More than 400 attendees at the recent International Sweetener Colloquium held Feb. 12-15 in Orlando, Fla., heard a common theme that the U.S. market greatly but uncomfortably depends on Mexican sugar to offset a perennial domestic shortfall. But this year also brought a couple new themes, including a possible dip in domestic sugar use, weaker sugar prices for the next two years and a slight uptick in U.S. use of high-fructose corn syrup.

Most of the news was “good” at the meeting, which was attended predominately by sugar users. It was the first time in about five years that participants heard the word “lower” in front of prices for sugar. That trend had been evident well before the Colloquium in forward sales for 2013 in the 42@45c a lb f.o.b. Midwest range and in pricing for 2014 in the 35@40c range. For users those levels compare quite favorably with most sales in 2011-12 (fiscal 2012) that have been around 55c a lb, and with values that averaged about 57c in 2010-11 and a record high 57.3c in 2009-10. One speaker suggested prices may even dip below 30c a lb in 2014, although there were few believers in that level.

At its Agricultural Outlook Forum 2012 last week, the U.S. Department of Agriculture projected refined sugar prices through 2021-22 that ranged from a low of 33.38c a lb in 2012-13 to a high of 42.16c in 2015-16 and averaging 36.57c from 2012-13 through 2021-22.

Of course price forecasts always come with a big “but.” Of greatest concern at the Colloquium were potential weather disruptions in cane refining operations. More than one participant noted the Gulf region was overdue for a major hurricane. Because of generally tight refining capacity in the United States, any significant down time may have an amplified effect on sugar supply and price as was the case when Hurricane Katrina hit the New Orleans area in 2005. That concern has been voiced ever since, although the only other major catastrophe was an explosion early in 2008 that shut down Imperial Sugar Co.’s cane refinery in Georgia for several months.

Weather also has been a factor in cane sugar production in Mexico, which has been the primary source of supplemental supply to the U.S. sugar market since Jan. 1, 2008, under the North American Free Trade Agreement. Now in its fifth year, the unrestricted movement of sweeteners between the United States and Mexico remains a key topic at each Colloquium. Although it hasn’t happened during that time, U.S. sugar producers continue to warn about a potential flood of Mexican sugar into the United States. Instead, Mexican sugar production has been below expectations, usually because of weather, most years since the free trade agreement began, and U.S. sugar producers have quietly been thankful for the Mexican supply that kept U.S. prices from getting too high.

Earlier in February Mexico trimmed its projected 2011-12 sugar production to 5.1 million tonnes from 5.3 million (4%) initially and from 5.2 million last year. The latest U.S.D.A. forecast was 5 million tonnes. Sugar output from the start of the season Oct. 1, 2011, through mid-February was running more than 10% below the same period a year earlier. The Mexican government also last week said it would soon issue a sugar import quota for 250,000 tonnes to avoid market volatility caused by supply uncertainty. That uncertainty was seen as either lower-than-expected production or larger-than-expected exports to the United States.

The importance of Mexico to U.S. sugar supply is undeniable. The U.S.D.A. noted that about 11% of the sugar consumed in the United States from 2008 through 2011 came from Mexico and was projected to increase to an average of 15% annually from 2013 through 2022.

Strong exports of sugar from Mexico have been and are expected to continue to be offset by larger imports of HFCS from the United States. Use of HFCS in Mexico was projected by the U.S.D.A. to reach 2.4 million tonnes, dry weight, in 2020-21, compared with 653,000 tonnes in 2008-09. That increase has been a boon to U.S. corn refiners who have seen domestic use of HFCS decline for more than a decade, until possibly this year.

After widespread and much-publicized switching from HFCS to sugar a couple of years ago, when sugar prices happened to be at or near record highs, a number of companies appear to have quietly switched back to HFCS. In its February World Agricultural Supply and Demand Estimates, the U.S.D.A. trimmed its projection of U.S. sugar use by 250,000 tons for 2011-12, “based on the slower-than-expected pace
to date.” With population growth typically accounting for increased sugar use of about 1% annually, the change back to HFCS was one of the few explanations the trade and attendees at the Colloquium had for the decrease in U.S. sugar use.