Sugar market awaits Mexico trade resolution

by Ron Sterk
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ORLANDO, FLA. — Uncertainty related to the ongoing trade dispute between the United States and Mexico has added a new level of uncertainty to the market since the first salvos were fired 10 months ago. What is certain is that the vast majority of market participants, both in Mexico and the United States, including the U.S. Department of Agriculture, want the matter settled so they can get on with “business as usual,” if such a thing still exists in the sugar market.

“We would like to see a negotiated agreement to allow Mexico to export all the sugar we need duty free and allow the sugar program to work as it is supposed to,” Michael Scuse, U.S.D.A. Under Secretary for Farm and Foreign Agricultural Services, said at the International Sweetener Colloquium held Feb. 9 in Orlando. “We don’t want a trade dispute with our third largest trade partner.”

Mr. Scuse said the U.S.D.A. supports the suspension agreements signed Dec. 19, 2014, by the U.S. Department of Commerce and various entities in Mexico that suspended antidumping and countervailing duties in excess of 50% on exports of Mexican sugar to the United States. Many in the trade hoped those agreements had brought to an end the trade dispute that began March 28, 2014, when a group of U.S. sugar producers filed petitions charging Mexico with dumping subsidized sugar on the U.S. market. But two U.S. sugar refiners, Louis Dreyfus Commodities’ Imperial Sugar Co. and AmCane Sugar L.L.C. on Jan. 8 requested the U.S. International Trade Commission review the agreements, which Imperial said put U.S. production of cane sugar and related jobs at risk by limiting the amount of raw cane imports needed to keep mills running.

The D.O.C. on Jan. 26 said no duties would be collected during the I.T.C. review, which must be completed within 75 days of the Jan. 8 request, but all exports must meet the requirements outlined in the suspension agreements.

Mr. Scuse said a managed trade agreement would help the U.S. sugar market avoid another year like 2013 when excess sugar supplies (both domestic and imported from Mexico) resulted in U.S. sugar loan forfeitures by processors that cost the U.S. government $259 million under the U.S.D.A.-managed sugar program.

“I do not want that to happen again,” Mr. Scuse said. “The signed suspension agreements give the U.S.D.A. enough flexibility to manage the sugar program even with the added restrictions.”

Mr. Scuse said there “remains much uncertainty about how much sugar will flow (from Mexico to the United States) during the review.” Imports from Mexico were down about 88% from a year ago in the October-December 2014 period and total imports were down about a third from this time last year, he said.

“I’m sure their (Mexico’s) warehouses are quickly filling up,” Mr. Scuse said. “Mexico has sugar and we need sugar.”

Trade sources last week indicated some imports of sugar from Mexico already had resumed as a result of the lifted duties during I.T.C. review, but any longer-term trade still was expected to be muted until the review was completed.

Mr. Scuse also indicated some other countries had asked if they will have more access to the U.S. sugar market as the result of the dispute with Mexico, but that the U.S.D.A. had not initiated conversations with other countries to fill the current void of shipments from Mexico.

“There is a lot of uncertainty the next 60 days,” he said.
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