Speaker says USDA lost control of sugar market

Published online: Aug 13, 2014
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STOWE, VT.—The U.S. Department of Agriculture lost its ability to control the U.S. sugar market in the past two years because of the inability to limit imports of sugar from Mexico, Frank Jenkins, president of JSG Commodities, said at the International Sweetener Symposium Aug. 4.

Jenkins termed the past two years “default, dumping and devastation,” with the unlimited imports resulting in sugar loan defaults by U.S. processors in 2013 and the filing of antidumping and countervailing duty charges by U.S. producers against Mexico earlier this year with the pending case unsettling the market.

“The inability to limit imports of Mexican sugar was the main cause the American Sugar Coalition sued,” Jenkins said. “The outcome will return the market to a manageable form or (if dismissed) return it to an unsustainable cycle and imperil the U.S. sugar program.”

Jenkins said he expects the case “will likely run its full course,” and that the suit will succeed in terms that the U.S. Department of Commerce and U.S. International Trade Commission will find in favor of the American Sugar Coalition. But he does not expect that to happen until late December or early January.

Mexico will not be a “meaningful exporter” before February 2015, Jenkins forecast, “and will likely import sugar in the fourth quarter (of 2014). Mexico is only a net surplus producer due to access to U.S. economics. Production (in Mexico) will drop to match consumption if prohibitive duty is imposed and maintained.”

The market currently is unsettled but is transitioning “to the new reality” or a “new NAFTA” of a managed market with the U.S.D.A. setting the supply, Jenkins said.

Although the market is unsettled, Jenkins sees sugar prices remaining firm through the spring of 2015. Near term he sees sugar supplies and prices influenced by any U.S.D.A. action to increase supply after the preliminary determinations in the Mexican trade case due Aug. 25 and Sept. 4, with the latter likely to be extended 75 days.

If there is no “deal” with Mexico by March 2015 and no increase in imports allowed by the USDA, he sees refined sugar prices rising to 36c to 39c a lb, but if the USDA increases import quotas by 200,000 tonnes in September for arrival by November, he sees refined sugar prices at 33.5c to 35c a lb.

Bulk refined sugar prices quoted by Milling & Baking Newscurrently are 35c to 38c a lb f.o.b. Northeast for cane and 36c to 37c a lb f.o.b. Midwest for beet.

Jenkins and sugar refiners at the meeting said there is no shortage of sugar in the United States even though new offers from Mexico have been lacking for months and imports from Mexico were expected to slow significantly in the final quarter of 2013-14 and arriving at a record pace earlier in the marketing year.

If the case is not settled until the first quarter of 2015 and no further action is taken to increase supply, there will be ample physical supply but the market will be starved for price liquidity, Jenkins said. But if the U.S.D.A. announces another tariff rate quota increase before Sept. 30, there will be too much physical sugar, too much selling before November and existing fourth quarter supply will be displaced, causing turbulence in the market, he said.

An increase in the T.R.Q. also “removes ‘capital’ to finance an eventual deal with Mexico,” Jenkins said.

Source: www.foodbusinessnews.net