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Sugar and Sweeteners Outlook Summary (March 15, 2017)

Core Content

The March 2017 World Agricultural Supply and Demand Estimates (WASDE) report provides an updated outlook for the U.S. and Mexican sugar markets for the 2016/17 fiscal year. Key changes and trends are outlined below.

U.S. Sugar Market Outlook

• Projected U.S. Beet Sugar Production: 5.106 million STRV, a decrease of 265,000 STRV from the previous month. The decline is due to lower sugar extraction rates from sliced sugarbeets, which have remained below historical levels.
• Projected U.S. Cane Sugar Production: 3.869 million STRV, unchanged from the February projection. This is in line with earlier processor reports and the reduced sugarcane production in Florida.
• Total Sugar Supplies: 14.007 million STRV, a decrease of 31,000 STRV from the February projection. This is due to the reduction in beet sugar production being offset by an increase in imports.
• Projected Imports: 2.978 million STRV, an increase of 234,000 STRV from the previous month. The increase is primarily due to higher projected imports from Mexico, which rose by 190,000 STRV based on the anticipated Export Limit calculation.
• Projected Domestic Deliveries: 12.255 million STRV, an increase of 100,000 STRV. This increase is attributed to higher deliveries for food and beverage use.
• Total Use: 12.330 million STRV, up from the previous month's projection.
• Ending Stocks: 1.677 million STRV, a decrease of 131,000 STRV from the February report. The stocks-to-use ratio is 13.6 percent, down from 14.8 percent.

Mexican Sugar Market Outlook

• Projected Sugar Production: 6.371 million MT, unchanged from the previous month. This aligns with the initial crop estimate from Conadesuca.
• Total Supplies: 7.468 million MT, unchanged from the previous month.
• Total Use: 6.190 million MT, a decrease of 49,000 MT from the February report. This is due to a net decline in exports to other countries.
• Ending Stocks: 1.278 million MT, an increase of 49,000 MT from the previous month. The stocks-to-consumption ratio is 29.1 percent, up from 28.0 percent.

Key Trends and Factors

• Beet Sugar Production Decline: The reduction in beet sugar production is attributed to lower extraction rates, which have not returned to historical averages despite the season progressing.
• Cane Sugar Deliveries: Cane sugar deliveries for food and beverage use have been above long-term averages, contributing to a more balanced market.
• Import Adjustments: The increase in imports from Mexico is linked to the suspension agreements and the Export Limit calculation by the U.S. Department of Commerce.
• Market Proportions: The proportion of beet sugar deliveries for human consumption is expected to be around 39.7 percent of total deliveries, which is a key determinant of ending stocks and the stocks-to-use ratio.
• Stocks-to-Use Ratio Divergence: The report highlights the expected continued divergence between beet and cane sugar stocks-to-use ratios, with beet sugar at 30.01 percent and cane sugar at 2.80 percent under the hypothetical scenario of 40 percent beet sugar deliveries.

Conclusion

The U.S. sugar market faces a continued decline in beet sugar production due to lower extraction rates, but this is partially offset by increased imports, particularly from Mexico. The stocks-to-use ratio is expected to decrease, reflecting the higher use of sugar. In contrast, Mexico's sugar market remains stable, with production and supplies unchanged, and ending stocks increasing, supporting a higher stocks-to-consumption ratio. The market dynamics are heavily influenced by the proportion of beet versus cane sugar deliveries for domestic use and the associated cost differences.