USDA-Sugar & Sweeteners Outlook
Electronic Outlook Report from the Economic Research Service
U.S. sugar supply for fiscal year (FY) 2011 is projected to be 3.3 percent less than in FY 2010. Although production in FY 2011 is expected to be higher than in FY 2010 by 318,000 short tons, raw value (STRV), lower beginning stocks (269,000 STRV less) and lower imports (435,000 STRV less) are more than offsetting. Higher beet sugar production reflects a return to trend yields, while cane sugar production is increased for Florida and Texas.
Imports under the tariff-rate quota (TRQ) are projected at the minimum of U.S. commitments to import raw and refined sugar, including an expected shortfall. The Secretary of Agriculture will establish the actual level of the TRQ at a later date. Imports from Mexico are nearly unchanged. Total use (combined deliveries, exports, and refining losses) is unchanged.
Mexico's FY 2011 sugar supply is up 1.7 percent, with higher stocks and production more than offsetting lower imports. Production is projected to increase, as yields rebound to trend levels. Imports reflect mainly U.S. exports for Mexico's IMMEX program. Domestic sugar consumption is down slightly, due to higher expected use of corn-based sweeteners, and exports are up slightly. Ending stocks are moderately above a year earlier.
For FY 2010 U.S. sugar, increased supplies nearly offset increased use, compared with a month earlier. Imports are increased under the TRQ, in line with USDA's April 23, 2010, announcement and expectations for increased imports at the high-tier tariff. Cane sugar production is reduced. Sugar deliveries are increased to reflect the recent strong pace to date and improved data availability that made possible better analysis of recent trends.
On May 11, 2010, the U.S. Department of Agriculture (USDA) released its latest supply and use estimates for fiscal year (FY) 2010 and first projections for FY 2011 in the World Agricultural Supply and Demand Estimates (WASDE) report.
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. For the most part, the USDA accepts the production estimates and projections provided by beet sugar processors and cane sugar millers to the Farm Service Agency. However, the processors' and millers' forecasts are not available until June of the preceding crop year. Therefore, in the meantime, WASDE reflects ICEC projections for FY 2011 sugar in May and June.
FY 2011 Beet Sugar Production
The National Agricultural Statistics Service (NASS) forecasts sugar beet acreage intentions for crop year 2010/11 at 1.174 million acres, about 9,000 acres, or 0.8 percent, lower than area planted in crop year 2009/10. Areas planted in all regions are close to last year's levels, with Michigan and the Far West (Idaho, Oregon, and California) slightly above and the Upper Midwest (Minnesota and North Dakota) and Great Plains (Colorado, Montana, Nebraska, and Wyoming) slightly below.
In making its sugar beet production forecast, the sugar ICEC assumes normal sucrose levels and normal area harvested-to-planted ratios. The national sugar beet yield is forecast at 26.68 tons/acre, just about equal to the 2008/09 record yield of 26.71 tons/acre. Area planted to genetically modified organism (GMO) seed varieties is forecast at 95 percent of total area, about the same as last year. The jump in yields in most States took place in 2006/07 and was due mainly to use of rhizomania-resistant seed varieties and use of Pancho Beta to control for Curly Top. Fuller adaption of GMO seeds reinforces the trend of substantially higher yields into the coming
year (fig. 1).
Assuming trend improvements in processing, the USDA projects national beet sugar production in crop year 2010/11 at 4.630 million short tons, raw value (STRV). Figure 2 shows the direct relationship between sugar beet yield and sugar production used for prediction. The modeled relationship holds for the 1981/82-2009/10 period but recognizes that weather-related disturbances can affect the relationship, as that which occurred in 2009/10 when difficult harvest conditions affected sucrose recovery.1
FY 2011 Cane Sugar Production
The USDA projects FY 2011 cane sugar production at 3.535 million STRV, an increase of 187,000 STRV over that of FY 2010. Because area harvested is not forecast by NASS until the end of June, current cane sugar projections assume the same area harvested for sugar as in the previous year. Florida cane sugar production for FY 2010 is forecast at 1.785 million STRV, assuming normal weather.
Unfortunately, weather conditions in Florida have been off the norm in recent years: possible freeze damage in FY 2010, remarkably dry conditions for several years, and hurricane damage to the crop in FY 2006. The USDA projects FY 2011 Louisiana cane sugar production at 1.465 million STRV, the same as this fiscal year.
