SUGAR AND SWEETENERS June 30, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- SUGAR AND SWEETENERS Situation and Outlook is published four times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. SSSV20N2. Please note that this release contains only the text of SUGAR AND SWEETENERS--tables and graphics are not included. Subcriptions to the printed version of this report are available from the ERS- NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock #SSS, $22/year. ERS-NASS accepts MasterCard and Visa. ----------------------------------------------------------------------------- Sugar and Sweetener Situation and Outlook Report. Commercial Agriculture Division, Economic Research Service, U.S. Department of Agriculture, SSSV20N2. Contents Page Summary World Sugar Overview Production Consumption Trade Stocks and Prices U.S. Sugar Production Consumption Trade Stocks and Prices Programs U.S. Corn Sweeteners Production Consumption Trade Prices and Costs Special Article: Mexico: Sugar and Corn Sweeteners, An Update List of Tables Report Coordinator Peter Buzzanell (202) 219-0886 FAX (202) 219-0042 Principal Contributors Peter Buzzanell Ron Lord Nydia Suarez Database Coordinator/Graphics & Table Design Fannye Lockley-Jolly Layout & Text Design Wynnice Pointer-Napper Word Processing Betty Barrett Approved by the World Agricultural Outlook Board. Summary released June 19, 1995. The next Sugar and Sweetener Situation and Outlook report is scheduled for release on September 19, 1995. Report text may be accessed electronically through the USDA CID system. For details, call (202) 720-9045. Summary World sugar production will be in surplus in 1994/95. A mid-June revision to India's production estimate moved the USDA forecast from a production- consumption balance to a production surplus. Since March, production forecasts were revised upward for several key producing countries, such as India, Thailand, Cuba, and Brazil. Lower-than-originally expected consumption in Russia and Mexico helped move sugar supplies from the previous expected deficit to a surplus. This surplus follows 2 years during which world stocks were drawn down sharply. These stock drawdowns resulted in strong world sugar prices, particularly during the last quarter of 1994 and the first quarter of 1995. However, world sugar prices are expected to face downward pressure due to a forecast larger world sugar crop and increased export availabilities in 1995/96. World sugar production in 1995/96 is forecast to increase 1.8 percent to a record 117.7 million metric tons, and is expected to exceed world consumption. Particularly noteworthy are developments in India, where production was revised upward 11 percent from the March forecast (1.1 million tons above USDA's May forecast) to a record 16.0 million tons for 1994/95 and a projected 15.1 million for 1995/96. Good weather conditions and increased planted area, which resulted from firm market prices at planting and a hike in the minimum cane support price, resulted in a record 1994/95 sugarcane crop of 255 million tons. In addition, firm prices during 1993/94 enabled mills to pay outstanding arrears to farmers, which has stimulated cane deliveries in 1994/95. The government provided early and late season crushing incentives, which increased early season crush, and may raise late season crush volumes. In addition, new sugar mills, which were licensed during the late 1980's and early 1990's, are coming on line with improved efficiency and greater capacity. For the first-half of June, world raw sugar spot prices (f.o.b. Caribbean ports, contract No. 11, New York) averaged 13.79 cents a pound. In April and May, world raw sugar spot prices averaged 13.63 and 13.49 cents, respectively. Prices averaged 14.63 cents for the January-March quarter, the highest since the first quarter of 1990. World refined sugar prices (c.i.f. contract No. 5, London) showed a similar pattern, with prices averaging 16.31 and 17.05 cents a pound in April and May, and 18.12 cents in January-March 1995. Improved crop prospects for many key cane sugar producing and exporting countries and beet sugar producers across Europe are placing downward pressure on prices. The direction of prices over the next several months will be largely influenced by weather. If good harvest conditions continue in the Southern Hemisphere and if sugarbeet crops across Europe receive normal rains this summer, prices are likely to continue to weaken. If adverse conditions develop in a number of key countries, prices could rebound, especially since global stocks will still be relatively tight. Apart from weather, the level of Russian and Chinese buying and shipments of new crop sugar from South-Central Brazil will shape the movement of prices of both world raw and refined sugar this summer. Again India will be a pivotal country to watch. Despite the record production, imports of 400,000 tons are expected this summer, and may be used to establish buffer stocks. India's sugar industry is pressing the government to lift the ban on sugar exports. A decision has yet to be made, however, India is expected to become a net sugar exporter during 1995/96. U.S. sugar production in fiscal 1995/96 (October 1995-September 30, 1996) is projected at 7.68 million short tons, raw value, down 3.8 percent from the revised 1994/95 estimate. Lower output forecasts result from a likely return to normal yields for sugarbeets and for Louisiana sugarcane, plus the closure of two mills in Hawaii. Beet sugar production is forecast at 4.35 million tons, down 200,000 tons from the revised estimate for this year. Cane sugar production for fiscal 1995/96 is forecast at 3.33 million tons, down 103,000 tons from the current year. Florida, the leading producing State, is expected to produce 1.80 million tons, up 4 percent from the weather-delayed 1994/95 harvest. Louisiana's sugar production is forecast at 900,000 tons, down 12 percent from the record outturn this year as yields are expected to return to more normal levels. Hawaii's sugar industry continues its contraction as two more sugar factories will close by mid-1996 and production drops 8 percent to 460,000 tons. Production in Texas and Puerto Rico are expected to remain relatively unchanged at 130,000 and 40,000 tons, respectively. U.S. sugar consumption for fiscal 1995/96 is forecast at 9.53 million tons, up 1.6 percent or 150,000 tons from the revised estimate for the current year. The year-to-year anticipated growth rate is comparable to recent years, but down from the 2.4-percent annual growth experienced during the second half of the 1980's. U.S. sugar import forecasts for fiscal 1995/96 are not available as the level of the tariff rate quota (TRQ) imports has not been set. The United States has a commitment, under the Uruguay Round Agreement, to the World Trade Organization (WTO) to import at least 1.256 million short tons, raw value of sugar per year at the low tariff level of the TRQ. Imports under USDA's reexport programs are forecast at 825,000 tons in 1995/96. U.S. sugar exports for the forecast year are projected at 450,000 tons, largely consisting of refined sugar reexports. For fiscal 1994/95, total imports are estimated at 1.68 million tons, consisting of 1.39 million tons of TRQ sugar, 225,000 tons of sugar for the reexports programs, 49,000 tons from Canada, 1,000 tons high tariff, and 15,000 tons for polyhydric alcohol. The estimate for imports of quota-exempt sugar for reexport have been reduced 175,000 tons from the March estimate as refiners are delaying imports because of substantially lower futures market prices in 1996. Sugar exports for 1994/95 were lowered 8 percent to 470,000 tons due to the relatively slow pace of exports during the first-half of the year. On June 13, the Secretary of Agriculture announced that a TRQ shortfall of 101,883 short tons (92,427 metric tons) is expected for the import quota period that ends September 30, 1995. The countries for which a shortfall is officially declared are Barbados, Congo, Gabon, Papua New Guinea, and St. Kitts and Nevis. In response, the U.S. Trade Representative announced that the quota allocations for the five countries have been suspended for the current quota period, and are being reallocated among the remaining quota holders, except for the 10 minimum quota-holding countries. The Secretary of Agriculture also