Ron Sterk

A year ago much of the “buzz” at the International Sweetener Colloquium centered on labeling, especially of bioengineered ingredients and added sugars on the Nutrition Facts Panel. While labeling remains a critical topic for the sweetener industry and food manufacturers overall, it was far from the main topic of discussion at this year’s Colloquium held Feb. 26 through March 1 at Dana Point, Calif.

Instead, politics in Washington and trade with Mexico, which are closely related, were the topics du jour. The change to the Trump administration has resulted in considerable uncertainty, although many in the industry were hopeful about the potential for a more business-friendly environment than was typical under the Obama administration. What was less popular was the transition process and the unknowns with an as yet unconfirmed Secretary of Agriculture and a just-confirmed Secretary of Commerce, both significant for key decisions about sugar.

Mexico provides more than 35% of U.S. sugar imports and around 10% of total sugar used in the United States.

It was hoped that the confirmation of Wilbur Ross as Secretary of Commerce last week will allow talks to restart on reworking the 2014 Anti-Dumping and Countervailing Duty Suspension Agreements between the United States and Mexico. Review and renegotiation of the agreements began months ago but stalled in December as the transition of power approached. Meanwhile, uncertainty about raw and refined sugar imports from Mexico, which are controlled by the agreements, has left some U.S. cane refiners who depend on imported raws critically low of supply, a situation expected to become more critical in the weeks ahead. 

Trading, specifically with Mexico, which provides more than 35% of U.S. sugar imports and around 10% of total sugar used in the United States, probably was the No. 1 topic at the Colloquium, not unlike in 2008 when the North American Free Trade Agreement first allowed duty free sweetener trade between the two countries and again in 2012-13 and 2013-14 when Mexican sugar exports were flooding the United States, prompting U.S. sugar producers to file petitions with the U.S. Department of Commerce charging Mexico with dumping subsidized sugar on the U.S. market. Those charges ultimately were confirmed and resulted in large duties, leading finally to the Suspension Agreements.

In the past two years, though, many decided those agreements were flawed and needed “tweaking” to adequately meet U.S. sugar import needs. Should the Suspension Agreements issue be settled in the near future, it should increase the supply of raw sugar for the cane refiners who so desperately need it. Most seem to agree the suspension agreements will be revised, but there is doubt whether it will be before the refiners all but run out of raw sugar.

Chart: U.S. sugar supply sources

So the U.S.D.A. enters the debate because it has the power and authority to adjust the tariff-rate quota that could allow more raw sugar imports from countries other than Mexico. But with the exception of the couple of refiners who need the raw sugar, most in the industry fiercely oppose a T.R.Q. increase, which they maintain could result in loan forfeitures by U.S. beet processors. The U.S.D.A. wants to avoid forfeitures because it does not allow the sugar program to be run on a no-cost basis as mandated by Congress. Beet producers and processors want to avoid forfeitures in part because the timing just ahead of negotiations on a new farm bill could make maintaining the sugar program more difficult in the new farm bill. Forfeitures have only occurred once since 2002. That was in 2013 and served as a precursor to the anti-dumping actions. Beet sugar supplies are more than adequate to fill their portion of domestic marketings under the sugar program. Domestic cane supplies are not adequate, and thus the need for imports from Mexico and other countries.

And Mexico’s point of view cannot be ignored. This year more than ever, Mexico seems poised to retaliate with some action if the Suspension Agreements are canceled or if the United States opts out of the NAFTA, a move most do not expect to happen, although they expect changes. That retaliation most likely would include, at a minimum, Mexico stopping imports of high-fructose corn syrup and possibly of corn and other commodities, which would further complicate already tenuous trade relations.