U.S.D.A. acts to boost current-year sugar supplies

by Ron Sterk
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The net effect should boost sugar supplies by 200,000 tons.

WASHINGTON — The U.S. Department of Agriculture on May 17 said it increased the current-year (2015-16 ending Sept. 30) domestic sugar Overall Allotment Quantity (O.A.Q.), reassigned some projected surplus domestic sugar marketing allotments and reassigned part of the surplus cane sugar marketing allotment to raw cane sugar imports.

“Based on the projections in the May 10, 2016, World Agricultural Supply and Demand Estimates (WASDE) report, U.S.D.A. took this action as required by the farm bill in order to maintain an adequate sugar supply in an uncertain market,” the U.S.D.A. said. “This uncertainty is in part due to inaction on G.E. (genetically engineered) labeling legislation and lack of consumer information about genetic technology.”

The U.S.D.A. added that it “recognizes that America’s beet sugar producers have made significant investments in a strong 2016 crop, but they continue to face uncertainty.”

The U.S.D.A. reassigned 500,000 short tons, raw value, of cane sector domestic supply shortfall to imports. Of that amount, 300,000 tons were reassigned to imports already expected to enter the United States; 140,000 tons to an increase in the U.S. raw sugar tariff-rate quota (T.R.Q.) from World Trade Organization quota holders; and 60,000 tons to sugar expected to be imported from Mexico.

The net effect of the U.S.D.A.’s actions is about a 200,000-ton increase in total sugar supplies from previous domestic allotments and import quotas.

The U.S.D.A. requested the U.S. Department of Commerce to increase the 2015-16 sugar export limit for Mexico by 60,000 tons, under provisions of the Agreement Suspending the Countervailing Duty Investigation on Sugar from Mexico signed Dec. 19, 2014. The additional sugar must have polarity of less than 99.2 degrees (thus not be refined sugar) “to ensure that this is the type of sugar for which there is an increasing demand in the U.S. market, and which also requires further processing,” the U.S.D.A. said.

Under the suspension agreement, the U.S.D.A. is required to maintain the U.S. ending stocks-to-use ratio at a minimum 13.5% by adjusting imports from Mexico after accounting for other supply and use estimates. The ratio in the May 10 WASDE was 14.2%. The 200,000-ton increase just announced would potentially boost the ratio to 15.9%, assuming other inputs are not changed.

The overall 2015-16 U.S. raw sugar T.R.Q. now is 1,371,497 tons, up from 1,231,497 tons previously, the U.S.D.A. said. The Office of the U.S. Trade Representative allocates the increase among supplying countries. Raw cane under the T.R.Q. must be accompanied by a certificate of quota eligibility and may be entered by Sept. 30, 2016.

The 2015-16 O.A.Q. was increased to 10,200,000 tons from 10,093,750 tons initially as the result of an increase in estimated domestic human sugar consumption to 12 million tonnes in the May WASDE. The sugar program requires the U.S.D.A. to quarterly adjust the domestic O.A.Q. so that it is not less than 85% of domestic human sugar consumption for the crop year, and to allocate 45.65% of the O.A.Q. to cane sugar and 54.35% to beet sugar.

“Per sugar program provisions, U.S.D.A. reassigned cane allocation from two cane processors in Florida with surplus to another Florida cane processor that needed more allocation to market its higher-than-expected raw sugar supply,” the U.S.D.A. said. “Since this action did not eliminate the overall cane sector surplus allotment, 500,000 tons is reassigned from domestic cane sugar allocations to raw cane sugar imports.”

The U.S.D.A. also reassigned beet sugar allocations from certain beet processors to those that lacked adequate refined beet sugar supply to other processors that needed more allocation to market their sugar, resulting in no surplus beet allotment to reassign to raw cane imports.

While sugar users and some cane refiners who depend on imported raw cane supply had asked the U.S.D.A. to boost raw cane imports, there also was concern from the beet sector that such action could push beet sugar processors into forfeitures because of already-weaker beet sugar prices and larger supplies relative to cane sugar. The increase in the O.A.Q. and T.R.Q. along with the various reallocations should preclude such forfeitures, even if some in the industry maintained sugar supplies were adequate prior to the U.S.D.A.’s actions.

The U.S.D.A. on May 5 raised the 2015-16 specialty sugar T.R.Q. by 22,046 tons to “accommodate increased U.S. demand for organic sugar and other specialty sugars.” The additional sugar may enter the United States beginning May 9.

Also on May 5, the U.S.D.A. set the initial 2016-17 (beginning Oct. 1, 2016) raw cane sugar T.R.Q. at 1,231,497 tons, the minimum required under W.T.O. agreements and unchanged from the initial 2015-16 T.R.Q.  

A bipartisan group of 45 members of the U.S. Senate and the House of Representatives in a May 5 letter urged the U.S.D.A. to immediately allow an increase in the raw sugar T.R.Q. “to make adequate sugar supplies available in the United States at reasonable prices.”
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