reconfirmed that the August 8, 1994 announcement setting the TRQ at 1,458,333 short tons (1,322,978 metric tons) remains unchanged, and that the TRQ entry period ends September 30, 1995. Current U.S. supply-demand forecasts for sugar have not been revised to reflect the reallocation of the TRQ shortfall. U.S. raw sugar prices (nearby futures, c.i.f., duty-paid, contract No. 14, New York) averaged 22.93 cents a pound in the first half of June (September contract) compared with 23.10 cents in May; 22.76 cents in April; and 22.22 cents for the first half of fiscal 1995. Comparable prices for the first 8-1/2 months of fiscal 1994 (October through mid-June) averaged 22.02 cents. The upturn in prices has reflected contraction in the fiscal 1995 supply situation in terms of domestic production, imports of nonquota sugar for reexport, and stocks. U.S. corn sweetener production in fiscal 1996 (October/September) is forecast to total 12.2 million tons, dry basis, up 4.3 percent from the current year. This projection reflects expanded industry capacity and is based on recent growth trends equal to 1990-94 averages, excluding the high and low years. HFCS production for fiscal 1996 is forecast at 8.15 million short tons, dry basis, up 350,000 tons, or 4.5 percent from the current year. HFCS-55 will likely account for 60 percent of the total and HFCS-42 the remainder. Combined glucose and dextrose production are projected to reach 4.05 million tons, up 150,000 tons from the fiscal 1995 forecast. The United States remains the world's leading producer of corn sweeteners, accounting for about three- quarters of global production. For 1995/96, about 715 million bushels or 9.1 percent of the U.S. corn crop forecast at 7.9 billion bushels are expected to be used to produce corn sweeteners by the corn wet milling industry. In the U.S., HFCS-55 and HFCS-42 consistently sell at a discount to wholesale refined sugar. The average discount over the last 5 fiscal years has been 4.2 cents a pound for HFCS-55, and 6.4 cents for HFCS-42. For the first 8 months of fiscal 1995, the discount has been 6.4 and 8.5 cents, respectively. For May, HFCS-55 and 42 list prices averaged 18.5 and 16.2 cents a pound, respectively. World Sugar ---------------------------------------------------------------------- 1/ In this report, world sugar estimates are given in metric tons equal to 2,204.6 pounds or 1,000 kilograms. U.S. estimates are presented in short tons equal to 2,000 pounds or 907,185 kilograms. All estimates are expressed in raw value, unless otherwise specified. It takes 1.07 tons of cane sugar, raw value, to produce 1.0 ton of refined sugar. For beet sugar the factor is 1.07 tons raw value sugar to 1.0 ton of refined sugar in the United States, and 1.087 tons in other countries. 2/ The USDA world sugar supply and demand balance for 1994/95, released by the Foreign Agricultural Service on June 1, indicates a balance between production and consumption. However, a revised production estimate for India (USDA, FAS World Agricultural Production, June 13, 1995) changes the balance to a surplus. The United States and Mexico's supply and use also has been revised. Data for all other countries remain unchanged from the June 1 release. _________________________________________________________________________ Overview Upward revisions to USDA's 1994/95 sugar estimates for world production and consumption indicate there will be a surplus (production greater than consumption) of about 640,000 tons in 1994/95. -- A mid-June revision to India's production estimate moved the USDA forecast from a production-consumption balance to a production surplus. This contrasts with forecasts of a world sugar deficit of 500,000 tons estimated in March and 1.2 million tons projected in December. Increased production prospects in India, Brazil, and Thailand are largely responsible for the higher 1994/95 ending stocks forecast. In addition, consumption in Russia and Mexico has been lower than previously expected. The surplus in 1994/95 follows 2 years of large sugar deficits. The large drawdown of world sugar stocks that result explain the strong world prices that were at a 5-year high during the first quarter of 1995. World sugar prices now are facing downward pressure because of a larger world sugar production resulting in more exportable supplies forecast for 1995/96. Production Higher Production Forecast For 1995/96 USDA's preliminary forecast for world sugar production in 1995/96 is a record 117.7 million metric tons, raw value, up 1.8 percent from the revised 1994/95 production of 115.7 million tons, and 1 percent above the previous record of 116.5 million tons in 1991/92 (table 1). Sugar produced from sugarcane is forecast at a record 80.4 million tons, accounting for 68 percent of the global sugar production forecast. While sugarcane yields are expected to be somewhat lower, sugarcane area harvested is forecast up nearly 3 percent to a record 12.7-million hectares. Sugar processed from sugarbeets is forecast at 37.3 million tons, up 7 percent from 1994/95. Global sugarbeet area harvested is expected to be relatively unchanged at 7.8 million hectares, but yields are forecast to be over 6 percent higher than last year's yields, largely reflecting the improved prospects for Europe's sugarbeet agriculture. Among the world's major cane sugar producing countries, large crops are foreseen in Cuba, Brazil, India, Pakistan, and China. Foreign investment in Cuba's sugarcane production, mainly the purchase of production inputs, is expected to boost sugar output by 14 percent to 4.0 million tons. For Brazil, production is forecast at a record 12.5-million tons, largely reflecting continued diversion of cane from fuel-alcohol to sugar and improvements in recovery rates. In India, an increase in sugarcane area, combined with relatively low cane diversion to the production of gur will likely result in centrifugal sugar output of 15.1 million tons, only 6 percent below this season's record output. Pakistan's production is forecast at a record 3.6 million tons, up 3 percent from 1994/95 due to both higher expected area harvested and yields. China's cane sugar crop is expected to be up 5 percent to 5.4 million tons, due to increased area harvested and some improvement in recovery rates. Like the United States, China is a major producer of both cane and beet sugar, with cane sugar normally accounting for more than 80 percent of annual production. For Thailand, Australia, and the United States, also world leaders in cane sugar production, the 1995/96 outturns are expected to be lower at 5.0, 4.9 and 3.0 million metric tons, respectively. Yields are expected to decline in both Thailand and Australia after record production in 1994/95. In the United States, area harvested is forecast to be down largely due to the closing of two cane mills in the State of Hawaii. For details on Mexico, which ranks as the world's seventh largest cane sugar producer, see the special article Mexico: Sugar and Corn Sweeteners, An Update on page 28. The expected upturn in global beet sugar production largely reflects improved forecasts across Europe. The European Union's (EU-15) beet sugar production forecast for 1995/96 is 17.4 million tons, up 6 percent from 1994/95 and accounting for 47 percent of projected world beet sugar production (table 2). The EU-15 is expected to have a 3-percent increase in harvested sugarbeet area and a potential for higher yields. The anticipation of more favorable weather conditions and increased planted area in France and Germany, the EU's two major producers--with production forecasts of 4.5 and 4.2 million tons, respectively,--will account for most of the production increase. Turkey and Poland are also forecast to have improved beet sugar crops. Normal weather is expected to boost beet sugar output in Ukraine, up 11 percent to 4.0 million tons and Russia, up 19 percent to 2.0 million tons. However, area in sugarbeets in both countries is forecast to be largely unchanged, remaining significantly below levels of the recent past. For China and Japan, the only significant beet sugar producers in Asia, production is expected to be improved somewhat to 1.1 million and 650,000 tons, respectively, reflecting better yields in China and improved recovery rates in Japan. Production Revised Upward for 1994/95 Since publication of the