States.
In its March WASDE the U.S.D.A. projected 2008-09 shipments of Mexican sugar to the United States at 680,000 tons, down from 694,000 tons in 2007-08. But shipments in the first four months of the marketing year were well above the same period a year earlier, leading some in the trade to project Mexican sugar exports to the United States as high as 1 million tons in 2008-09. Others doubt Mexico will be able to maintain such a pace for the whole year.
Mexico’s Secretary of the Economy Ruiz Mateos said in a Jan. 28 letter to the U.S. Trade Representative and the U.S. Secretary of Agriculture that sugar exports to the United States "are expected to reach around 750,000 to 800,000 tons this year. I respectfully ask you to consider the new figures provided before allocating any import quotas to third countries."
Trade sources also note U.S. refining capacity will increase significantly when the Imperial Sugar Co. plant in Port Wentworth, Ga., down since February 2008, resumes operations later this spring.
Further, the U.S.D.A. in late February forecast 2009 U.S. sugar beet plantings up sharply from 2008. Some refined sugar from the 2009 crop could be pulled into the 2008-09 marketing year, although the bulk of it would apply to 2009-10. Planting numbers will come into better focus when the U.S.D.A. issues its annual Prospective Plantings report on March 31.
This article can also be found in the digital edition of Food Business News, March 31, 2009, starting on Page 1. Click