Sugar and Sweeteners Outlook

Transcription

1 United States Department of Agriculture Electronic Outlook Report from the Economic Research Service SSS-237 May 30, 2003 Sugar and Sweeteners Outlook Stephen Haley, Nydia R. Suarez and Alberto Jerardo USDA Increases Sugar Marketing Allotments Contents U.S Sugar Honey Policy World Sugar Prices Contact & Links Tables Alternative WASDE Mexico PS&D World refined sugar price World raw sugar price U.S. raw sugar price Beet sugar price U.S. refined sugar price U.S. sugarcane area, yield and production U.S. sugarbeet area, yield and production U.S. cane and beet sugar deliveries U.S. sugar, PS&D U.S. HFCS deliveries Web Sites WASDE Sugar Briefing Room The next release is September 23, Approved by the World Under authority granted in the Farm Security and Rural Investment Act of 2002, the U.S. Department of Agriculture (USDA) announced on May 13, 2003, that it was immediately raising the Overall Allotment Quantity (OAQ) for sugar marketing allotments by 463,000 short tons, raw value (STRV), to million STRV. The resulting sector allocations for the 2002 crop are: Beet sugar: million STRV Cane sugar: million STRV Total million STRV By statute, the OAQ of sugar for a crop year is determined by subtracting the sum of million STRV and carryin stocks of sugar (including inventory owned by the Commodity Credit Corporation) from the USDA s estimate of sugar consumption and reasonable carryover stocks at the end of the crop year. The OAQ is divided between refined beet sugar at percent of the overall quantity and raw cane sugar at percent of the overall quantity. According to the formula, the estimated sugar consumption of 9.6 million STRV as reported in USDA s May 12, 2003, World Agricultural Supply and Demand Estimates report (WASDE) and implied reasonable carryout of million STRV (19.25 percent of total use of million STRV) are added. Subtracted from this total are the estimated carryin of million STRV and the statutory million STRV. On May 12, 2003, the USDA released its latest supply and use estimates for fiscal year (FY) 2003 and projections for FY 2004 in the WASDE. The USDA estimates sugar production for FY 2003 at 8.4 million STRV. Beet sugar production for FY 2003 is estimated at 4.45 million STRV, and is based on the April 2003 beet sugar processors survey conducted by USDA s Farm Service Agency (FSA). Cane sugar

2 production for FY 2003 is estimated at 3.95 million STRV. Sugar production was strong in all States except Louisiana where production was off due to complications from tropical storm Isidore and by Hurricane Lili in the fall. As of May 7, 2003, raw sugar FY 2003 tariff-rate quota (TRQ) imports have totaled 549,856 metric tons, raw value (MTRV). This amount is 49.2 percent of the total allocation of million MTRV. Of the remaining amount, 72.2 percent are from countries whose exports are subject to shipping patterns. Shortfall is estimated at 30,000 STRV, and is attributable mainly to three countries that do not have sugar to export to the United States (Barbados, Gabon, and Haiti). With the exception of allocations made to Canada and Mexico, the refined sugar TRQ has been largely filled. To date, only 309 MTRV of Mexican refined sugar has entered as part of the FY 2003 sugar TRQ. Other program sugar imports outside the sugar TRQ for FY 2003 are estimated to total 340,000 STRV. Other USDA import programs include the Refined Sugar Re-export Program, the Sugar-Containing Products Program, and the Polyhydric Alcohol Program. According to the U.S. Census Bureau, these imports from October 2002 to March 2003 have totaled 205,370 MTRV, or 226,379 STRV. This amount is about 62 percent of the estimated total. Nonprogram imports for FY 2003 are estimated at 60,000 STRV. This total includes 50,000 STRV of sugar contained in molasses imported for the commercial extraction of refined sugar (HTS ). High-tier tariff imports from Mexico are estimated at 10,000 STRV. The USDA estimates deliveries for domestic food and beverage use for FY 2003 at 9.6 million STRV. The USDA estimates sugar exports at 155,000 STRV. These exports occur under the Refined Sugar Re-export Program. The USDA also projects that deliveries made to domestic food and beverage manufacturers under the Sugar-Containing Products Re-export Program will total 160,000 STRV. The USDA projects FY 2003 ending stocks at million STRV, implying an ending stocks-to-use ratio of percent. The USDA s Interagency Commodity Estimates Committee (ICEC) for sugar made its projections for FY 2004 supply and use. Beet sugar production for FY 2004 is projected at 4.45 million STRV. Aggregate cane sugar production in Florida, Louisiana, Texas, and Hawaii for FY 2004 is projected at million STRV. Although the FY 2004 refined and raw sugar TRQs have not yet been announced by the USDA, they are projected in the May WASDE at the Uruguay Round minimum commitment levels less an assumed shortfall of 35,000 STRV, or million STRV. Other program sugar imports outside the sugar TRQ are projected to total 320,000 STRV. Non-program imports are projected at 60,000 STRV. This total includes 50,000 STRV of sugar contained in molasses imported for the commercial extraction of refined sugar (HTS ). High-tier tariff imports from Mexico are projected at 10,000 STRV. Sugar exports are projected at 150,000 STRV. These exports occur under the Refined Sugar Re-export Program. The USDA projects that deliveries made to domestic food and beverage manufacturers under the Sugar-Containing Products Re-export Program will total 170,000 STRV. Deliveries for domestic food and beverage use for FY 2004 are projected at 9.85 million STRV. This projection represents a modest increase over expected consumption in FY Ending stocks are projected at million STRV, implying an ending stocks-to-use ratio of 15.7 percent. Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