Sugar and Sweetener Situation and Outlook in March, USDA has increased the 1994/95 world sugar production estimate by 2.1 million tons to 115.7 million tons. The upturn is largely attributed to better-than- anticipated record outturns in India and Thailand and revised estimates for Brazil and Cuba. India's sugar production surged to a record 14.7 million tons through mid-May. With 4 months remaining in the crushing season, total sugar production is expected to reach 16.0 million tons, including 740,000 tons of khandsari, up 37 percent from 1993/94. Good weather conditions and increased planted area, which resulted from firm market prices at planting and a hike in the minimum cane support price, resulted in a record sugarcane crop of 255 million tons. In addition, firm prices during 1993/94 enabled mills to pay outstanding arrears to farmers, which has stimulated cane deliveries in 1994/95. The Government provided early and late season crushing incentives which increased early season crush, and may raise late season crush volumes. New sugar mills, which were licensed during the late 1980's and early 1990's, are coming on line with improved efficiency and greater capacity. Despite the record production, imports of 400,000 tons are expected this summer, and may be used to establish a buffer stocks. India's sugar industry is pressing the Government to lift the ban on sugar exports. A decision has yet to be made, however, India is expected to become a net sugar exporter during 1995/96. Brazil's 1994/95 sugar production estimate was revised several times during the year with the latest estimate a record 12.4 million tons, 25 percent higher than the year before. Both of Brazil's producing areas--the Central South (harvest May-October) and the North/Northeast (harvest September-March)--have experienced excellent harvest and milling seasons. Moreover, the strong upturn in world prices has encouraged a significant volume of cane to shift from ethanol to sugar production. This trend has been facilitated by investment of many ethanol plant owners in equipment to produce sugar. Consumption Sugar Use Continues To Expand World sugar consumption in 1994/95 has been revised up to 115.0 million tons, about 900,000 tons above the March forecast. Higher-than-expected growth in sugar demand in China and India account for most of the higher consumption forecast, and more than offset lower estimates for Russia and Mexico. China is recovering from the apparent decline in sugar consumption in 1993/94. India has experienced record production resulting in a substantial increase in sugar availability for the country's 950 million people, second only to China in population. Although the USDA has not yet made a world consumption estimate for 1995/96, continued strong sugar demand is anticipated. Major consuming countries such as the United States, Mexico, Brazil, India, Pakistan, and Indonesia will likely use an additional 1.2 million tons in 1995/96. Additionally, increased sugar consumption is expected in countries in Central and South America, Africa, and Asia. The surge is due to a mix of factors, including increased sugar production, higher consumer incomes, population growth, and rising demand for sugar containing products such as drinks and processed foods. However, sugar consumption in 1995/96 in the EU, Russia, and Eastern European countries is expected to remain at the 1994/95 level. For Russia, USDA revised downward both the 1993/94 and 1994/95 consumption estimates to 5.4 and 4.9 million tons, respectively. The drop-off of sugar consumption, down more than 20 percent between 1990/91 and 1994/95, has been the result of tight family incomes and the contracting economy. Consumption of domestically produced sugar has also been negatively affected by increased sugar prices and declining production. Also, increased availability of imported confectionery has reduced the demand for sugar from domestic confectionery suppliers. For 1995/96, Russia's sugar consumption is expected to remain at 1994/95 levels. Since 1980/81, global sugar consumption has expanded, reflecting population growth and sugar's role as a staple in most of the world. The lack of substantial growth in recent years is due to a drop in sugar use in the countries of the former Soviet Union and Central Europe, as well as generally slow consumption growth in the rest of the world, apart from Asia. Also, there has been a significant volume of high fructose corn syrup (HFCS) substituting for sugar in liquid sucrose markets in North America and some Asian countries. Despite rapid growth in sugar consumption, Asia continues to have the lowest per capita sugar consumption of any region. For the world's two most populous nations, India and China, sugar consumption in 1995/96 is projected at 15.0 and 8.0 million tons, up 3.4 and 1.9 percent from this year's record levels. With a combined population in 1994/95 estimated at 2.2 billion, India and China are expected to account for nearly 60 percent of Asia's total sugar use and nearly 20 percent of the world total. A decade earlier, India's sugar use was estimated at 9.1 million and China's at 2.2 million tons--together only 11.5 percent of the world total. Per capita sugar use for India is now around 14 kilograms and for China only 6 kilograms, strikingly different from the 30 to 40 kilogram range in Europe and much of Latin America. Trade Trade Expansion Expected in 1995/96 World sugar trade is forecast to increase 2.4 percent in 1995/96 to 31.0 million tons. It is expected that improved sugar export availabilities in 1995/96 in Cuba, EU, Ukraine, and Guatemala will likely account for most of the increase in world sugar exports next season. USDA forecasts India's exports at 500,000 tons, more than double last year's level. The EU-15, the world's largest exporter, is expected to export 5.4 million tons, up marginally from 1994/95 and accounting for 18 percent of the world total (table 2). Exports from these countries should more than offset lower sugar shipments forecast for Australia, Thailand, and Brazil (table 3). Anticipated lower sugar production in the first two countries could reduce their export availabilities, while increased domestic demand in Brazil will lower its international sugar shipments. A recovery in the level of imports in Russia, supplied in part from a larger Cuban crop, will be a major factor in the anticipated increase in world trade. USDA forecasts Russia's imports, the largest of any single country, at 3.1 million tons, up 15 percent from 1993/94. Russia and Cuba have signed a new barter deal for 1995/96 under which Cuba will supply Russia with 1 million tons of sugar in exchange for 3 million tons (22 million barrels) of petroleum, and petroleum products. China will also import at high levels, 2.50 million tons. EU-15 imports, mostly ACP (African, Caribbean and Pacific) sugar under the Lome Convention, are expected to approach 2.0 million tons. India, a sizeable importer the last 2 years, is not expected to import sugar in 1995/96 as improved production should meet its domestic requirements as well as generate an exportable surplus. Import forecasts for the United States will not be available until the U.S. Government sets the tariff rate import quota for 1995/96. Export Estimate Raised for 1994/95 USDA has revised its sugar trade estimate upward for 1994/95 by 1.2 million tons to 30.3 million. The revision is based primarily on larger-than-expected exportable supplies in Brazil, Cuba, China, and Thailand (table 3). This situation, and the fact that world prices continued strong throughout most of the current season, helped foster the upturn in trade. The growth in Brazil's exports have been particularly impressive, with export estimates for 1994/95 put at 4.1 million tons versus 2.6 million the year before. According to Brazilian trade statistics, between June 1994 and January 1995, Brazil exported 2.0 million tons of crystal sugar (plantation white), 0.8 million tons of raw sugar, and 0.6 million tons of refined sugar. This diversity of types of exportable supplies enables Brazil to market its sugar to a wide-range of international customers. For example, Brazil in 1994/95 exported for the first time, an impressive 1.23 million tons of crystal sugar to India. Effective June 1, 1995, Brazil increased the export tax on sugar from 2 to 40 percent. Some in