Sugar and Sweeteners Outlook

Transcription

1 United States Department of Agriculture Electronic Outlook Report from the Economic Research Service SSS-243 May 31, 2005 Sugar and Sweeteners Outlook Stephen Haley, Andy Jerardo and David Kelch USDA Projects Less Beet Sugar Production in FY 2006 Than FY 2005 Contents U.S. Sugar U.S. Sweetener Demand Mexican Sugar & HFCS EU Sugar Reform & WTO Ruling Honey Maple Syrup Price Index At-A-Glance Contact & Links Tables Cane sugar production U.S. sugar deliveries Stochastic sugar model Estimated monthly import deliveries Projected monthly Import deliveries Beet/cane allotments & allocations Sugar S&U Web Sites WASDE Sugar Briefing Room The next release is September Approved by the World Agricultural Outlook Board. The National Agricultural Statistics Service (NASS) published 2005 crop year sugarbeet acreage intentions for planted area at the end of March. Acreage intentions were about 3.5 percent lower than 2004 crop year area planted million. Acreage reductions are largest for the Far Western region (11.2 percent) and the Great Lakes region (10.7 percent). For the first time since 1982, there is no area planted to sugarbeets in Ohio. Assuming a return to normal sucrose levels from last year s high levels and trend improvement in productivity, the U.S. Department of Agriculture (USDA) projects fiscal year (FY) 2006 national beet sugar production at 4.37 million short tons, raw value (STRV). This projection is 323,000 STRV less than USDA s estimate of FY 2005 production (4.693 million STRV). The USDA projects cane sugar production at 3.77 million STRV. Florida sugar production is projected to recover from the poor weather-related FY 2005 output to 1.95 million STRV, an increase of 265,000 STRV. A more modest recovery is projected for Louisiana at 1.40 million STRV, an increase of 137,000 STRV over last year s disappointing results (1.263 million STRV). FY 2006 Texas cane sugar production is projected at 170,000 STRV, and Hawaii cane sugar production is projected at 250,000 STRV. All producers have felt the effects of higher energy costs. Although the USDA has not announced the sugar tariff-rate quota (TRQ) for FY 2006, it is provisionally projected at million STRV. This amount is equal to the U.S. commitment to the World Trade Organization (WTO) to allocate a minimum access quantity of imports of raw and refined sugar (1.256 million STRV), less a projected shortfall of 50,000 STRV. Included in the total minimum access quantity is the refined sugar TRQ whose minimum access commitment is 24,251 STRV, or 22,000 metric tons, raw value (MTRV). Other program sugar imports outside the sugar TRQ for FY 2006 are projected to total 325,000 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 2006 are projected at 60,000 STRV. This total includes 30,000 STRV of sugar contained in molasses imported for the commercial extraction of refined sugar (HTS ), 20,000 STRV of thick juice sugar

2 syrup (HTS ), and high-tier tariff imports at 10,000 STRV. The USDA projects FY 2006 exports at 200,000 STRV, a decrease of 40,000 STRV from the estimated FY 2005 level of 240,000 STRV. For the first time since FY 1999, domestic deliveries in FY 2004 grew relative to the previous year--by 174,000 STRV to million STRV. For the first two quarters of FY 2005, deliveries for food and beverage use have summed to million STRV, an increase of 2.1 percent relative to the same period in FY For the entire FY 2005, deliveries are estimated at million STRV. At the same time, sugar in imported products has continued its growth and has certainly displaced domestic sugar deliveries. Sugar in imported products in the first two quarters of FY 2005 has totaled 540,000 STRV, an increase of 8.2 percent relative to the same period in FY The USDA projects FY 2006 sugar deliveries for food and beverage use at million STRV. This projection assumes growth of less than 0.8 percent over the current fiscal year estimate. Ending stocks are the difference between supply and use. For FY 2005, they are estimated at million STRV, implying an ending stocks-to-use ratio of percent. If realized, the ratio would be the lowest since FY 1995 (12.6 percent). For FY 2006, ending stocks are projected at 759,000 STRV, implying an even lower ending stocks-to-use ratio of 7.4 percent. Marketing allotments for FY 2006 have not yet been announced. Marketing allotments for FY 2005 remain unchanged at 8.1 million STRV. On April 29, 2005, however, the USDA announced the reassignment of unused cane sugar allocations from processors in Hawaii and Louisiana to processors in Florida and Texas. No allocation adjustments were necessary for the beet sugar sector. 2

3 U.S. Sugar On May 12, 2005, the U.S. Department of Agriculture (USDA) released its latest supply and use estimates for fiscal year (FY) 2005 and first projections for FY 2006 in the World Agricultural Supply and Demand Estimates (WASDE) report. Production For most of the year, the USDA s Interagency Commodity Estimates Committee (ICEC) for sugar does not project sugar production for the out-year crop. The USDA accepts the production estimates and projections provided by beet sugar processors and cane sugar millers to the Farm Service Agency (FSA). However, the processors and millers forecasts are not available until July of the preceding crop year. In the meantime, the WASDE reflects ICEC projections for FY 2006 sugar in May and June. FY 2006 Beet Sugar Production The National Agricultural Statistics Service (NASS) published 2005 crop year (FY 2006) sugarbeet acreage intentions for planted area at the end of March. Acreage intentions were about 3.5 percent lower than 2004 crop year area planted million. Figure 1 shows the distribution of area planted across the major producing regions since Acreage reductions are largest for the Far Western region (11.2 percent) and the Great Lakes region (10.7 percent). For the first time since 1982, there is no area planted to sugarbeets in Ohio. On average, 97.9 percent of area planted is harvested, or million acres for FY A State-by-State analysis of sugarbeet yield trends implies a national yield projection of 22.2 tons per acre, a reduction of 0.7 ton from the previous year. The resulting sugarbeet production projection is 28.2 million tons, about 1.73 million Figure 1 U.S. sugarbeet area planted by State, ,000 acres Great Lakes Upper Midwest Great Plains Far West Source: USDA. 3