3 U.S. Sugar Outlook U.S. Sugar On May 12, 2003, the U.S. Department of Agriculture (USDA) released its latest supply and use estimates for fiscal year (FY) 2003 and projections for FY 2004 in the World Agricultural Supply and Demand Estimates (WASDE) report. On the next day, the USDA announced an increase in beet and cane sugar marketing allotments for FY Marketing Allotments On May 13, 2003, the USDA announced an increase in the overall allotment quantity (OAQ) for domestic sugar by 463,000 STRV. The OAQ now totals million STRV. According to the provisions of the 2002 Farm Act, the OAQ is allocated among beet processors (54.35 percent -- 4,708,341 STRV) and cane processors (45.65 percent -- 3,954,660 STRV). On May 19, the Commodity Credit Corporation (CCC) announced that it had determined that the U.S. beet producers are capable of fulfilling only 4,534,341 STRV of their allotment. Included in this amount are 77,641 STRV of beet sugar that had to be reassigned among beet processors. The unfilled remainder of 174,000 STRV has been reassigned to the CCC for the sale of its inventory. This reassignment has been made recognizing that the CCC had on January 15, 2003 announced its reassignment of 182,000 STRV of the beet sugar allotment to the CCC, subject to the results of the anticipated processor survey. With the survey results now known, the CCC revised its beet sugar reassignment in the described manner. The CCC also announced on May 19 that it had determined that cane processors can only fulfill 3,944,660 STRV of their allotment. The unfilled portion of 10,000 STRV is reassigned to CCC for sale The 2002 Farm Act directs the USDA to operate the sugar program at no-net cost to taxpayers, thus avoiding forfeitures to the CCC and maintaining market balance. For the first year of program operation under the 2002 Farm Act, the USDA announced in August 2002 that domestic marketing allotments would be in effect for FY 2003 with an OAQ of million STRV, using the allotment formula guidelines in the 2002 Farm Act. A first adjustment was made in January 2003 with an OAQ increase of 500,000 tons to 8.2 million STRV. In making the May 13 OAQ announcement, the USDA noted that market prices of sugar were well above forfeiture levels, thus justifying the decision to make more domestic sugar available to the market. The USDA also noted that the higher OAQ, along with higher-than-expected beet sugar production, precluded the need to increase the sugar TRQ and import more foreign sugar. FY 2003 Supply and Demand Estimates Beet Sugar Production Beet sugar production for FY 2003 is estimated at 4.45 million short tons, raw value (STRV). This estimate is based on the April 2003 beet sugar processors survey conducted by USDA s Farm Service Agency (FSA). The estimate is an increase of 235,000 STRV from the April 2003 WASDE. There are two components to the increase (fig. 1). First, the processors estimate this September s production from the 2003 crop that is included in FY 2003 at about 79,000 STRV higher than the April USDA projected level. Second, the processors estimate that higher recovery from April to August will yield an additional 156,000 STRV above the earlier USDA projections. A small portion of the STRV Figure 1 Components of May 2003 WASDE beet sugar production increase 180, , , , ,000 80,000 60,000 40,000 20,000 0 Source: USDA. 78,914 Proj. increase in Sept production 156,086 Higher forecast recovery (Apr.- Aug.) Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