the sugar industry fear that what has been called a temporary measure may assume a more definite character. The tax was imposed as a stopgap measure with the expiration of the sugar export quota authority on May 31, 1995. The government was expected to announce the Sugar Program before the end of May for the 1995/96 season which for the South-Central Brazil sugarcane crop milling has already started. The major concern of the government is adequate supplies of both sugar and ethanol for the domestic market. In past Sugar Programs, domestic sugar supplies were assured by establishing export quotas to limit excessive exports of sugar, as well as domestic targets for ethanol production to assure adequate supplies of fuel ethanol made from sugarcane. Stocks and Prices Global Stock Estimate Increased World ending stocks for 1994/95 are estimated at 19.2 million tons, up from 17.6 million in March. The new stocks-to-use ratio is 16.7 percent, compared with 16.5 percent the year before. Significant upward adjustments in stocks were registered for India and Thailand due to improved production and for Russia because of a downturn in consumption. USDA will not forecast 1995/96 world ending stocks until after the U.S. tariff rate quota for sugar imports is announced. World Prices Weaken For the first-half of June, world raw sugar spot prices (f.o.b. Caribbean ports, contract No. 11, New York) averaged 13.79 cents a pound. In April and May, world raw sugar spot prices averaged 13.63 and 13.49 cents, respectively. Prices averaged 14.63 cents for the January-March quarter, the highest since the first quarter of 1990. World refined sugar prices (c.i.f. contract No. 5, London) showed a similar pattern, with prices averaging 16.31 and 17.05 cents a pound in April and in May, and 18.12 cents in January-March 1995. Improved crop prospects for many key cane sugar producing and exporting countries and beet sugar producers across Europe are placing downward pressure on prices. However, the direction of prices over the next several months will be largely influenced by weather. If good harvest conditions continue in the Southern Hemisphere and if sugarbeet crops across Europe receive normal rains this summer, prices are likely to continue to weaken. If adverse conditions develop in a number of key countries, prices could rebound, especially since global stocks will still be relatively tight. Apart from weather, the level of Russian and Chinese buying and shipments of new crop sugar from South-Central Brazil will shape the movement of prices of both world raw and refined sugar this summer. Russia's recent decision to increase the import tariff on refined sugar from 20 to 25 percent effective July 1 could effect the mix of raw and refined imports and result in a weakening of world refined sugar prices. U.S. Sugar Production Production Downturn Expected in Fiscal 1995/1996 U.S. sugar production in fiscal 1995/96 (October 1995-September 30, 1996) is projected at 7.68 million short tons, raw value, down 3.8 percent from the revised 1994/95 estimate. Lower output results from a likely return to normal yields for sugarbeets and for Louisiana sugarcane, plus the closure of two mills in Hawaii. Beet sugar production is forecast at 4.35 million tons, down 200,000 tons from the revised estimate for this year. The beet sugar forecast is underpinned by intended plantings reported in USDA's Prospective Plantings, released March 31. Sugarbeet growers indicated intentions to plant 1.45 million acres in 1995, down 2 percent from last year. USDA's forecasts of the percent of area harvested and beet yield equal the 1990-94 averages, excluding the high and low years. Sugar recovery from beets (14.3 percent) excluding net additional sugar from desugarization of molasses is the projected linear trend of 1982-94 recoveries. Total sugar from molasses is forecast at 310,000 tons. Net additional sugar from molasses is forecast at 285,000 tons. Of the 14 states where sugarbeets were planted this spring, the top five-- Minnesota, North Dakota, Idaho, Michigan and California--account for nearly 80 percent of the total. All have experienced expansion in acreage in recent years except California (table 4). Rain in early March slowed sugarbeet planting in California. Heavy rains in mid-March flooded low-lying sugarbeet fields and caused plant loss, especially in the Sacramento Valley. These delays pushed planting past optimal crop production dates. According to industry sources, growers in California tend to cut back acreage if weather is expected to reduce the crop's yield potential and when prices at planting time are flat or declining. Reflecting these factors, USDA's National Agricultural Statistics Service (NASS) reported prospective sugarbeet plantings in California for 1995/96 at 125,000 acres, down 13 percent from the previous season. In the previous several years, sugarbeet acreage has been declining in California due to weather problems such as the recent persistent drought which limited irrigation water supplies in some areas and the availability to growers of more remunerative alternative crops. As of June 1, industry reports from other sugarbeet growing areas indicate that the upcoming crop is generally progressing well, although the crop got off to a late start in many parts of the United States due to a cool, wet spring. These conditions pushed back planting in growing areas in Southern Minnesota, the Red River Valley of Minnesota and North Dakota, and western Nebraska. In contrast, the sugarbeet crop in Michigan was planted in the normal period and overall is reported to be in good-to-excellent condition. Cane sugar production for fiscal 1995/96 is forecast at 3.33 million tons, down 103,000 tons from the current year. Florida, the leading producing State, is expected to produce 1.80 million tons, up 4 percent from the weather-delayed 1994/95 harvest. Louisiana's sugar production is forecast at 900,000 tons, down 12 percent from the record outturn this year as yields are expected to return to more normal levels. Hawaii's sugar industry continues its contraction as two more sugar factories will close by mid-1996 and production drops 8 percent to 460,000 tons. Production in Texas and Puerto Rico are expected to remain relatively unchanged at 130,000 and 40,000 tons, respectively. USDA's cane sugar production forecast is based on estimates of sugarcane area harvested for sugar in each State, which reflects information from producers, processors, and other knowledgeable sources; and forecast sugarcane yields and sugar recovery from cane equal to 1990-94 averages excluding the high and low year for each State (table 5). USDA does not issue its first survey-based sugarcane acreage report until June 30. However, as of June 1, industry reports indicate that the upcoming sugarcane crop is progressing well in Florida, Louisiana, Texas, and Hawaii. No significant freezes were reported this past winter that could have pushed back plant growth in the mainland States. Also, the heavy rains experienced in southern Louisiana in May did not damage the upcoming sugarcane crop. In contrast, the Texas growing area has been experiencing dry conditions that could diminish yield potential. Fiscal 1994/1995 Estimate Revised Downward Since the March Sugar and Sweetener Situation and Outlook, USDA has revised downward the fiscal 1994/95 sugar production estimate by 3.1 percent or 257,000 tons to 7.98 million tons. Despite the downturn, the revised estimate is up 4.0 percent from fiscal 1994 and represents a record high for U.S. sugar production. Beet sugar production was revised downward by 100,000 tons to 4.55 million tons. The decline was caused by a number of factors, including lower-than- anticipated sugar recovery because of deterioration of stored beets late in the processing season, some abandonment of stored beets at the end of the season, and rains in California that disrupted processing and caused losses. For 1994/95, total cane sugar production is now put at 3.48 million tons representing 43 percent of total U.S. sugar production. Cane sugar production was revised downward, 157,000 tons, reflecting a 110,000-ton downward adjustment to the Florida estimate, and a 40,000-ton contraction in Hawaii's estimated production. Florida, the largest cane sugar producing State, experienced extremely wet conditions in November