4 fewer tons than last year. Assuming a return to normal sucrose levels and trend improvement in productivity, national beet sugar production is projected at 4.37 million short tons, raw value (STRV). This projection is 323,000 STRV less than FY 2005 estimated production (4.693 million STRV). FY 2006 Cane Sugar Production Table 1 shows cane sugar projections by State, along with underlying assumptions made by the sugar ICEC. The first column shows projected area harvested. Because NASS does not forecast area harvested until the end of June, the same area is assumed to be harvested as the previous year. An exception is Hawaii, where high energy costs have led to some abandonment of land. Yield is projected either according to trend analysis (Florida) or as an average of recent year yields (Hawaii) or according to reported field/crop conditions (Louisiana and Texas). Mainland State sugar yields are projected based on sugarcane yields, trend productivity improvement, and normal sucrose levels. Sugar production is the multiplication of sugar yield and area harvested. In Hawaii, a recovery of percent is projected. FY 2005 Production The beet processors forecast of FY 2005 beet sugar production is million STRV, the same as the previous year. Although this projection implies a record sugar recovery per harvested acre of tons, production that would have occurred in September (part of FY 2004) was pushed into FY Total FY 2005 cane sugar production is estimated at million STRV. In Florida, sugarcane and sugar production were affected by four hurricanes. NASS estimates sugarcane for sugar production at million tons, the lowest total since FY Florida sugar processors project FY 2005 production at million STRV. This projection is down 327,000 STRV, or 16.3 percent, from prehurricane projections. Louisiana sugarcane and sugar production in FY 2005 were affected by poor field conditions. NASS estimates sugarcane for sugar yield at 24.0 tons per acre, the lowest since FY The sugarcane for sugar estimate is million tons. Sugar production from October 1 to the end of the campaign was a low million STRV. Added to this amount is expected production in September a relatively high 113,000 STRV, implying FY 2005 production at million STRV. The cane sugar miller in Texas projects FY 2005 sugar production at 157,500 STRV. Cold winter weather affected the crop--sugar per acre was 3.69 tons, a reduction of 12 percent from the previous year. Hawaiian cane sugar millers project FY 2005 sugar production at 269,000 STRV. Trade Although the USDA has not announced the sugar tariff-rate quota (TRQ) for FY 2006, it is provisionally projected at million STRV. This amount is equal to the U.S. commitment to the World Trade Organization (WTO) to allocate a 4

5 Table 1--FY 2006 cane sugar projections State Area harvested Sugarcane Sugarcane Projected Sugar Recovery for sugar yield for sugar sugar yield production rate (1,000 acres) (ton per acre) (1,000 tons) (STRV per acre) (1,000 STRV) (percent) Mainland Florida , , Louisiana , , Texas , Sub-total , , Off-shore Hawaii , Puerto Rico Total , , Source: Interagency Commodity Estimates Committee for Sugar, USDA. minimum access quantity of imports of raw and refined sugar (1.256 million STRV), less a projected shortfall of 50,000 STRV. Included in the total minimum access quantity is the refined sugar TRQ whose minimum access commitment is 24,251 STRV, or 22,000 metric tons, raw value (MTRV). In previous years, an amount equal to 1,825 STRV (1,656 MTRV) has been reserved for specialty sugar under this portion of the TRQ. Also, in FY 2005 an additional amount above the minimum refined TRQ commitment level, equal to 23,148 STRV (21,000 MTRV), was allocated to specialty sugar. Mexico s allocation under the sugar TRQ is set under the terms of the North American Free Trade Agreement (NAFTA). A NAFTA formula defines net surplus production as projected production minus projected domestic consumption, plus a possible adjustment for the previous year for realized components of the formula that differ from what was earlier projected. A side agreement stipulates that, for the purposes of the formula, high fructose corn syrup (HFCS) should be included on the consumption side only. Thus, projected Mexican sugar production would have to exceed Mexican consumption of both sugar and HFCS for Mexico to be considered a net surplus producer. From fiscal years 2000 through 2007, Mexico can have duty-free access to the U.S. market for the amount of its surplus as measured by the formula, up to a maximum of 250,000 MTRV, with minimum duty-free access equal to 7,258 MTRV. Under NAFTA, Mexico can ship either raw or refined sugar to the United States. Representatives from the United States and Mexico Governments meet prior to July 1 to determine Mexico s net surplus production status. 1 Other program sugar imports outside the sugar TRQ for FY 2006 are projected to total 325,000 STRV. Other USDA import programs include the Refined Sugar Reexport Program, the Sugar-Containing Products Program, and the Polyhydric Alcohol Program. Nonprogram imports for FY 2006 are projected at 60,000 STRV. This total includes 30,000 STRV of sugar in molasses imported for the commercial extraction of refined sugar (HTS ), 20,000 STRV of thick juice sugar syrup (HTS ), and high-tier tariff imports at 10,000 STRV. As of May 2, 2005, raw sugar FY 2005 TRQ imports have totaled 611,666 MTRV. This amount is 54.8 percent of the total raw sugar TRQ of million MTRV 1 Mexico s allocation of the FY 2005 raw sugar TRQ was set at 7,258 MTRV. Although there was no public announcement, the implication is that Mexico failed to qualify as a net surplus producer prior to the announcement of the FY 2005 sugar TRQ. In this Outlook, see chapter entitled Mexican Sugar and HFCS for a discussion of Mexican sugar production and consumption in 2004/05 and 2005/06. 5