4 increase can be attributed to better-than-expected sugar per acre in the spring and summer California harvests. With the end of beet slicing in Idaho (March) and the Red River Valley (mid-may), the remainder of the increase is from thick juice stored from earlier slicing activity. Figure 2 shows crop year sugar recovery net of sugar from desugared molasses for September-March and for September-August since 1994/95. The average September-March recovery for 1994/95 through 2001/02 has been 271 pounds of sugar per one ton of sliced beets. The average over the same time period for the entire crop year has been 284 pounds per ton, implying an increase in recovery of 4.95 percent during the April-August period. In order to reach the current WASDE estimate of 4.45 million tons, total crop year recovery should be in the neighborhood of 299 pounds per ton. If realized, the increase in recovery over the current year September-March rate of 274 pounds per ton will have to be 8.83 percent, or about 3.25 standard deviations above the average growth for the 1994/ /02 period. (Parenthetically, prior to the May 2003 WASDE, the USDA had been projecting recovery growth slightly under the historical average growth rate.) Evidently, pounds/ton Figure 2 Crop year sugar recovery from sliced beets (not including sugar from desugared molasses) / / /03 Source: USDA. (actual/proj) Recovery rate Sept.-Mar. Recovery rate Sept.-Aug. processors are confident about their high levels of thick juice in storage from which to produce the additional sugar. Cane Sugar Production Cane sugar production for FY 2003 is estimated at 3.95 million STRV, about 40,000 STRV less than last year. Sugar production was strong in all States except Louisiana where production was off due to complications from tropical storm Isidore and by Hurricane Lili in the fall. Based on industry reports, FY 2003 Florida cane sugar production is estimated at million STRV. The National Agricultural Statistics Service (NASS) estimates Florida sugarcane acreage harvested for sugar at 442,000 acres and production of sugarcane for sugar at million tons, implying a yield estimate of 38.3 tons per acre, the highest since FY1999. The harvest was extended through late April, with generally favorable conditions although sugar recovery tailed off in the last few weeks of the harvest. Overall, the recovery rate is estimated at percent, close to the average rate for the last 5 years. Louisiana cane sugar production is estimated at 1.36 million STRV. In the first half of the harvest, many fields were flooded from tropical storm Isidore, Hurricane Lili, and more subsequent rainfall. Conditions improved by December. January production of 131,000 STRV was a record. Still, sugar per acre amounted to a low 2.92 tons, the lowest level since the adaption of high-yielding cane in Louisiana. The portion of the next season s harvest occurring in September will be counted as production in this fiscal year. It is currently expected to be over 70,000 STRV. Texas sugar production is estimated at 185,000 STRV. The harvest season has been affected by wet conditions and has extended into May. Sugar recovery, however, has been excellent, estimated at 11.2 percent, the second highest level on record. Hawaii sugar production for FY 2003 is estimated at 280,000 STRV. The Hawaiian harvest season, unlike mainland areas, follows the calendar year. Although NASS does not make a sugarcane area and production forecast for 2003 until August, it is expected that with normal weather conditions, production will be about the same in Kauai and increase more than 10 percent Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