and December with significant flooding in some areas. These conditions, coupled with milling delays reduced the overall potential of the crop. For Hawaii, weak monthly production levels, especially the last several months, forced a lower estimate for the year. At 500,000 tons, Hawaii's cane sugar production has fallen to only one-half of the 1 million tons regularly produced a decade ago. According to information from USDA's Consolidated Farm Service Agency (CFSA) published in Sweetener Market Data, beet sugar production for the first 6 months of fiscal 1994/95 (October-March) totaled 3.32 million tons, accounting for 73.0 percent of the revised estimate for the year. This compares with 3.13 million or 75.5 percent of the estimate for the corresponding period in 1993/94. Cane sugar production for the first 6 months of 1994/95 totaled 3.04 million tons or 87.5 percent of the forecast for the year. This compares with 3.04 million or 84.7 percent for the same 6-month period in 1993/94. Consumption Expansion in Sugar Use Expected To Continue in Fiscal 1995/96 U.S. sugar consumption for fiscal 1995/96 is forecast at 9.53 million tons, up 1.6 percent or 150,000 tons from the revised estimate for the current year. The year-to-year anticipated growth rate is comparable to recent years, but down from the 2.4 percent annual growth experienced during the second half of the 1980's. The anticipated growth reflects population growth and increased incomes. Population growth is projected up nearly 1 percent to 269.2 million people (including Puerto Rico), including an increasing number of immigrants, many of whose traditional diets are high in sugar. These developments, along with increasing away-from-home food consumption, and expanded use of processed foods, are reflected in heightened demand for sugar in commercially prepared foods and packaged sugar for the grocery trade and institutional users. Per capita sugar use is forecast at 65.0 pounds for fiscal 1995/96, up 3.4 pounds since fiscal 1986/87 when sugar use began to rebound after the soft drink industry completed its switch to HFCS. This forecast is below the average annual growth rates of recent years. The reduced growth rate, in part, is explained by increases in imports of sugar- containing products, which displace some U.S. sugar deliveries. Other factors could be a resurgence in inroads into sugar markets by corn sweeteners, including crystalline fructose, and expanded substitution of high intensity sweeteners (aspartame and saccharin) for sugar. Fiscal 1994/1995 Estimate Lowered USDA has lowered the estimate for U.S. sugar consumption in fiscal 1994/95 published in the March report. The sugar use estimate was revised downward by 50,000 tons to 9.38 million tons. This represents only a 0.5 percent growth rate over the previous year. The slowing of the sugar use growth rate this year is attributed to high sugar deliveries in the last quarter of 1993/94 in anticipation of marketing allotments, reduced demand for sugar-containing reexports, and increased use of alternative sweeteners, particularly crystalline fructose. For the first 6 months of fiscal 1994/95, sugar deliveries totaled 4.42 million tons or 47.1 percent of the estimate for the year. Comparable data for 1993/94 was 4.45 million tons or 47.7 percent of 9.33 million tons. During the second half of 1994/95, the pace of sugar consumption is expected to increase and total 4.96 million or 52.9 percent of the estimate for the year. The breakdown of deliveries between beet and cane sugar shows beet sugar at 1.91 tons for the first 6 months of fiscal 1994/95, 43.2 percent of the total, and cane sugar, 2.40 million, 54.4 percent, up from 53.0 percent the previous year. The remaining 2.5 percent of total deliveries for the first half of fiscal 1995 includes importers' direct consumption, sugar reexported in products, and sugar for polyhydric alcohol and livestock feed use. Table 27 has delivery details by month and quarter. During the first half of fiscal 1994/95, industrial use of sugar totaled 2.33 million tons, refined, compared with 2.35 million a year earlier (table 6). Bakery/cereal and confectionery sectors continue to underpin industrial use, accounting for 39 and 27 percent, respectively, of total deliveries to industrial users. Delivery levels for these industrial users have been relatively stable for the first half of the year. Stronger deliveries to these sectors, as well as an expected seasonal upsurge in demand from the ice cream and dairy products category are expected during the last half of 1994/95. USDA also tracks deliveries to non-industrial users (table 7). This group registered 1.75 million tons, refined, for the first half of fiscal 1995. In this group, wholesale grocers, jobbers, and sugar dealers accounted for 58 percent or 1.01 million tons of the total, and retail grocers and chain stores, 34 percent or 600,000 tons. Table 8 provides a summary of all delivery data by region. The North-Central and South each accounted for 32 percent of the 4.08 million tons, refined for the first-half of fiscal 1995. Traditionally, the North-Central region has been the leading use region reflecting the large number of food processing plants concentrated in the region as well as the food stores that service the 19 percent of the U.S. population that live in the 10 state region. ------------------------------------------------------------------------ 3/ USDA places the following States in the North Central region: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, and Wisconsin. ------------------------------------------------------------------------- Deliveries to the South increased 14 percent between 1990 and 1994 due to the growth in food processing facilities in the region as well as food stores serving the region's growing population. Trade Import Quota Shortfall Reallocated The United States remains a large net sugar importer. U.S. sugar import forecasts for fiscal 1995/96 are not available as the level of tariff rate quota (TRQ) imports has not been set. U.S. sugar exports for the forecast year are projected at 450,000 tons, largely consisting of refined sugar reexports. The United States has a commitment, under the Uruguay Round Agreement, to the World Trade Organization (WTO) to import at least 1.256 million short tons, raw value of sugar per year at the low tariff level of the TRQ. Imports under USDA's reexport programs are forecast at 825,000 tons in 1995/96. For fiscal 1994/95, total imports are estimated at 1.68 million tons, consisting of 1.39 million tons of TRQ sugar, 225,000 tons of sugar for the reexports programs, 49,000 tons from Canada, 1,000 high tariff, and 15,000 tons for polyhydric alcohol. The estimate for imports of quota-exempt sugar for reexport have been reduced 175,000 tons from the March estimate as refiners are delaying imports because of substantially lower futures market prices in 1996. Sugar exports for 1994/95 were lowered 8 percent to 470,000 tons due to the relatively slow pace of exports during the first-half of the year. On June 13, the Secretary of Agriculture announced that a sugar tariff-rate quota (TRQ) shortfall of 101,883 short tons (92,427 metric tons) is expected for the import quota period that ends September 30, 1995. The countries for which a shortfall is officially declared are Barbados, Congo, Gabon, Papua New Guinea, and St Kitts and Nevis. In response, the U.S. Trade Representative announced that the quota allocations for the five countries have been suspended for the current quota period, and are being reallocated among the remaining quota holders, except for the 10 minimum quota-holding countries. The Secretary of Agriculture also reconfirmed that the August 8, 1994 announcement setting the TRQ at 1,458,333 short tons (1,322,978 metric tons) remains unchanged, and that the TRQ entry period ends September 30, 1995. Current U.S. supply-demand forecasts for sugar have not been revised to reflect the reallocation of the TRQ shortfall. According to USDA's Foreign Agricultural Service, as of June 14, 1995 approximately 595,000 tons of TRQ allocations remain available for entry into the United States by September 30, 1995 (table 9). Stocks and Prices Fiscal 1994/1995 Stocks Lower Beginning stocks in fiscal 1995/96 are forecast at 1.15 million tons, down 187,000 from the beginning stocks for fiscal 