6 and is running over 106,000 MTRV more than last year at this same date. Refined sugar FY 2005 TRQ imports have totaled 28,483 MTRV, or 66.2 percent of the refined sugar TRQ of 43,000 MTRV. The fourth (and last) tranche of the specialty sugar TRQ, equal to 7,716 STRV (7,000 MTRV), opens on June 7, To date, no TRQ Mexican sugar has entered into the United States. The USDA projects FY 2006 exports at 200,000 STRV, a decrease of 40,000 STRV from the estimated FY 2005 level of 240,000 STRV. Through the first 6 months of FY 2005, sales for exports have totaled 120,271 STRV. Most of these are exports occurring under the Sugar Re-export Program. Sales for exports by beet processors have totaled 14,226 STRV, the highest level of sales since FY Exports are counted as outside of the allotment program only when no credit for export is claimed under the Refined Sugar Re-export Program. Deliveries and Sugar-Containing Products Table 2 shows quarterly estimates of domestic sugar deliveries for food and beverage use (top panel), sugar in imported products (second panel), sugar in exported products (third panel), sugar in USDA s Sugar-Containing Products Re- Export Program (fourth panel), and domestic deliveries of sugar for food and beverage use adjusted for trade (bottom panel). For the first time since FY 2000, domestic deliveries (top panel) in FY 2004 grew relative to the previous year--by 174,000 STRV to million STRV. For the first two quarters of FY 2005, deliveries for food and beverage use have summed to million STRV, an increase of 2.1 percent relative to the same period in FY For the entire FY 2005, deliveries are estimated at million STRV. Technically, this estimate was derived by imputing the same first half-year share of deliveries from FY percent to FY The first half-year-share total from FY 2004 was the highest level in over 12 years. Using that percentage allows for a relative decrease in second-half deliveries equal to the fiscal year (i.e., FY 2004), where the decline has been the largest since at least FY1993. Sugar in imported products has continued its growth and has displaced domestic sugar deliveries. As seen in table 2, sugar in imported products in the first 2 quarters of FY 2005 has totaled 540,000 STRV, an increase of 8.2 percent relative to the same period in FY (Fig. 2 shows the quarterly growth of sugar in imported products from 1995 to Sugar-containing product imports have grown in all categories.) The USDA projects FY 2006 sugar deliveries for food and beverage use at million STRV. This projection assumes growth of less than 0.8 percent over the current fiscal year estimate. Additional ERS Sugar Delivery Analysis ERS has developed a simulation model that projects monthly deliveries by end-user destination, based on estimates of sugar availability (i.e., sum of sugar deliveries and sugar in imported products) in end uses and imports of sugar-containing products by tariff chapter. The model uses estimated times-series regression equations that have been estimated using data over the period of January 1992 through the latest month for which data are available (currently March 2005). The 6

7 Table 2--Estimated U.S. sugar deliveries and sugar in traded sugar-containing products 1/ Fiscal year Population Oct.-Dec. Jan.-Mar. Apr.-June July-Sept. FY total Per capita 1,000 short tons, raw value (STRV) pounds Domestic sugar deliveries for food and beverage use (refined value) ,280 2,046 2,172 2,432 8, ,277 2,121 2,265 2,533 9, ,260 2,105 2,311 2,542 9, ,379 2,191 2,355 2,519 9, ,430 2,143 2,401 2,591 9, ,443 2,233 2,428 2,568 9, ,458 2,208 2,553 2,655 9, ,580 2,318 2,484 2,611 9, ,564 2,370 2,486 2,580 10, ,474 2,227 2,439 2,645 9, ,497 2,183 2,360 2,464 9, ,504 2,286 2,368 2,520 9, NA 2,567 2,322 Estimated sugar in imported sugar-containing products , Est. sugar in exported sugar-containing products Est. sugar in USDA sugar-containing product re-export program Est. sugar deliveries for domestic consumption (adj. for trade in sugar-containing products) ,320 2,092 2,222 2,497 9, ,300 2,137 2,304 2,588 9, ,295 2,128 2,337 2,584 9, ,398 2,206 2,384 2,552 9, ,457 2,209 2,432 2,650 9, ,476 2,276 2,494 2,655 9, ,532 2,303 2,641 2,746 10, ,652 2,387 2,566 2,686 10, ,626 2,442 2,569 2,688 10, ,592 2,338 2,567 2,800 10, ,630 2,321 2,521 2,645 10, ,647 2,419 2,557 2,727 10, ,741 2,467 1/ Includes Puerto Rico. -- = Data not available. Source: USDA (deliveries data), ERS (sugar in traded products). 7