5 in Maui. First-quarter Hawaiian production (October- December 2002) amounted to more that 74,000 STRV, nearly 35 percent higher than the same period in the preceding year. The 2003 crop-year harvest started in March (about 20,000 STRV) and will extend the rest of the year. TRQ Imports On July 30, 2002, the USDA established the FY 2003 tariff-rate quota (TRQ) for imports of raw cane sugar into the United States at 1,117,195 metric tons, raw value (MTRV) (1,231,497 STRV). This amount represents the level to which the United States is committed under the Uruguay Round Agreement on Agriculture (URAA). No allocation for Mexico under the terms of the North American Free Trade Agreement (NAFTA) has been announced. Mexico, however, received a TRQ allocation of 7,258 MTRV as part of the regular raw sugar TRQ. The USDA established the FY 2003 refined sugar TRQ at 37,000 MTRV (40,786 STRV) for which the sucrose content, by weight, in the dry state, must have a polarimeter reading of 99.5 degrees or more. This refined sugar TRQ exceeds the minimum level of 22,000 MTRV to which the United States is committed under the URAA. As part of the refined sugar TRQ, there is an allocation for specialty sugar of 16,656 MTRV, of which 15,000 MTRV are reserved for organic sugar and other specialty sugars not currently commercially produced in the United States or reasonably available from domestic sources. As has become customary, allocations within the refined sugar TRQ have been made to Canada (10,300 MTRV) and Mexico (2,954 MTRV). As of May 7, 2003, raw sugar TRQ imports have totaled 549,856 MTRV. This amount is 49.2 percent of the total. Of the remaining amount, 72.2 percent are from countries whose exports are subject to shipping patterns. Shortfall is estimated at 30,000 STRV, and is attributable mainly to three countries that do not have sugar to export to the United States (Barbados, Gabon, and Haiti). With the exception of allocations made to Canada and Mexico, the refined sugar TRQ has been largely filled. To date, only 309 MTRV of Mexican refined sugar has entered as part of the 2003 sugar TRQ. Non-TRQ Imports and Program Exports of Sugar Other program sugar imports outside the sugar TRQ for FY 2003 are estimated to total 340,000 STRV. Other USDA import programs include the Refined Sugar Re-export Program, the Sugar-Containing Products Program, and the Polyhydric Alcohol Program. According to the U.S. Census Bureau, imports from October 2002 to March 2003 have totaled 205,370 MTRV, or 226,379 STRV. This amount is about 62 percent of the estimated total. Non-program imports for FY 2003 are estimated at 60,000 STRV. This total includes 50,000 STRV of sugar contained in molasses imported for the commercial extraction of refined sugar (HTS ). To date, only about 5,000 STRV of sugar contained in the molasses has been imported. High-tier tariff imports from Mexico are estimated at 10,000 STRV. According to U.S. Customs Bureau, first-half FY 2003 high-tier tariff imports have totaled 2,148 STRV of raw sugar, and 188 STRV of refined sugar. Sugar exports are estimated at 155,000 STRV. These exports occur under the Refined Sugar Re-export Program. These data have been revised due to a company making corrections to its reporting. Firsthalf FY 2003 exports have totaled 66,450 STRV. This is 16.8 percent higher than the same period last year. The USDA estimates that deliveries made to domestic food and beverage manufacturers under the Sugar-Containing Products Re-export Program will total 160,000 STRV. First-half FY 2003 deliveries have totaled 86,500 STRV, which is 10.4 percent higher than the same period last year. Domestic Food and Beverage Deliveries Deliveries for domestic food and beverage use for FY 2003 are estimated at 9.6 million STRV. Before the November 2002 WASDE, the projection had been 9.8 million STRV. The projection was reduced after delivery data for September 2002 indicated that sugar processors and refiners had increased deliveries above underlying demand requirements in order to reduce reported stocks before marketing allotments were put in place on October 1. Because FY 2002 food and beverage deliveries exceeded the October WASDE s estimate by over 200,000 STRV, and being unable to discern any fundamental change in Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

6 demand conditions, the projection for FY 2003 was reduced by 200,000 STRV. Deliveries for domestic food and beverage use have totaled million STRV through March. Although these deliveries are down about 2.5 percent compared with the same period last year, adding in the 200,000 STRV to the current year would imply that food and beverage deliveries are running at about 1.8-percent higher than a year ago. Miscellaneous Adjustments for FY 2003 Prior to FY 2003, the USDA did not project statistical adjustments in the WASDE s miscellaneous category. It would make an estimate in the November WASDE after data for the completed fiscal year have been reported to the USDA by sugar processors, millers, and refiners. For FY 2003, this would not be until November The miscellaneous category is comprised of four primary components: refining losses, inventory adjustments, differences in raw sugar imports between totals reported by cane refiners and the U.S. Customs Bureau, and sugar shipments less receipts among beet sugar processors, cane millers, and cane refiners. Except categories for cane refiners and cane processors shipments less receipts, relationships within and between these categories are often random and cannot be projected on a monthly basis with any reliability. Over a variable time period, however, these within-category sugar levels tend to converge to a number not statistically different from zero. There is a relationship between shipments less receipts for cane processors and cane refiners. Generally, processors shipments (a positive number) are directed to cane refiners. Receipts by cane refiners (a negative number), therefore, bear a predictable relationship to processor shipments. Regression analysis indicates that until April 2002, refiners receipts equaled times processors shipments for the same month plus times processors shipments for the previous month. Starting in April 2002, refiners receipts started to average 32,505 STRV less than predicted levels. With the exception of October 2002, this phenomenon has continued. In October, there was a partial, one-time adjustment in the opposite direction of 79,781 STRV. Figure 3 shows actual and predicted receipts since April. In total, actual cane refiners receipts are 275,000 STRV lower than predicted levels. This amount represents sugar stocks held by entities not required to report to the USDA. At some point, this sugar should enter back into the marketing system and be reported as refiners receipts. For that reason, the WASDE makes an estimate in the Miscellaneous Category. Although it is difficult to forecast when and how much will enter back, the estimate since December 2002 has been 200,000 STRV. It is recorded as a negative number because it represents an expected addition to supply although technically included as a component of Total Use in the WASDE. Ending Stocks Ending stocks are estimated as the difference between estimated total supply and estimated total use. Total supply is constituted by beginning stocks, production, and imports, and is estimated at million STRV. Total use is constituted by exports, deliveries, and miscellaneous adjustments, and is estimated at million STRV. Accordingly, ending stocks are projected at million STRV, implying an ending stocks-to-use ratio of 16.4 percent. ERS estimates that Figure 3 Cane refiner receipts of domestic raw sugar, April March 2003, by quarters 1,400,000 1,200,000 1,000, , , , ,000 0 Actual refiners receipts Projected receipts based on processors shipments Source: USDA. Apr.-Jun. July-Sep. Oct.-Dec. Jan.-Mar. 1,056,381 1,070,425 1,080, ,929 1,163,979 1,265, ,749 1,052,948 Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