1994/95, and 553,000 tons below fiscal 1993/94. Since the fiscal 1995/96 TRQ has yet to be set, no ending stock figure can be calculated for September 30, 1996. For fiscal 1994/95, ending stocks on September 30, 1995, are estimated at 1.15 million tons, down 342,000 tons from the March estimate and largely reflecting downward adjustments in production and quota exempt imports that more than offset adjustments to consumption and exports. The new stock-to use ratio is 11.69 percent versus 15.02 in March. According to USDA's stocks and price model, for every 1 percent change in the stock level there is a corresponding 0.3-cent a pound change in price. For this 3.33 percent negative change since March, the model predicts about a 1.0-cent higher raw sugar price. The revised stock estimate includes 151,000 tons of beet sugar in excess of marketing allotments. The stocks-to-use ratio, without the "blocked stocks," would be 10.15 percent. According to USDA's Sweetener Market Data, compiled and published by the CFSA, sugar stocks on April 1, 1995, the midpoint in the fiscal year, totaled 3.90 million tons, compared with 4.02 million a year earlier. Beet processors held 1.79 million tons, 46 percent of the total, only slightly below a year earlier. The remaining stocks were held by cane mills 1.40 million (36 percent) and cane sugar refiners 713,645 tons (18 percent). No stocks were held by USDA's Commodity Credit Corporation (CCC). Normally at their highest point around April 1, U.S. sugar stocks are then drawn down to meet domestic demand. Stocks are usually the lowest at the end of the fiscal year. Raw Sugar Prices Strengthen U.S. raw sugar prices (nearby futures, c.i.f., duty-paid, contract No. 14, New York) averaged 22.93 cents a pound in the first half of June (September Contract) compared with 23.10 cents in May; 22.76 cents in April; and 22.22 cents for the first half of fiscal 1995. Comparable prices for the first 8-1/2 months of fiscal 1994 (October-mid-June) averaged 22.02 cents. The upturn in prices reflects contraction in the fiscal 1995 supply situation in terms of domestic production, imports of nonquota sugar for reexport, and stocks. Wholesale refined beet sugar prices (f.o.b. plant, Midwest markets) averaged 25.60 cents a pound for fiscal 1994, and 25.40 cents for the first half of fiscal 1995, according to price data compiled by the Milling and Baking News. Wholesale refined beet sugar prices have remained stable during April, May, and mid-June, averaging 25.50 cents. The stability of refined beet prices reflects the size of the 1994/95 beet crop, up 460,000 tons over the previous season, the overhang on the market from blocked stocks, and slow growth in market demand. Programs Sugar Marketing Allotments Continued On April 11, USDA announced the third quarter (April-June) revision of sugar marketing allotments and allocations for fiscal year 1994/95. After re- estimation of U.S. sugar consumption, stocks, production, and imports, USDA determined that sugar marketing allotments, implemented October 1, 1994, should continue. Based on the supply-demand-price situation at the end of the January-March quarter, reasonable ending stocks were estimated at 1.222 million tons, up 50,000 tons from the December estimate. This resulted in the overall allotment quantity (OAQ) continuing unchanged at 7.889 million tons. Based on the revised estimates, the beet sugar percentage share of the OAQ is 55.25 percent, up 8 hundredths of a percent from the December level. This resulted in the beet sugar allotment totalling 4.359 million tons, compared with the 4.352 million tons previously announced. The raw cane sugar percentage share and allotment levels decreased a like amount, and now total 44.75 percent and 3.530 million tons, respectively. The marginal change in beet-cane sugar shares resulted from slight changes in the 1994/95 crop beet and cane sugar production forecasts (March estimates were used for these calculations), and slightly lower cane processing capacity as a result of revised cane sugar data in crop years 1989-93. In setting allotment levels, USDA utilizes a weighted 3-factor criteria: past marketings (25 percent); processing capacity (25 percent); and ability to market (50 percent). USDA also announced a reassignment of 50,000 tons of Hawaiian and 5,000 tons of Puerto Rican allotments to processors in Florida, Louisiana, and Texas. The reassignment is a portion of the Hawaii and Puerto Rico allotments that is not expected to be filled because of a deficit in each State's sugar supply relative to allotment. The reassignment in Florida, Louisiana, and Texas were limited to only those processors whose expected production exceeded their previous allocation. In addition to sugar, marketing allotments cover crystalline fructose according to the Farm Act of 1990. The allotment for crystalline fructose is also unchanged at 159,757 short tons. The next re-estimation of the need for marketing allotments, and if needed, allotment levels, will be made by the beginning of the July-September quarter. U.S. Corn Sweeteners Production U.S. Corn Crop Forecast Lower The 1995/96 (September/August) U.S. corn crop is forecast at 7.90 billion bushels, down 22 percent from the record 1994 crop, due to reduced acres and lower expected yields. Prolonged wet conditions in the Midwest are expected to prevent some plantings and have delayed others. Planted acres are forecast down 7 percent to 73.3 million. Harvested acres are projected to be down by a slightly greater margin, 9 percent to 66.0 million. The average corn yield is projected at 119.7 bushels per acre in 1995/96. This compares with the record 138.6 bushels per acre yield in 1994/95. Although farmers can make very rapid planting progress if conditions allow, late plantings could increase the risk that more of the crop will enter the pollination stage during the typical hot weather of July. Domestic corn use for 1995/96 is forecast at 6.83 billion bushels, with feed and residual use taking 74 percent or 5.05 billion bushels, and food, seed, and industrial (FSI) use the remainder. Within the FSI use sector, the corn grind for corn sweeteners is forecast at a record 715 million bushels, or 20.0 million short tons, up 2.9 percent from the current season. ---------------------------------------------------------------------------- 4/ It is assumed one 56-pound bushel of number 2, yellow dent corn, the type used by U.S. wet millers, will yield approximately 33.33 pounds of corn sweetener, dry basis. This means, on the average, 60 56-pound bushels of corn are needed to produce 1 short ton of corn sweetener, dry basis, whether fructose syrup, glucose syrup, or dextrose. ------------------------------------------------------------------------------- Corn sweeteners represent nearly 10 percent of the projected domestic use of the 1995/96 crop, and 40 percent of FSI use. For 1994/95, corn used for high fructose corn syrup (HFCS) is expected to total 465 million bushels, up 5.2 percent from the previous year. Corn used for glucose syrup and dextrose is expected to total 230 million bushels, up 3.1 percent from 1993/94 (table 11). HFCS Output Continues To Expand, U.S. Remains World Leader U.S. corn sweetener production in fiscal 1995/96 (October/September) is forecast to total 12.2 million tons, dry basis, up 4.3 percent from the current year. ---------------------------------------------------------------------------- 5/ In this report, U.S. corn sweetener estimates are given in short tons, dry basis, unless otherwise specified. It is assumed HFCS-42 contains 71 percent solids; HFCS-55, 77 percent solids; glucose corn syrup, 80.3 percent solids; and dextrose--assumed to be monohydrate, 92 percent solids. ----------------------------------------------------------------------------- This projection reflects expanded industry capacity and is based on recent growth trends equal to 1990-94 averages, excluding the high and low years. HFCS production for fiscal 1995/96 is forecast at 8.15 million short tons, dry basis, up 350,000 tons, or 4.5 percent from the current year. HFCS-55 will likely account for 60 percent of the total and HFCS-42 the remainder. Combined glucose and dextrose production are projected to reach 4.05 million tons, up 150,000 tons from the fiscal 1994/95 forecast. About 75 percent of HFCS output is targeted to the