8 Figure 2 Estimated sugar in imported sugar-containing products, quarterly basis, STRV 300, , , , ,000 50, Source: ERS. Carbonated soft drinks Misc. edible preparations Bread, pastry, cakes, etc. Cereal and bakers preparations Cocoa and cocoa preparations Sugar confectionery regression equations are used to forecast sugar availability in industrial and nonindustrial end uses, and also sugar in differing types of imported products. In each end-use sector, a forecast of sugar imported in sector products is subtracted from a forecast of sugar available to the sector. The difference is a forecast of sugar to be delivered to manufacturers/customers in the end-use sector by (primarily) beet sugar processors and cane sugar refiners. The reason for this approach is that sugar in a variety of imported products has grown substantially since the mid-1990s, making direct estimation of domestic deliveries less statistically sound. Sugar availability in end uses is a more reliable reflection of consumer demand. The current approach incorporates directly the effect of imported products on domestic deliveries. 2 Table 3 shows some of the modeling detail. Sugar-using product categories are listed in the left column. Sugar used in these sectors comes from two sources: domestic deliveries and sugar in imported products. Domestic deliveries to end users are reported by FSA 3 The source of the import data is the U.S. Census Bureau. Using sugar-content coefficients developed at ERS, the amount of sugar in products corresponding to tariff lines in the Harmonized Tariff Schedule (HTS) chapters are calculated and summed with the sugar in the FSA end-user category that corresponds most closely with product characteristics of the imported product. 4 As seen in the table, the first column category (e.g., bakery/cereal) is the sum of sugar in the FSA end-use category in the middle column (e.g., bakery, cereal, and related products) and the sugar estimated in the imported sugar-containing products in the HTS chapter in the right column (e.g., HTS chapter 19). 2 Forecasts based on end use deliveries alone have tended to overestimate future deliveries because they have not directly reflected the increasing competition of sugar in imported products See appendix tables for tariff codes of the sugar-containing products and sugar-content coefficients. There are eight regression equations (numbered 1 through 8) corresponding to the aggregate end uses in the first column. There are five equations (numbered 17 through 21) that correspond to sugar in products organized by their HTS chapter. For the first four domestic delivery sectors (middle column, numbers 9 through 12), a fixed point monthly forecast is derived by subtracting the corresponding monthly forecast of sugar in imported products from the corresponding aggregate end-use 8

9 Table 3--Sector composition of ERS stochastic sugar delivery projections model Eqn. End user sector description Eqn. Combines data from Eqn. With data from sugar est. No. No. Sweetener Market Data : No. in sugar-containing products from following HTS chapters: 1/ 1 Bakery/Cereal 9 Bakery, cereal, and 17 HTS chapter 19 - Preparations related products of cereals, flour, starch or milk; bakers' wares 2 Confectionery 10 Confectionery and 18 HTS chapter Sugar related products confectionery, not cont. cocoa 19 HTS chapter Chocolate and other food prep. cont. cocoa 3 Beverages 11 Beverages 20 HTS Chapter Carbonated soft drinks 4 Processed foods 12 Canned, bottled, and frozen 21 HTS Chapter 21 - Misc. edible foods preparations 5 Multiple uses 13 Multiple and all other food -- uses 6 Dairy 14 Ice cream and dairy products -- 7 Non-food 15 Non-food uses -- 8 Non-industrial 16 Hotels, restaurants, and -- institutions Wholesale grocers, jobbers, dealers Retail grocers, chain stores Government agencies All other Deliveries 1/ See tables for tariff codes and sugar content coefficients. Source:. 9

10 sector monthly sugar estimate. In the four remaining domestic delivery sectors (middle column, numbers 13 through 16), sugar in competing imported products is harder to identify or relatively unimportant; therefore, the fixed-point monthly forecast is the same as the aggregate forecast. Tables 4 and 5 show monthly forecasting results for FY 2005 and FY 2006, respectively. The data are presented in the two end-user aggregations of industrial and non-industrial uses. Monthly forecasts are summed to provide a whole-year forecast. Because the forecasts are made from data in actual weight, they are converted into raw value. Because the end-user delivery data do not include direct consumption imports, a forecast value is added. In the WASDE, there is an independent projection of deliveries for the Product Re-export Program, for the Polyhydric Alcohol Program, and for livestock collectively known as other deliveries. The subtraction of other deliveries yields the forecast of deliveries for domestic food and beverage use. The mean forecast for FY 2005 is seen as million STRV, and the mean forecast for FY 2006 as million STRV. Although all forecasts contain uncertainty, knowledge about the uncertainty can help provide statistical bounds to how much a forecast is likely to deviate from its projected value. In a single forecasting equation, the standard error of the regression equation can be used to bound an equation forecast to a probable set of outcomes. In a simulation model, a similar outcome is possible for a model with more than one equation. The method involves forecasting values for model variables that deviate systematically from mean values, based on statistical distribution properties. Point estimates are generated by assuming the forecast is normally distributed (mean = fitted value from the equation) with a variance equal to the squared value of the equation s standard error. In a single simulation iteration, a single value for each variable is generated according to the distribution assumptions in the equation. Structural relationships within the model lead to a single forecast value for sugar deliveries for food and beverage use for the fiscal year. By increasing the number of iterations to a large number (in this case, to 10,000 iterations), the set of forecasts for total year deliveries will itself be normally distributed with a calculable variance and standard error. In tables 4 and 5, the standard error of the deliveries total is seen immediately below the mean estimate. The error is smaller for the FY 2005 forecast because there is actual data for 6 of the 12 months forecasting is only for the 6 remaining months rather the entire 12 months as in FY Below the standard error is the lower and upper range for the forecast, assuming a 95-percent confidence interval. The model is forecasting with a high degree of probability that the year s total deliveries for food and beverage use will be between and million STRV in FY 2005 and between and million STRV in FY These forecasting intervals are basically overlapping. The WASDE forecast of deliveries for food and beverage use is million STRV, placing it in the lower range forecast by the simulation model. The corresponding forecast for FY 2006 is million STRV, which is very close to the mean value of the simulation model. Although the simulation approach shows no growth between FY 2005 and FY 2006, the WASDE shows growth of 75,000 10