7 this sugar will be distributed between beet processors ,000 STRV, cane processors ,000 STRV, and cane refiners ,000 STRV. The CCC has sold all of its sugar stocks and no longer holds uncommitted sugar. FY 2004 Supply and Demand Projections Beet Sugar Production Beet sugar production for FY 2004 is projected at 4.45 million STRV. In March, NASS reported producers planting intentions at million acres, a reduction from FY 2003 of 40,900 acres. The largest decreases were forecast for Minnesota (18,000 acres), Nebraska (15,000 acres), and North Dakota (10,000 acres). Although intended acreage in Michigan was forecast to increase by 17,000 acres, this total inadvertently included acreage in Ohio and Ontario where beets normally processed in Michigan are actually grown. The increase was overstated by 12,300 acres, and thus corrected planting intentions should be million tons. The USDA s Interagency Commodity Estimates Committee (ICEC) for sugar projects area for harvest at million acres. The sugar ICEC assumes normal weather and cropping conditions in making its forecast. As such, area for harvest is forecast at only 3,200 acres less than the previous year. The ICEC s State-by-State analysis of sugarbeet yields suggests a national yield projection of 22.1 tons/acre. This projection assumes the continuation of trend yield increases, or the absence thereof in certain States. Sugarbeet production is projected at 30.0 million tons, an 8.9-percent increase above FY 2003 production. Projected national sugar yield per acre is 3.29 tons. The projection assumes a yearly trend increase of.021 tons per acre, and also varies directly with the national sugarbeet yield projection (yield increase of 1 ton per acre raises the sugar per- acre projection by tons). Cane Sugar Production Aggregate cane sugar production in Florida, Louisiana, Texas, and Hawaii for FY 2004 is projected at million STRV. Florida production for FY 2003 is projected at 2.1 million STRV. This projection assumes the same sugarcane acreage for sugar as FY 2003, normal weather, and a trend increase in sugar yield of tons/acre. Louisiana production is projected at 1.6 million STRV. This projection assumes a reduction in harvested area from the previous year of 10,000 acres and sugarcane yields slightly below 30 tons per acre. A return to trend growth in sugar per acre (0.027 tons/acre per year), along with the projected cane yield, implies sugar per acre at 3.56 tons. Texas production for FY 2004 is projected at 165,000 STRV from a sugarcane crop for sugar projected at 1.55 million tons. Production is projected lower than FY 2003 because harvesting into May 2003 has shortened the growing season for the FY 2004 crop. Hawaii sugar production for FY 2004 is projected at 280,000 STRV, the same as FY Trade Although the FY 2004 refined and raw sugar TRQs have not yet been announced by the USDA, they are projected in the May WASDE at the Uruguay Round minimum commitment levels less an assumed shortfall of 35,000 STRV, or million STRV. Other program sugar imports outside the sugar TRQ for FY 2003 are projected to total 320,000 STRV. Other USDA import programs include the Refined Sugar Re-export program, the Sugar-Containing Products Program, and the Polyhydric Alcohol Program. Non-program imports for FY 2003 are projected at 60,000 STRV. This total includes 50,000 STRV of sugar contained in molasses imported for the commercial extraction of refined sugar (HTS ). High-tier tariff imports from Mexico are projected at 10,000 STRV. This amount represents expected entries occurring close to the U.S.-Mexico border. In the WASDE, the USDA relies on specific indications regarding high-tier NAFTA imports before projecting imports above basic trans-border import levels. Sugar exports are projected at 150,000 STRV. These exports occur under the Refined Sugar Re-export Program. The USDA projects that deliveries made to domestic food and beverage manufacturers under the Sugar-Containing Products Re-export Program will total 170,000 STRV. Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

