Ron Sterk

Many of the nation’s beet and cane sugar producers gathered at the International Sweetener Symposium July 29 to Aug. 3 in Couer d’Alene, Idaho, to catch up on sugar policy, trade and market issues. While uncertainty about the upcoming presidential election and its potential impact on those topics was a common point of interest, the key issue may have been the ongoing renegotiation to adjust the Countervailing Duty Suspension Agreements between the United States and Mexico, which if not resolved, may threaten both much-needed U.S. imports of Mexican raw cane and Mexican imports of U.S. high-fructose corn syrup. At the same time, the word “forfeiture” concerning beet sugar came up for the first time since 2013.

The suspension agreements were designed to replace substantial duties on imports of Mexican sugar after U.S. sugar producers, largely the same group that attends the Symposium, successfully showed they were harmed by Mexico’s dumping of subsidized sugar on the U.S. market. But the plan, in effect only about 20 months, went awry when a larger-than-expected share of exports from Mexico went to U.S. “melt houses” as direct consumption sugar rather than to U.S. cane refineries that melt and crystalize the raw sugar, leaving those refiners who lack a source of domestic raw cane woefully short of raw material. The market situation was exacerbated by those same U.S. cane refiners selling refined cane heavily in the first half of the year, a trend in part driven by sugar users’ increased demand for non-bioengineered cane sugar over beet sugar, which is almost completely from bioengineered seed.

As a result, there is nearly a three-tiered U.S. sugar market, with prices for refined cane sugar from refiners who depend on raw imports at the high end of the price range quoted by Sosland Publishing Co., refined cane sugar prices from refiners with domestic raw cane supply at the low end of the refined price range, and refined beet sugar prices at an historically wide discount of 4c a lb or more below refined cane sugar prices.

The issue with Mexico is of such importance that some suggest it will dictate both refined sugar prices and corn sweetener prices in both countries if not resolved. While it may appear Mexico “holds the cards” in determining the fate of the North American sweetener market, it in fact is at a much weaker bargaining stance than is the United States because, as one attendee at the Symposium said, “Remember, Mexico lost the (dumping) case,” which means duties nearing 80% would go onto U.S. imports of sugar from Mexico if the suspension agreements are voided. Thus, it would appear to be in the best interest of both countries to reach an amicable solution, especially since Mexico has excess sugar and U.S. prices provide a better alternative than the world market.

U.S. sugar market seeking equilibrium
‘Do over’ of agreement with Mexico key for sugar producers.

The United States is said to be seeking to adjust the mix of raw and refined sugar imported from Mexico (now at 53% raw and 47% refined in the suspension agreements) to a much higher percentage of raw, define what constitutes a refiner (must produce crystallized sugar rather than just melt) and perhaps adjust the floor price above which Mexican sugar may be exported to the United States.

The situation of higher cane sugar demand and reduced beet sugar demand has led some to mention the potential for forfeitures by beet processors against government loans if beet sugar prices drop much further, or if they are unable to clear sufficient supply by the end of the marketing year on Sept. 30. Barbara Fecso, who runs the U.S. Department of Agriculture’s sugar program, said at the Symposium that she expected excess beet sugar supplies will be cleared and forfeitures will not occur in 2016. Others at the meeting were less sure about ruling out forfeitures, but beet processors did appear confident they would be able to reduce old-crop sugar stocks sufficiently to limit carryover into the new marketing year that begins Oct. 1, which would effectively avoid forfeitures.

Increased sales of beet sugar the past few weeks have aided processors in reducing old crop stocks. Those increased sales have been driven by a combination of weak refined beet sugar prices and buyers’ willingness to buy discounted beet sugar in lieu of refined cane, especially after the signing of the national G.M.O. labeling bill July 29 that took pressure off food processors to meet G.M.O. labeling laws in Vermont that began July 1.

While the sugar market has many hurdles ahead, including added sugars on the Nutrition Facts Panel, beverage taxes in a number of cities (or at least several votes on taxes this fall), it was hoped the first major hurdle of a revised trade deal with Mexico will be cleared in the next few weeks or months.