11 Table 4--Monthly estimated and projected sugar deliveries and sugar in imported products, by end use, FY 2005 Industrial end users Non-industrial deliveries Total domestic sugar deliveries Deliveries Sugar in Total products A B C=A+B D E=C+D 1,000 short tons, actual weight Estimated 1/ Oct. 489,801 92, , , ,725 Nov. 436,190 89, , , ,147 Dec. 381,112 79, , , ,996 Jan. 417,025 81, , , ,014 Feb. 400,022 77, , , ,925 Mar. 446,695 85, , , ,185 Projected 2/ Apr. 423,871 84, , , ,097 May 442,232 86, , , ,146 June 467,762 88, , , ,487 July 437,562 89, , , ,537 Aug. 477,848 93, , , ,107 Sept. 476,422 93, , , ,399 Total 5,296,542 1,040,350 6,336,893 4,083,223 9,379,765 Total (raw value) 5,667,300 1,113,175 6,780,475 4,369,048 10,036,348 Plus estimate of Direct Consumption Imports 73,957 Less Other Deliveries (Product re-exports, polyhydric alcohol, livestock) -145,000 Deliveries for domestic food and beverage use - estimated mean 9,965,305 Standard deviation of estimate 54,179 Deliveries for domestic food and beverage use - low end of range 3/ 9,859,115 Deliveries for domestic food and beverage use - high end of range 4/ 10,071,496 Source: ERS, USDA. 1/ USDA's Sweetener Market Data; Total = Deliveries + sugar in products. 2/ Projected deliveries = projected total - projected sugar in products. 3/ Lower limit of 95 percent confidence interval range. 4/ Upper limit of 95 percent confidence interval range. 11

12 Table 5--Monthly estimated and projected sugar deliveries and sugar in imported products, by enduse, FY 2006 Industrial endusers Nonindustrial deliveries Total domestic sugar deliveries Deliveries Sugar in Total products A B C=A+B D E=C+D 1,000 short tons, actual weight Projected 1/ Oct 459,322 96, , , ,430 Nov. 410,815 90, , , ,722 Dec. 372,094 85, , , ,960 Jan 412,178 85, , , ,773 Feb. 405,082 85, , , ,287 Mar. 459,542 91, , , ,614 Apr. 425,835 90, , , ,191 May 445,082 92, , , ,127 June 470,747 95, , , ,603 July 441,441 96, , , ,548 Aug. 481,721 99, , , ,110 Sept. 480, , , , ,570 Total 5,264,321 1,111,368 6,375,689 4,117,616 9,381,937 Total (raw value) 5,632,824 1,189,164 6,821,988 4,405,849 10,038,673 Plus estimate of Direct Consumption Imports 73,957 Less Other Deliveries (Product re-exports, polyhydric alcohol, livestock) -165,000 Deliveries for domestic food and beverage use - estimated mean 9,947,630 Standard deviation of estimate 76,633 Deliveries for domestic food and beverage use - low end of range 2/ 9,797,430 Deliveries for domestic food and beverage use - high end of range 3/ 10,097,830 Source: ERS. 1/ Projected deliveries = projected total - projected sugar in products 2/ Lower limit of 95 percent confidence interval range 3/ Upper limit of 95 percent confidence interval range 12

13 Figure 3 Monthly sugar stocks-to-use ratios Percent Av (1993:2004) FY FY2005 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sep. Source: USDA. STRV. That growth, small in percentage terms at 0.76 percent, is statistically no different from zero growth. Ending Stocks Ending stocks are the difference between supply and use. For FY 2005, they are estimated at million STRV, implying an ending stocks-to-use ratio of percent. If realized, the ratio would be the lowest since FY 1995 (12.6 percent), when the third quarter U.S. raw sugar price averaged cents a pound. For FY 2006, ending stocks are projected at 759,000 STRV, implying an ending stocks-touse ratio of 7.4 percent. Because FY 2006 TRQ imports were projected only at the required commitment level required by the WTO less projected shortfall, it is possible that ending stocks will be projected higher after the USDA announces the FY 2006 TRQ for sugar. Figure 3 shows monthly sugar stocks-to-use ratios from October through September for the average of ratios between FY 1993 and FY 2004, for FY 2004, and for the first half of FY Monthly use is defined as the sum of the previous 11 months uses (i.e., exports, deliveries, and miscellaneous, from Sweetener Market Data) and the current month s use. The FY 2004 monthly stock-to-use ratios were above the average. In FY 2005, the March ratio is drawing very close to the average. Figures 4 and 5 show U.S. raw sugar prices and U.S. refined beet sugar prices, respectively, over periods defined as in figure 3. With convergence in FY 2005 of monthly stocks-to-use toward the monthly average stocks-to-use in March, both the raw and refined prices started to rise in April above levels of the previous 18 months for raw sugar and the previous 16 months for refined sugar. 13

14 Marketing Allotments Marketing allotments for FY 2006 have not yet been announced. Marketing allotments for FY 2005 remain unchanged at 8.1 million STRV. On April 29, 2005, however, the USDA announced the reassignment of unused cane sugar allocations from processors in Hawaii and Louisiana to processors in Florida and Texas. No allocation adjustments were necessary for the beet sugar sector. Table 6 shows the reassignment details. Marketing allotments place direct limits on beet processor deliveries but only indirect limits on cane sugar deliveries made by refiners. The cane sector allotment restricts raw sugar shipments of cane processors to cane refiners (and some small amounts to consumers). One perspective on the WASDE delivery estimate of million STRV is how the delivery estimate can be met. Although it is possible to understand the WASDE without active consideration of allotments, separating out the individual sectors whose accounting combine into the WASDE show implicit constraints of the allotments. Figure 4 Monthly U.S. raw sugar prices Cents per pound Av (1993:2004) FY2004 FY2005 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sep. No. 14 New York contract, nearby. Source: New York Board of Trade. 14