beverage industry which is experiencing strong growth spurred by expansion in fast-food soft drink use, and "new age" beverages including the fastest growing beverage category, ready- to-drink teas. Growth in HFCS exports to Mexico during fiscal 1995/96 is also a factor explaining projected higher U.S. corn sweetener production (see following article Mexico Sugar and Corn Sweetener Industries, An Update. In fiscal 1994/95, U.S. production of corn sweeteners (HFCS, glucose syrup, and dextrose) is estimated at 11.7 million tons, up 4.3 percent from the previous year. This forecast has been raised from the 11.6 million published in March, reflecting higher-than-anticipated production in January-March 1995. Total HFCS production in fiscal 1994/95 is expected to reach 7.8 million tons, up 4.5 percent from the preceding year (figure 4). HFCS-55 (55-percent fructose, dry basis) continues to be the dominant corn sweetener in the United States, with output estimated over 4.7 million tons, 5.9 percent higher than 1994. For the first half of fiscal 1994/95, HFCS-55 production totaled 2.1 million tons, up 8.2 percent from the year before and accounting for 45 percent of the estimate for the year. HFCS-42 (42-percent fructose, dry basis) production in fiscal 1994/95 is estimated at 3.1 million tons, up 2.5 percent from 1993/94. For October 1994 to March 1995, HFCS-42 production totaled nearly 1.4 million tons, up 3.1 percent from a year earlier and accounting for over 44 percent of the estimate for the year (table 12). The United States remains the world's leading producer of HFCS, accounting for 75 percent of global production. According to a leading international sweetener analyst, world HFCS production for 1994/95 is estimated at 9.51 million tons, dry basis, up 37 percent from 1986/87. ---------------------------------------------------------------- 6/ F. O. Licht, "World Corn Syrup Growth Outpaces Sugar," Reuters, March 30, 1995. --------------------------------------------------------------- Global sugar production in the same period grew only 9.5 percent. In addition to the United States, other major HFCS producers in 1994/95 are Japan (870,000 tons), South Korea (330,000 tons), the EU (303,000 tons) and Canada (240,000 tons). As in the United States, HFCS is used around the world primarily as a liquid sweetener for the soft drink industry. Combined U.S. glucose syrup and dextrose production is estimated at 3.9 million tons for fiscal 1994/95, one-third of total U.S. corn sweetener output. Glucose syrup production is estimated at nearly 3.2 million tons, of which 1.5 million tons was produced October-March, up 3.9 percent from the corresponding period the year before. Dextrose production is estimated at 728,000 tons for the year, of which 48 percent of the estimate was produced during the first- half of the year. Consumption U.S. Corn Sweetener Domestic Use Also Continues To Expand Total U.S. corn sweetener use is expected to reach 11.6 million tons of which U.S. production is expected to supply 98 percent of domestic demand. USDA forecasts fiscal 1995/96 HFCS consumption at 8.2 million tons, up 4.7 percent from the current year. The consumption forecast for HFCS is based on projections of deliveries from domestic production and imports. On a per capita basis and using a U.S. population of 269.2 million (including Puerto Rico), domestic HFCS use is forecast at 61.4 pounds in fiscal 1996, up from 58.7 pounds the current year, and 49.8 pounds in fiscal 1990/91. Glucose syrup and dextrose deliveries are forecast at 3.4 million tons, up 4.1 percent from the current year. For fiscal 1994/95, U.S. corn sweetener use is expected to total 10.95 million tons, up 3.9 percent from the previous year. ------------------------------------------------------------------- 7/ Domestic deliveries of corn sweeteners in "consumption" are limited to those for domestic food and beverage use only, and do not include nonfood use. ------------------------------------------------------------------- The composition of estimated corn sweetener use by the domestic food and beverage industry is HFCS-55, 4.6 million tons; HFCS-42, 3.1 million; glucose syrup, 2.7 million tons; and dextrose, 0.5 million tons. Nonalcoholic beverages account for more than 70 percent for total HFCS domestic food and beverage use and nearly 90 percent for HFCS-55 alone. HFCS domestic deliveries for the first half of fiscal 1994/95 totaled over 3.4 million tons, leaving nearly 4.3 million or 55 percent for the remainder of the year, assuming USDA's current forecast (table 13). Over the past 5 years, deliveries during the last 2 quarters averaged 28 and 27 percent, respectively. The major reason for recent growth of HFCS deliveries has been rising use in nonalcoholic beverages, largely carbonated soft drinks as well as the increasingly popular noncarbonated sports and fruit drinks and ready-to-drink teas. Domestic glucose syrup deliveries for the first half of fiscal 1994/95 totaled 1.3 million tons, up 46,000 tons from a year earlier. For the entire fiscal year, glucose syrup deliveries are expected to be up 3.3 percent or 88,000 tons for the year. In recent years, glucose growth can be attributed to expanded use by the bakery and cereal, confectionery, and processed foods industries. Domestic dextrose deliveries for the first half of fiscal 1994/95 totaled 250,000 tons, up nearly 5.0 percent from the same period last year. Domestic use grew slightly over 2.0 percent annually over the last 5 years. The higher growth was led by use in the confectionery and multiple product areas. A minor but positive reason for expanded nonfood use of corn sweeteners, particularly for glucose syrup and dextrose, is a growing market for their use in the production of chemicals and pharmaceuticals. Trade The United States is a Net Exporter of HFCS The United States is expected to be a small net exporter of HFCS in fiscal 1994/95 and 1995/96. For this year, HFCS imports, mostly from Canada, are forecast to total around 113,800 short tons, down from 158,143 tons in fiscal 1993/94. For the first 6 months of fiscal 1994/95, HFCS imports totaled 45,100 tons, down by one-half from a year earlier. Relatively high world sugar prices so far this fiscal year appears to have stimulated HFCS use in Canada and reduced the incentive to export to the United States. World raw sugar prices averaged 14.02 cents a pound during October 1994 through June 15, 1995, compared with 10.82 cents during the same period in fiscal 1993/94. HFCS exports, including crystalline fructose, are expected to total 114,100 short tons in fiscal 1994/95, down from 134,820 tons in fiscal 1993/94. Most HFCS exports go to Canada, but over the last 2 years increasing quantities have been going to Mexico. For the first half of fiscal 1994/95, HFCS exports totaled 52,891 tons versus 73,572 tons for the first half of fiscal 1993/94. With sugar prices up in Canada, HFCS use was expected to increase and draw in more imports than a year ago, but that has yet to occur. U.S. HFCS exports to Mexico totaled 25,095 tons for the first half of fiscal 1994/95, down from 32,331 tons from the corresponding period in fiscal 1993/94. The downturn is largely due to Mexico's major peso devaluation announced in December 1994. This action has made HFCS exports from the United States 30 to 45 percent more expensive in Mexico. The United States is expected to continue to be a net exporter of glucose syrup and dextrose. For the first 6 months of fiscal 1994/95, glucose syrup exports totaled 16,774 tons, down from 19,192 tons the year before, and likely to total 37,400 tons for the year. U.S. imports of glucose syrup are forecast to total around 13,800 tons in fiscal 1994/95, nearly 11 percent above the previous year. Dextrose exports in fiscal 1994/95 are likely to total around 39,100 tons, 40 percent higher than fiscal 1993/94, based on the trend for the first 6 months. Dextrose imports in fiscal 1994/95 will likely total 7,700 tons. Dextrose imports, in recent years, have been less than one-fifth as large as dextrose exports. But while dextrose imports are relatively small, they continue to grow. Prices and Costs HFCS Prices Expected To Seasonally Strengthen In the United States, HFCS-55 and 42 consistently sell at a discount to wholesale refined beet sugar. The average discount over the last 5 fiscal years