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Sugar and Sweeteners Outlook Summary

Core Content

The Economic Research Service (ERS) report from February 15, 2017, provides an outlook for the U.S. and Mexican sugar markets for the 2016/17 fiscal year and long-term projections through 2026/27. It outlines the supply, use, and trade dynamics of both cane and beet sugar, emphasizing the ongoing divergence between the two markets.

Main Points

U.S. Sugar Market (2016/17)

• Total Domestic Supplies: Projected at 14.038 million short tons, raw value (STRV), a decrease of 23,000 STRV from the previous month.
• Domestic Production:
  • Beet Sugar: 5.371 million STRV, unchanged from the previous month.
  • Cane Sugar: 3.869 million STRV, a 73,000 STRV decline due to reduced production in Florida and Hawaii.
• Imports:
  • Total imports are projected at 2.744 million STRV, a 50,000 STRV increase from the previous month.
  • The increase is attributed to the re-export program, which allows for more raw cane sugar imports to offset the decline in cane sugar production.
• Exports:
  • Projected at 75,000 STRV, a 50,000 STRV increase from the previous month.
  • Exports of refined beet sugar are expected to increase, supporting additional raw cane sugar imports under the re-export program.
• Domestic Deliveries:
  • Remain unchanged at 12.155 million STRV for 2016/17.
  • First-quarter beet sugar deliveries increased by 18.5%, driven by high beet supplies, lower cane supplies, and price differences.
• Ending Stocks:
  • Projected at 1.808 million STRV, a 73,000 STRV decrease from the previous month.
  • The stocks-to-use ratio is projected at 14.8%, down from 15.4%.
• Market Dynamics:
  • There is a substantial divergence between cane and beet sugar markets.
  • Beet sugar has seen increased supply and deliveries, while cane sugar has experienced a decline in both production and imports.
  • The U.S. sugar market is expected to see growth in domestic production through 2026/27, but domestic deliveries will outpace production, requiring larger imports.

Mexico Sugar Market (2016/17)

• Total Sugar Supplies: Projected at 7.468 million metric tons (MT), actual value, unchanged from the previous month.
• Production:
  • Projected at 6.371 million MT, a 4.2% increase from the previous year.
• Imports:
  • Total imports remain at 60,000 MT, with 50,000 MT for sugar-containing product exports.
• Domestic Deliveries:
  • Projected at 4.769 million MT, unchanged from the previous month.
  • Human consumption deliveries are 4.389 million MT, unchanged from the previous month.
• Exports:
  • Total exports are projected at 1.470 million MT, with 832,000 MT to the U.S. and 638,000 MT to other countries.
• Ending Stocks:
  • Projected at 1.229 million MT, a 18.6% increase from 2015/16.
  • The stocks-to-consumption ratio is 28.0%, up from 23.6% in the previous year.

Key Information

Cane Sugar

• Production Decline: Cane sugar production in Florida and Hawaii declined significantly, with Florida's production down 70,000 STRV and Hawaii's down 3,000 STRV.
• Inventory Levels: Cane sugar inventories are higher than the previous year, but still below historical levels.
• Market Dynamics: Cane sugar prices remain relatively high, and despite increased inventories, its share in the U.S. sugar supply mix is expected to decrease due to beet sugar's price advantage and increased availability.

Beet Sugar

• Production Increase: Beet sugar production remained stable at 5.371 million STRV, supported by a large sugarbeet crop.
• Deliveries: Beet sugar deliveries in the first quarter of 2016/17 were 10.6% higher than the previous year, with a strong increase in the first three months.
• Market Trends: Beet sugar deliveries have outpaced historical averages, and the stocks-to-use ratio for beet sugar has increased due to higher supply and lower use.

Trade and Policy

• Re-Export Program: Increased refined beet sugar exports are expected to support additional raw cane sugar imports, as well as higher imports from Mexico.
• Tariff-Rate Quota (TRQ): TRQ imports are projected at 1.532 million STRV, unchanged from the previous month.
• Free-Trade Agreements (FTAs): Current trade policies and FTAs are assumed to remain in place for long-term projections.
• AD/CVD Investigations: These investigations have limited sugar imports from Mexico, contributing to tighter supply conditions.

Long-Term Projections

• U.S. Sugar Market (2016/17–2026/27):
  • Domestic production is expected to grow steadily.
  • Domestic deliveries will outpace production, requiring more imports.
  • Mexico is expected to be a major source of imports, with projected increases in its export volumes.
• Market Integration:
  • There is uncertainty about whether the divergence between cane and beet sugar markets is structural or temporary.
  • Despite the separation, there is evidence of some integration, and the market may return to equilibrium over time.

Conclusion

The U.S. sugar market for 2016/17 is marked by a decline in cane sugar production, increased beet sugar supply and deliveries, and a shift in the supply mix due to market dynamics and policy changes. Mexico continues to be a significant supplier, with a 4.2% increase in production and higher ending stocks. Long-term projections suggest continued growth in domestic production but a need for increased imports to meet rising domestic demand. The divergence between cane and beet sugar markets is expected to persist, but there is potential for the market to integrate again over time.