15 Figure 5 Monthly refined beet sugar prices Cents per pound Av (1993:2004) FY2004 FY Oct. Dec. Feb. Apr. June Aug. Midwest, wholesale. Source: Milling and Baking News. Table 7 shows a modified WASDE accounting, with specific sugar sector accounting separated out to the extent possible. These sectors include beet processors, cane processors, cane refiners, the Commodity Credit Corporation (CCC), and direct consumption imports/unallocated items. Although most row categories line up across sectors, there are some exceptions. In the WASDE, shipments by cane processors (limited by allotments) are matched by cane receipts by cane refiners (limited by the same allotment restrictions) in the miscellaneous category. 5 The WASDE accounting puts cane refiner receipts into a use category that enters with a negative sign to offset cane processor shipments. The goal of table 7 is to start with beginning stocks and follow down the columns by requiring consistency with the WASDE, assume behavior where processors make full use of the allotments, and then analyze the consequences for ending stocks. The top panel shows sugar supply from beginning stocks, production, imports, and cane refiner receipts from cane processors. Cane and beet sugar production estimates are from the WASDE, and beginning stocks are from Sweetener Market Data. The CCC had begun the fiscal year with 17,120 STRV of beet sugar. Although it accumulated more beet sugar through forfeitures during FY 2005, it has sold all of its inventory back into the market. The analysis assumes that cane refiners receive raw sugar from cane millers up to the allotment quantity less cane miller deliveries to final consumers (estimated at 7,195 STRV through March). It also assumes that refiners receive estimated sugar imports of million STRV less the sum of the refined sugar in the TRQ and high-tier tariff imports of 57,399 STRV. 5 Typically, the projection/estimate is set at zero until all data are available in the November after the end of the fiscal year, at which point other items are also included (inventory adjustments, refining losses, differing sugar import sources.) Exports are estimated at 240,000 STRV, of which 120,271 STRV have been exported through the end of March by beet and cane processors, and cane refiners, as shown in the table. That leaves 119,729 STRV to be exported in the second half of the year. It is not clear at present how much of the remaining total will be exported by individual processors and refiners. 15

16 Table 6--Fiscal year 2005 beet/cane sugar allotments and allocations Beginning FY 2005 Reassigned amount New Allotments/Allocations (Cane only) Allotments/Allocations --- short tons, raw value --- Beet sugar 4,402,350 4,402,350 Cane sugar 3,697,650 3,697,650 Total OAQ 8,100,000 8,100,000 State cane sugar allotments Florida 1,816, ,203 1,940,342 Louisiana 1,404, ,000 1,304,987 Texas 157,880 10, ,677 Hawaii 318, ,000-31,356 Puerto Rico 0 0 Total cane sugar 3,697,650 3,697,650 Florida Atlantic Sugar Assoc. 152,485-1, ,798 Growers Co-op. Of Florida 326,697 58, ,842 Okeelanta Corp. 384,570 20, ,766 Osceola Farms Co. 210,697 25, ,147 U.S. Sugar Corp. 741,690 22, ,790 Total 1,816, ,203 1,940,342 Louisiana Alma Plantation 76,622 6,760 83,382 Cajun Sugar Co-op. 106,425 3, ,996 Cora-Texas Mfg. Co. 130,503 9, ,010 Harry Laws & Co. 57, ,216 Iberia Sugar Co-op. 67,840-19,317 48,523 Jeanerette Sugar Co. 64,199-10,868 53,331 Lafourche Sugars Corp. 76,525 3,191 79,716 Louisiana Sugarcane Co-op. 87,411-9,483 77,928 Lula Westfield, LLC. 165, ,913 M.A. Patout & Sons 369,050-47, ,608 St. Mary Sugar Co-op. 92,989-5,202 87,787 South Louisiana Sugars Co-op. 110,397-29,821 80,576 Total 1,404, ,000 1,304,987 Texas Rio Grande Valley 157,880 10, ,677 Hawaii Gay & Robinson, Inc. 73, ,145 Hawaiian Commercial & Sugar Co. 245,499-35, ,499 Total 318,644-35, ,644 Source: USDA. 16

17 Table 7--Sectoral sugar supply and utilization for FY 2005 WASDE Beet Cane Cane CCC Direct/ processors processors refiners unallocated short tons, raw value Beginning stocks 1,897, , , ,392 17,120 0 Production 8,066,702 4,692,531 3,374,171 Net CCC transfer NA 17,120-17,120 Cane receipts - domestic NA 3,690,455 Imports 1,638,896 1,581,497 57,399 1/ Supply 11,602,927 5,412,643 3,736,996 6,086, ,399 Exports 240,000 14,226 1, , ,729 2/ Deliveries for food/bev. 9,875,000 4,617,997 7,195 5,192,409 57,399 Subj. to allotment NA 4,402,350 7,195 Not subj. to allot. sold in FY 2004 NA 198,527 CCC purchase NA 17,120 Other deliveries 145,000 20, ,000 Product re-export 105, ,000 Polyhydric alcohol 20,000 20,000 Feed use 20,000 20,000 Shipments (cane allot.) NA 3,690,455 Shipments less 0 receipts Other miscellaneous 0 Total Use 10,260,000 4,652,223 3,699,291 5,421, ,128 Ending stocks 1,342, ,420 37, , ,729 Source: USDA, ERS. NA = not applicable. 1/ Sum of refined sugar TRQ and high-tier tariff imports. 2/ Projected exports for 2nd half of FY 2005, unallocated between sectors. 17