The USDA projects Texas production at 150,000 STRV, implying recovery from this year's poor harvest conditions. Hawaiian production is forecast at 135,000 STRV. There is now only one sugar processor in Hawaii on the island of Maui.
Although the raw and refined sugar tariff-rate quotas (TRQ) for FY 2011 have not yet been announced, the USDA projects them at minimum levels implied by existing international commitments to the World Trade Organization (WTO) and at the allocated levels of existing Free Trade Agreements (FTAs). The projection in the May WASDE is, therefore, at 1.224 million STRV (table 1).
Projected shortfall is forecast at 160,257 STRV.
Until the TRQ is announced, there is no projection for additional specialty sugar. This sugar is mostly organic sugar, and its allocation for FY 2010 was set at 75,000 STRV in addition to the 1,825 STRV included in the minimum access quantity. The USDA projects imports from Mexico at 550,000 STRV, a level close to this year's estimate of 540,000 STRV. Projected exportable sugar supply in Mexico is based on an assumed return to normal production levels in FY 2011 and on expanded use of high fructose corn syrup (HFCS) in Mexico (see below).
Other program sugar imports outside the sugar TRQ for FY 2011 are projected to total 300,000 STRV. Other USDA import programs include the Refined Sugar Re-export Program, the Sugar-Containing Products Program, and the Polyhydric Alcohol Program. High-tier tariff sugar imports and sugar in imported syrups are projected at 10,000 STRV. Sugar exports for FY 2011 are forecast at 150,000 STRV. Most of these exports are expected to go to Mexico, where they are used in Mexico's product re-export (IMMEX) program. Almost all such sugar-containing products are expected to be exported to the United States.
On April 23, 2010, the Secretary of Agriculture announced an additional in-quota quantity for the raw sugar TRQ for FY 2010 in the amount of 200,000 STRV (181,437 metric tons, raw value (MTRV)). The country-by-country allocations were announced by the Office of the U.S. Trade Representative (USTR) on May 5. The total sugar TRQ for FY 2010 is estimated at 1.554 million STRV, an increase of 167,000 STRV over the April 2010 projection.
TRQ shortfall is projected at 100,256 STRV. Also, the estimate for high-tier tariff imports for FY 2010 was increased from 10,000 STRV to 75,000 STRV. These imports of refined sugar at the high-tier tariff began in April and are expected to continue through September 2010.
Deliveries, Refining Losses, and Ending Stocks
Deliveries for domestic food and beverage use for FY 2011 are projected at 10.500 million STRV, the same level as for FY 2010. The FY 2010 estimate was raised by 160,000 STRV based on strong deliveries in March 2010 and also on an improved set of data from the Foreign Agricultural Service on sugar imports from Mexico. Refining losses are expected to be in the area of -200,000 STRV for both FY 2010 and FY 2011.
Ending stocks are the difference between total supply and total use. For FY 2010, ending stocks are estimated at 1.230 million STRV, implying an ending-year stocks-to-use ratio of 11.6 percent. The ending-year FY 2010 stocks estimate is the beginning stocks projection for FY 2011. Ending stocks for FY 2011 are projected at 844,000 STRV. The implied ending-year stocks-to-use ratio is 7.9 percent.
U.S. Sweetener Demand
The Economic Research Service (ERS) 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; the corn sweeteners of HFCS, glucose syrup, and dextrose; honey; and other edible syrups, including maple syrup and maple sugar. Table 2 shows the new estimates for 2009 and also includes refined sugar revisions for 2007 and 2008.
U.S. deliveries of total sweeteners for human food and beverage use for 2009 are estimated at 20.078 million tons, representing a decrease of 3 percent compared with deliveries in 2008. Refined sugar deliveries decreased by 1.8 percent, and corn sweetener deliveries fell by 4.1 percent. Within the corn sweetener category, HFCS deliveries fell by 4.7 percent. Since 2002, HFCS deliveries have fallen by 1.35 million tons, dry weight, or 14.9 percent. Honey deliveries decreased by 6.7 percent, and other edible syrups increased slightly.
U.S. sweetener deliveries for 2009 were equal to 130.7 pounds per capita, down 5.5 pounds from 2008 and down 20.7 pounds from the per capita high of 151.4 pounds set in 1999. About 65 percent of the decline from 2008 is attributable to lower corn sweetener deliveries and about 34 percent from lower refined sugar deliveries. However, per capita sugar consumption in 2009 at 63.6 pounds is still higher than its level of 62.3 pounds 2 years ago.