8 Deliveries and Ending Stocks Deliveries for domestic food and beverage use for FY 2004 are projected at 9.85 million STRV. This projection represents a modest increase of 50,000 STRV over underlying demand in FY (Recall that the FY 2003 deliveries estimate understates demand because an estimated 200,000 STRV of sugar was delivered by beet processors in September 2002 in order to escape marketing allotment restrictions. See Box 1.) Ending stocks are projected at million STRV, practically identical to projected beginning stocks of million STRV. The stocks-to-use is projected lower at 15.7 percent because FY 2004 total use is projected to be higher than FY 2003 use by 455,000 STRV. Program-Induced Behavior Affects the Data Firms in the U.S. sugar industry had incentives to transfer ownership of sugar prior to the onset of marketing allotments in October Final FY 2002 ending stocks reported in November 2002 were about 400,000 tons below expectations based on forecasts and factors known only several months earlier. Based on the program-induced behavior seen in FY2002, ERS has attempted to foresee potential actions in FY 2004, given the May increase in OAQ levels and production forecasts for the remainder of the year. The measure of anticipated beet sugar deliveries for food and beverage use is based on a model using weights for beet sugar production (.410) and total sugar deliveries for food and beverage use (.261). Based on data since 1991, the model explains about 70 percent of the variation of beet sugar deliveries. In fact, the model confirms that about 200,000 tons of refined sugar were sold ahead of allotments that would not have been sold otherwise. The table in this box illustrates the FY 2002 and FY 2003 sugar supply and demand with deliveries adjusted for pre-allotment sales. A 200,000-ton adjustment for raw sugar transfers to non-reporting entities is also included in the table. Adjusted ending stocks in FY2002 are much higher than reported by processor firms and the resulting stocks-to-use ratio is more consistent with market prices at that time. Looking ahead, based on May 2003 WASDE estimates of beet sugar production (4.45 million STRV) and sugar deliveries for food and beverage use (9.600), the model predicts beet sugar deliveries of 4.33 million STRV. The beet sugar processors share of the FY 2003 OAQ is STRV, suggesting further incentives to sell about 200,000 tons of refined sugar ahead of the FY2004 OAQ and in excess of immediate market needs. If that becomes known when actual data are available in November 2003, similar to what happened in 2002, deliveries in the FY2004 sugar balance sheet would be decreased and FY 2003 would be increased. However, price analysis would be improved by factoring in an alternative similar to what is shown in the table for FY Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

9 Table 1--U.S. sugar production, supply, and distribution: May 2003 WASDE and an alternative May 2003 WASDE 1/ Alternative 2/ Item 2001/ / / /03 Beginning stocks 2,180 1,281 2,180 1,681 Total production 7,906 8,400 7,906 8,400 Total Imports 1,527 1,665 1,527 1,665 Total supply 11,613 11,346 11,613 11,746 Total exports Miscellaneous Total deliveries 10,085 9,790 9,885 9,990 Domestic food & beverage 9,897 9,600 9,697 9,800 Other deliveries Total Use 10,332 9,745 9,932 10,145 Ending stocks 1,281 1,601 1,681 1,601 Stocks-to-use ratio / WASDE = World Agricultural Supply and Demand Estimates report 2/ Alternative version adjusts the WASDE version for estimated sugar deliveries and shipment made by sugar processors in September 2002 in anticipation of FY 2003 marketing allotments. Source: USDA. Economic Research Service. USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