18 Beet processors are assumed to market their total allotment of million STRV for delivery in FY Almost all of the sugar sold last fiscal year for delivery this year (i.e., 198,527 STRV) has been delivered. The remainder is assumed to be delivered before the end of the fiscal year. Also, the sugar purchased from the CCC (not subject to the OAQ) is assumed to be delivered. Other deliveries (i.e., not for domestic food and beverage consumption) are assumed to be sold as shown in the table. All use items are totaled and subtracted from supply, leaving a preliminary estimate of ending stocks by sector. What is assumed to be unknown is the allocation of exports for the second half of the year. Beet sugar processors are shown with ending stocks of 760,420 STRV, an increase of 57,428 STRV over the beginning stocks level. Estimated beet processor ending stocks would be about 43 percent higher than the average ending beet processor stocks of 530,280 STRV since Cane sugar processors are shown with ending stocks of 37,705 STRV, which are considerably below beginning stocks of 362,825 STRV and the average ending cane processor stocks of 340,580 STRV since The lowest ending cane processor stock level since 1992 was in FY 2002, when it was estimated at 106,028 STRV. Cane refiners are shown with ending stocks of 664,531 STRV, which are 149,861 STRV less than beginning stocks. Ending year cane refiners stocks have averaged 626,060 STRV since 1992, and were as low as 434,590 STRV in FY If all remaining estimated exports were refined cane sugar, the ending year cane refiners stocks would be 544,802 STRV, which is still 110,212 above the minimum level in FY Total cane sugar ending stocks held by processors and refiners could range between 582,507 STRV and 702,236 STRV, depending on the level of refined sugar exports after March. The lowest corresponding cane sugar ending stocks level was 719,600 STRV in FY 1995, and it was as low as 799,280 STRV in FY This analysis implies that if the estimated deliveries for food and beverages are to be met, all else constant, cane sugar stocks will be drawn down considerably below levels seen for a number of years. 18

19 U.S. Sweetener Demand The Economic Research Service of the U.S. Department of Agriculture makes calendar year estimates of total sweetener deliveries that are available for food and beverage consumption by U.S. consumers. These sweeteners include refined sugar, corn sweeteners (high fructose corn syrup (HFCS), glucose syrup, and dextrose), honey, and other edible syrups, including maple syrup and maple sugar. U.S. deliveries of total sweeteners for human food and beverage use for 2004 are estimated at 20,737 million tons (table 8), representing 0.8 percent growth over deliveries in Refined sugar deliveries increased 2.3 percent from 2003, but corn sweetener deliveries for food and beverage use fell by 0.2 percent. Within the corn sweetener category, HFCS deliveries fell for the second year in a row. The decline in 2004 was 1.7 percent. Although smaller in absolute terms, the deliveries of the other corn sweeteners for human use grew in 2004: 3.8 percent for glucose syrup and 8.5 percent for dextrose. Honey deliveries decreased by 11 percent and other edible syrups increased slightly. On a per capita basis, U.S. sweetener deliveries for 2004 were pounds, down 0.2 pound from 2003, and 9.9 pounds from the per capita high, set in 1999, of pounds. Sugar in imported products has been excluded in estimating U.S. per capita sweetener deliveries. Prior to 1995, sugar contained in imports was largely offset by the sugar in U.S. food exports, indicating only a minor positive adjustment to total deliveries. Beginning in the period, sugar-containing product imports started increasing at a faster rate than U.S. sugar-containing product exports. The next-to-last column of the table shows the addition of sweetener supplies due to net imports of these products. The added amount has grown from 96,000 tons in 1996 to 642,000 tons in On a per capita basis in 2004, the sugar in net imported product added 4.4 pounds to total per capita sweetener availability, up from the 4.0 pounds in Including sweeteners from imported products in the delivery totals moderates the decline in sweetener deliveries since If these imports are disregarded, per capita sweetener availability is calculated to have decreased 6.5 percent since When net sweetener product imports are included, the decline is at 5.1 percent. 19

20 Table 8--U.S. caloric sweeteners estimated deliveries for domestic food and beverage use, by calendar year 1/ U.S. population 2/ Refined Corn sweeteners Pure Edible Total Sugar from Total Calendar sugar HFCS Glucose Dextrose Total honey syrups caloric net imports caloric year (July 1) syrup sweeteners sweeteners with Millions sugar-containing products 1,000 tons, dry basis ,249 6,652 1, , , , ,305 7,086 2, , , , ,478 7,398 2, , , , ,652 7,676 2, , , , ,785 7,788 2, , , , ,861 8,240 2, , , , ,966 8,552 2, , , , ,264 8,897 2, , , , ,253 8,845 2, , , , ,195 8,920 2, , , , ,109 9,045 2, , , , ,859 8,849 2, , , , ,063 8,701 2, , , ,379 Pounds, dry basis / Per capita deliveries of sweeteners by U.S. processors and refiners and direct-consumption imports to food manufacturers, retailers, and other end users represent the per capita supply of caloric sweeteners. The data exclude deliveries to manufacturers of alcoholic beverages. Actual human intake of caloric sweeteners is lower because of uneaten food, spoilage, and other losses. 2/ U.S. Census Bureau. Source:. 20