Sugar contained in imported products is usually excluded in estimating U.S. per capita sweetener deliveries. Before 1995, sugar contained in imports was offset by sugar contained in U.S. food exports, therefore indicating only a minor positive adjustment to total deliveries. Beginning in the 1995-96 period, imports of sugar-containing products started increasing at a faster rate than U.S. exports of sugar-containing products. This trend continued until 2006 and has since reversed.
For 2009, sugar-containing product trade has contributed an estimated 555,000 tons to sweetener available for consumption, or 3.6 pounds per capita. This level is down from the high of 5.7 pounds in 2006.
Sugar in imported products in 2009 is estimated at 1.141 million tons, a 5.2-percent decrease from 2008 and 10.1- percent decrease from 2006 (table 3). About 41 percent of the decrease since 2008 is attributable to fewer imports of sugar confectionery, and about 27 percent is attributable to fewer imports of cocoa and cocoa preparations.
Sugar in exported products has been growing since 2006, estimated at 697,000 tons in 2009, up about 2.5 percent over 2008 and 24.3 percent over 2006.
Mexican Sugar & High Fructose Corn Syrup
Mexican sugar production is forecast to be 5.45 million metric tons, raw value (MTRV) in the 2010/11 harvest season, an 11-percent increase from the previous year. Expanded harvest area and recovering sugarcane yields will contribute to higher production. Area and yields were lower in 2008/09 and 2009/10 compared with historical trends, primarily because of poor weather conditions, contributing to lower production levels.
Higher U.S. and Mexican sugar prices in 2009/10 are expected to encourage planted and harvested area for sugarcane in 2010/11. Harvested area in the 2008/09 and 2009/10 growing seasons were 663,000 and 664,000 hectares, respectively, a 3-percent decrease from the 683,000 hectares harvested in 2007/08. The decrease was primarily due to poor weather conditions. In 2010/11, harvested area is expected to increase, although it is not expected to fully recover to 2007/08 levels.
Weather has also negatively affected sugarcane yields the past two seasons. From 1989/90 through 2008/09, sugarcane yields averaged 72 metric tons per hectare. Yields in 2008/09 and 2009/10 were, or are expected to be, nearly 12 percent lower than that of the 20-year average. Assuming normal weather conditions, yields are anticipated to rebound in 2010/11 and will be more aligned with average yields.
Sucrose recovery rates in Mexico have demonstrated a statistically significant upward trend over the past 20 years. The trend implies that recovery rates in 2010/11 should be approximately 11.4 percent, which was the basis for the estimate in the World Agriculture Supply and Demand Estimates. This rate is above the 2009/10 pace to date of 11 percent but not quite as high as the 2007/08 recovery rate of 11.7 percent, which was a 20-year high.
Domestic sugar use is expected to fall slightly from 5 million MTRV in 2009/10 to 4.95 million MTRV in 2010/11. Domestic sugar and sweetener demand for human consumption is forecast to increase 3 percent based on increasing per capita consumption patterns. However, HFCS accounts for all of the increase. Human domestic sugar consumption is expected to decrease 1 percent from 4.6 million metric tons to 4.55 million metric tons.
The IMMEX re-export program is anticipated to be fully used in the upcoming year, accounting for the remaining 400,000 metric tons of domestic use.
Mexican sugar imports are forecast to be 150,000 MTRV compared with the estimate for 2009/10 of 970,000 MTRV. With improved production and higher beginning stocks, imports will be primarily from the 135,000 metric tons allotted to the IMMEX re-export program.
Mexican sugar exports are expected to increase slightly next year from 490,000 metric tons to 500,000 metric tons, primarily going to the United States. Higher returns and a relatively tighter supply situation in the United States should continue to encourage Mexican sugar to be marketed in the United States. Since the beginning of the 2008 calendar year, Mexico has been able to export sugar to the United States without quota restrictions as part of the North American Free Trade Agreement.
Ending stocks for 2010/11 are expected to be 1.018 million tons, which would imply a stocks-to-domestic-consumption ratio of 22 percent compared with the current estimate of 19 percent in 2009/10. Higher production levels should help alleviate the tight stock levels that were observed over the previous 2 marketing years.
Contacts and Links
Stephen Haley, (202) 694-5247, email@example.com (coordinator)
Mike McConnell (202) 694-5158, firstname.lastname@example.org (world sugar)
Erik Dohlman (202) 694-5308, email@example.com (commodity analyst)
Mae Dean Johnson (202) 694-5245, firstname.lastname@example.org (web publishing)
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