10 World Sugar Prices World Prices The nearby raw sugar future contract price (July No. 11, New York) declined to 6.9 cents a pound in mid- May, 0.1 cent below a month earlier, but 1.1 cent above a year ago. Larger than expected production in Thailand, increased sugarcane harvest activity in Brazil, record 2002/03 global sugar production, sluggish world sugar import demand, expectations for a cutback in China s 2002/03 sugar imports, and the outlook for a buildup in 2002/03 global sugar carryover stocks are some of the factors that have pressured futures prices in the past month. Concerns about a 2003/04 global sugar production, prospects for record 2002/03 world sugar consumption, projections that Brazil may reduce sugar exports in 2003/04, firming commercial demand, and the outlook for lower 2002/03 sugar production in India will support futures prices in upcoming months. (See box no.2 for discussion of trends in world sugar prices.) Trends in Sugar Costs of Production and World Prices LMC International estimates worldwide costs of producing sugar in both cane and beet sugar producing areas. Their methodology is based on the use of an engineering concepts to costing: production functions relate physical inputs of labor, machinery, fuel, fertilizer, and chemicals to output via implemented technologies for field and processing operations. Local input prices are attached to implemented production functions to derive cost estimates in a myriad of settings worldwide where sugar is produced. LMC International estimates that global cane sugar production costs have, on average, been declining by 2.6 percent per year since This decline is a weighted-average of declines in field costs of 2.2 percent and in factory costs of 3.5 percent. Likewise, global beet sugar production costs have been declining, but not by as much percent. Although the decline in beet sugar field costs is estimated at 1.9 percent (a level close to the cane sugar field cost decline), factory costs have declined by only 1.4 percent, only 40 percent of the decline in cane sugar factory costs. LMC attributes the lower decline to vastly reduced production in the Former Soviet Union and the consequent effect on factory utilization in those regions. LMC International estimates that the real price of world raw sugar has been decreasing 2 percent per year over the last 50 years. In spite of the proliferation of policy distortions in domestic sugar markets, LMC International argues that the decline in the real price is not independent of the reductions in production costs. There are two explicit linkages. First, for sugar exporters, plans to expand sugar output are evaluated in terms of the ability to make a profit from world market sales. Second, for countries pursuing import substitution policies, the world price is the opportunity cost for industries seeking to substitute domestic production for imported sugar from the world market. Although reductions in sugar costs of production reflect productivity gains in a wide set of countries, much of the overall decline can be attributed to shifts in the location of production from high cost to low cost areas. In 1980 the world s top 10 producers accounted for 56 percent of world sugar production. By 2001, the top 10 accounted for 70 percent. Also, the top 3 producers in 2001 accounted for 43 percent of all production, up from 28 percent in In both cane and beet sugar, LMC International estimates that production relocation contributed a full percentage point per annum to the decline in world production costs. This effect is about 40 percent of the yearly average cane sugar cost decline and about 60 percent of the beet sugar cost decline. Increasing production concentration will only enhance the longer term cost reductions and put further downward pressure on world sugar prices. Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

11 U.S. Honey U.S. production of honey dropped 8 percent in 2002 from 2001 due to drought or dry conditions in the key producing States of the North Dakota, South Dakota, Minnesota, Montana, California, and Florida, which lowered the density and quality of flowers on plants and trees. From million pounds in 2001, production in 2002 was down to 171 million pounds (fig.4). As a result, honey prices shot up to almost $1.30 per pound on average from 70.4 cents per pound in Prices of light-colored honey had the largest gains. The total value of U.S. honey production jumped from $132 million to $222 million. The honey yield per bee colony fell from 74 pounds in 2001 to 68 pounds in 2002, due to the drought. To supplant reduced domestic supply, honey imports in 2002 were up almost 40 percent and stocks were drawn down sharply. Ending stocks in 2002 were 40 percent lower than beginning stocks. Thus, U.S. honey consumption even increased by 14 percent, raising per capita consumption from 1.2 to 1.4 pounds, equaling its previous peak. To compensate for the shortfall in domestic production, imported honey increased significantly in 2002, especially from countries not subject to import restrictions from dumping below market prices in previous years. The top U.S. sources of honey from 2000 to 2002 were Canada, Argentina, China, Mexico, and Vietnam. The import share of honey consumption also rose from 42 to 52 percent, the highest level ever. Imports in 2003 are expected to fall as prospects for domestic production were boosted by a wet winter and early spring rains. Figure 4 U.S. honey: apparent consumption, by source, Million pounds Source: USDA, U.S. Census Bureau Imports Production less exports Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

12 Contacts and Links Information Contacts Stephen Haley (202) Nydia R. Suarez (202) Subscription Information Subscribe to ERS s notification service at to receive timely notification of newsletter availability. Printed copies can be purchased from the USDA Order Desk by calling (specify SUB-SSS-4033). Yearbook Tables Tables from the Sugar and Sweeteners Yearbook are available in the Sugar and Sweeteners Briefing Room at They contain the latest data and historical information on the production, use, prices, imports, and exports of sugar and sweeteners. Related Websites WASDE, Sugar Briefing Room, The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation, or marital or family status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA's TARGET Center at (202) (voice and TDD). To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call (202) (voice and TDD). USDA is an equal opportunity provider and employer. Economic Research Service, USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