21 Mexican Sugar and HFCS Production The USDA announced a revised estimate for 2004/05 Mexican sugar production, supply, and utilization on May 26, 2005 (table 9). Sugar production is estimated at a record million metric tons, raw value (MTRV), or million tons, tel quel. (MTTQ). 1 Area harvested for sugarcane is projected at about 610,000 hectares, approximately the same as last year. ERS projects sugarcane production at million metric tons, implying sugarcane yield at a record 81.7 tons per hectare. Tel quel sugar recovery is projected at percent. The recovery rate implies that only 8.81 tons of sugarcane will be needed to produce 1 MTTQ of sugar. The average number of tons in the 1990s of sugarcane needed was The tel quel measure is the actual weight of the sugar, unadjusted for differences in sugar polarity. The harvest began the week of November 6, Sugar production through the 28th week (i.e., May 14, 2005) of the harvest is estimated at MTTQ, and milled sugarcane is estimated at million metric tons. The implied recovery rate to date is percent, higher than any previous harvest at 28 weeks. Table 10 shows sugarcane and sugar produced through the 28th harvest week for the current year and previous 2 years. The data are divided into six primaryproducing regions within Mexico and are also divided between publicly and privately owned mills. The data show current year recovery rates to be higher than in the previous years in all of the producing areas except the Northwest. With the exception of the Northwest and South producing regions, harvested sugarcane is running well ahead of the corresponding period in the 2 previous years. Recovery rates for the publicly and privately owned mills do not seem to differ in any of the years. The 13-percent growth in sugar production relative to last year has been shared by both publicly and privately owned mills. Private mills have contributed about 58 percent of total sugar production so far, only slightly behind the 60 percent in 2002/03 and 2003/04. Consumption Per capita sweetener consumption for the 2004/05 marketing year is projected at kilogram (kg), about the same level as for the previous year (fig. 6). The distinguishing characteristic this year, however, is that the consumption of high fructose corn syrup (HFCS) is estimated at 300,000 metric tons (mt), dry basis, up from 135,000 the last marketing year. The HFCS consumption growth is due to an estimated additional 165,000 mt used in the beverage industry, due to a judicial waiver (or amparo) granted to Coca Cola FEMSA and other bottlers, exempting them from the consumption tax on beverages manufactured with HFCS. At present, it is expected that only Coca Cola FEMSA will take advantage of the waiver. Sugar consumption is estimated at million MTRV, down 123,000 MTRV from last year. Although overall sweetener consumption is growing at slightly less than the population (1.0 percent), the growth in HFCS has displaced an equal amount of refined sugar. The sum of estimated HFCS and sugar (refined basis) consumed in Mexico is million mt. In raw value terms, consumption is equal to million MTRV. This amount is about 443,000 MTRV less than estimated sugar production. 21 Sugar and SweetenersOutlook/SSS-243/May 31, 2005

22 Table 9--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 1,173 1,195 1,238 1,919 Production 4,642 4,818 5,486 4,982 4,979 5,220 5,169 5,229 5,330 6,000 5,623 Imports Supply 6,462 6,412 6,573 6,015 5,958 6,328 6,770 6,465 6,852 7,438 7,643 Disappearance Human consumption 4,343 4,301 4,392 4,422 4,445 4,482 5,004 5,097 5,380 5,257 5,324 Other consumption Total 4,414 4,391 4,505 4,549 4,576 4,623 5,184 5,232 5,600 5,507 5,574 Exports Raw exports Refined exports Total , Total use 5,059 5,357 5,581 5,073 4,893 4,779 5,597 5,270 5,614 5,519 5,586 Ending stocks 1,403 1, ,065 1,549 1,173 1,195 1,238 1,919 2,057 Stocks-to-use HFCS cons. (dry weight) Source: USDA (sugar), ERS (HFCS). 1/ Forecast. Table 10--Sugarcane, sugar, and recovery rate in Mexico, week 28, May 14, of the harvest, by region and mill ownership No. of 2004/ / /03 Region Sector Mills Cane Sugar Recovery Cane Sugar Recovery Cane Sugar Recovery --metric tons, tel quel-- --percent-- --metric tons, tel quel-- --percent-- --metric tons, tel quel-- --percent-- Central Public 3 2,727, , ,543, , ,361, , Private 1 180,391 18, ,366 29, ,042 25, Total 4 2,907, , ,826, , ,622, , Gulf Public 12 11,260,398 1,248, ,883,810 1,085, ,511,629 1,041, Private 13 9,786,725 1,118, ,056,584 1,014, ,494, , Total 25 21,047,123 2,366, ,940,394 2,100, ,006,577 1,993, Northeast Public 4 4,276, , ,171, , ,484, , Private 4 4,246, , ,260, , ,241, , Total 8 8,522, , ,432, , ,726, , Northwest Public Private 3 1,206, , ,610, , ,832, , Total 3 1,206, , ,610, , ,832, , Pacific Public 3 1,380, , ,175, , ,219, , Private 9 7,888, , ,632, , ,319, , Total 12 9,268,888 1,109, ,808,101 1,026, ,539,138 1,010, South Public 1 302,672 31, ,645 29, ,025 27, Private 5 3,802, , ,872, , ,842, , Total 6 4,105, , ,142, , ,087, , Mexico Public 23 19,947,088 2,252, ,045,217 1,898, ,822,003 1,873, Private 35 27,110,930 3,090, ,715,077 2,835, ,992,716 2,796, Total 58 47,058,018 5,342, ,760,294 4,734, ,814,719 4,669, Source: Coazucar. 22