13 Table 2--Mexico: sugar production and supply, and sugar and HFCS utilization Fiscal Year (Oct/Sept) / / 1,000 Metric Tons Beginning Stocks 1,587 1,403 1, ,065 1,549 1,286 1,058 Production 4,642 4,818 5,486 4,982 4,979 5,220 5,168 5,038 5,200 Imports Supply 6,462 6,412 6,573 6,015 5,958 6,328 6,774 6,424 6,308 Disappearance Industrial Cons. 2,217 2,102 2,162 2,157 2,144 2,146 2,554 2,703 2,695 Nonindustrial Cons. 2,126 2,199 2,229 2,265 2,301 2,336 2,378 2,413 2,448 Other Cons Total 4,414 4,391 4,505 4,549 4,576 4,623 5,082 5,266 5,283 Exports Raw Exports Refined Exports Total , Total Use 5,059 5,357 5,581 5,073 4,893 4,779 5,487 5,366 5,323 Ending Stocks 1,403 1, ,065 1,549 1,286 1, Stocks-to-Use HFCS Cons. 2/ / Forecast 2/ dry weight Source: USDA Economic Research Service. USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

14 Table 3--World refined sugar price, monthly, quarterly, and by calendar and fiscal year 1/ Year Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. : 1st Q. 2nd Q. 3rd Q. 4th Q. : Calendar Fiscal Cents per pound : : : : : : : : : : : : : : : : : : : : : / Contract No. 5, London Daily Price, for refined sugar, f.o.b. Europe, spot. Source: LIFFE, London. Table 4--World raw sugar price, monthly, quarterly, and by calendar and fiscal year 1/ Year Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. : 1st Q. 2nd Q. 3rd Q. 4th Q. : Calendar Fiscal Cents per pound : : : : : : : : : : : : : : : : : : : : : : : : / Contract No. 11-f.o.b. stowed Caribbean port, including Brazil, bulk spot price. Source: Coffee, Sugar & Cocoa Exchange, Inc. Economic Research Service. USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

15 Table 5--U.S. raw sugar price, duty fee paid, New York, monthly, quarterly, and by calendar and fiscal year 1/ Year Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. : 1st Q. 2nd Q. 3rd Q. 4th Q. : Calendar Cents per pound : : : : : : : : : : : : : : : : : : : : : : : : / Contract No. 14, duty fee paid New York. Average of nearest futures month for which an entire month of prices will be available. For example, April 2001's price average of cents is the average of closes for the July 2001 futures during the month of April since there was not a full month of May 2001 futures in April (the May 2001 futures expired April 10th, July 2001 became the nearest futures, so July 2001 was used for the entire month of April). Source: NYBOT Table 6--U.S. wholesale refined beet sugar price, Midwest markets, monthly, quarterly, and by calendar and fiscal year Year Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. : 1st Q. 2nd Q. 3rd Q. 4th Q. : Calendar Fiscal Cents per pound : : : : : : : : : : : : : : : : : : : : : : : : Source: Milling & Baking News. Simple average of the lower end of the range of quotations for days in that month. Quotations are weekly. Economic Research Service. USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

16 Table 7--U.S. retail refined sugar price, monthly, quarterly, and by calendar and fiscal year Year Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. 1st Q. 2nd Q. 3rd Q. 4th Q. Calendar Fiscal Cents per pound : : : : : : : : : : : : : : : : : : : : : : : Source: Bureau of Labor Statistics. Economic Research Service. USDA Sugar and Sweeteners Outlook/SSS-237/May 30,

17 Table 8 --U.S. sugarcane: area, yield, production, sugar output, recovery rate, and sugar yield per acre, crop years 1/ Crop Area Percent Sugarcane Sugarcane Sugar Recovery Sugar year Total for For area for yield for production production rate yield per seed sugar seed sugar for sugar acre 2/ 1,000 acres Percent Tons/acre 1,000 1,000 tons, Percent Short tons, short tons raw value raw value Florida 1990/ ,874 1, / ,937 1, / ,143 1, / ,493 1, / ,213 1, / ,428 1, / ,803 1, / ,535 1, / ,083 2, / ,505 1, / ,350 2, / ,620 1, / ,934 2, Hawaii , , , , , , , , , , , , , Louisiana 1990/ , / , / , / , / ,589 1, / ,421 1, / ,347 1, / ,716 1, / ,880 1, / ,225 1, / ,811 1, / ,340 1, / ,485 1, continued-- Economic Research Service. USDA Sugar and Sweeteners Outlook/SSS-237/May 30,