has been 4.2 cents a pound for HFCS-55, and 6.4 cents for HFCS-42. For the first 8 months of fiscal 1995, the discount has been 6.4 and 8.5 cents, respectively. HFCS prices have a well-defined seasonal pattern. For example, after reaching plateaus in April-June and July-September 1994 of 24.8 and 24.5 cents a pound, respectively, HFCS-55 fell to 19.7 cents in October-December and 18.5 cents for January-March. In April and May of 1995, HFCS-55 prices held steady at 18.5 cents a pound, down 25 percent from the corresponding months in 1994. HFCS-42 has shown a similar pattern, averaging 22.2 cents during April- September 1994 and 17.0 cents during October-March. HFCS-42 prices in April and May 1995 were 16.6 cents, down by one-quarter from the corresponding months in 1994. Glucose syrup prices showed less variability as prices averaged 15.6 cents April-September 1994, 14.6 cents October-March, and 14.2 cents in April and May 1995. There is less seasonality in glucose syrup use and this is reflected in the price movements over the last year. Dextrose list prices remained unchanged at 24.5 cents per pound from October 1989 through December 1993--a 51-month period. List prices were increased to 26.0 cents per pound in February 1994, then dipped to 25.5 cents in 5 of the last 7 months (November- May). Dextrose continues its reputation as the most expensive major U.S. corn sweetener and the one with the most stable list prices. Net Corn Costs Higher Than a Year Ago The Midwest price of Number 2 yellow dent corn (the grade used by wet millers) averaged $2.16 per bushel during October 1994-March 1995, down from $2.70 in fiscal 1994. The lower corn prices this season reflect the record corn crop in 1994/95. But corn prices in April and May 1995 rose to average $2.41 and $2.50 per bushel, respectively. Prices for the three major byproducts (corn oil, corn gluten feed, and meal) for October 1994-April 1995, were mixed. For example, Midwest corn oil prices averaged 26.3 cents a pound during October 1994-March 1995, comparable with the first half of fiscal 1993/94. Midwest corn gluten meal prices averaged $227.7 per short ton during the first 6 months of fiscal 1994/95, down from $302.3 for fiscal 1993/94. Corn gluten feed prices averaged $84.3 per short ton, down from $87.6 in the previous year. The net corn cost (corn price less byproduct credits) to Midwestern corn refiners averaged 89 cents a bushel during October 1994-March 1995, down from $1.40 a bushel in fiscal 1993/94. This is equivalent to a net corn sweetener cost averaging 2.66 cents a pound, dry weight of sweetener, during the first 6 months of fiscal 1994/95, down from 3.91 cents for fiscal 1993/94. For October 1994-March 1995, corn prices declined around 20 percent and net corn costs declined 32 percent from fiscal 1994. Forecasts of 1995/96 corn production to be released over the next 5 months will affect corn prices and net corn sweetener costs. A corn crop falling much below 8.0 billion bushels can be expected to firm Midwest corn prices, while a crop much larger than 9.0 billion bushels could be expected to soften prices. USDA forecasts the farm price of corn to average $2.45 to $2.85 a bushel in 1995/96, up about 18 percent from the $2.20-$2.30 range for 1994/95. Reflecting prospects for a much smaller crop in 1995/96, corn prices rose from $2.36 per bushel in March to $2.41 in April, $2.50 in May, and $2.62 for the first half of June. Mexico: Sugar and Corn Sweeteners, An Update by Peter Buzzanell and Ron Lord ---------------------------------------------------------------- 8/ The authors are agricultural economists in the Field and Specialty Crops Branch, Commercial Agricultural Division, Economic Research Service, USDA. The authors wish to thank Dulce Flores M., Agricultural Specialist, Office of Agricultural Affairs, American Embassy, Mexico City for her assistance in the preparation of this article as well as officials of the U.S. and Mexican sweetener industry. ------------------------------------------------------------------------ Abstract: Mexico's sugar production is averaging just over 4 million tons a year. Sugar consumption is projected to decline to 4.1 million tons in 1994/95, in part due to the economic crisis following the December 1994 devaluation of the peso. Even with lower consumption, Mexico is forecast to be a net sugar importer this year, and require over 300,000 tons of imports next year when consumption is projected to rebound. The industry was privatized in 1990/91, but the government still plays a major role, controlling the domestic price of sugarcane and sugar, and sweetener tariff levels at the border. Several sugar companies have closed and others are under financial stress, and the government is involved with decisions about mill closures. Sugar prices have been raised twice in 1995. Mexico's sugar price policy will be key to not only sugar production prospects, but also prospects for the embryonic high fructose corn syrup (HFCS) industry and thus, indirectly, sugar consumption. Sugar trade between Mexico and the United States is minimal, and likely to so remain until the end of the 15-year phase-in of NAFTA sugar provisions in 2008. Key Words: Sugar, HFCS, production, consumption, trade. Introduction Mexico is one of the world's largest sugar producing and consuming nations. While achieving a high degree of self-sufficiency, Mexico since the late 1980's has been a consistent net importer of sugar. In recent years, the sugar industry has been in a state of transition as the government has ended most production subsidies, privatized the cane milling sector, and changed its trade policies. The implementation of the North American Free Trade Agreement (NAFTA), the peso devaluation announced in December 1994, the subsequent deterioration of the economic situation, and new investments in the sugar and corn wet-milling industries, are beginning to reshape the Mexican industry and the outlook for sweeteners for 1995 and beyond. Sugar Production Mexico's 1994/95 sugar production is up 10 percent or more over last year, largely reflecting good growing and harvesting conditions. USDA's official estimate for Mexico's 1994/95 (November-October) sugar production is 4.15 million metric tons, raw value, versus 3.78 million in 1993/94. Production data from the Mexican sugar industry in mid-June indicate that this season's output will surpass the record of 4.33 million tons achieved in 1992/93 (table A-1). USDA's initial production forecast for 1995/96 is 4.10 million tons for the crop to be harvested next December through June (figure A-1). The production projection assumes normal weather and yields, and a 2-percent growth in area harvested to 520,000 hectares (figure A-2). Sugarcane continues to be one of Mexico's most widely grown crops, with commercial production in 15 of the country's 32 States. However, four states concentrated in central Mexico-- Veracruz, Jalisco, San Luis Potosi, and Oaxaca--account for about two-thirds of annual production. Of Mexico's six northern-most states that border the United States, only Tamaulipas in the northeast produces cane sugar. Mexico's sugarcane growers, more than 130,000 mainly small growers, are attempting to improve yields, but progress has been slow. Prices of production inputs such as fertilizer, herbicides, and fungicides are up 30 percent or more due to the peso devaluation in December and up nearly 90 percent from May 1994 through May 1995. Moreover, most government production subsidies have ended. Interest rates have risen dramatically; production loans for the 1994/95 season carried an interest rate of 21 percent before the peso devaluation in December, then as high as 80 to 100 percent before falling recently to the 50-percent range. Electricity costs also have increased due to the economic situation. About one-third of Mexico's sugarcane area is irrigated and growers have cutback on the frequency of irrigation. While good rains this season helped compensate for the cutback in irrigation, if the cutback continues it could adversely affect productivity. Nevertheless, despite the recent financial problems and longer term technology transfer problems associated with a production sector dominated by small holders, Mexico's sugarcane quality has been generally good by world standards. According to USDA indicators, Mexico has the world's seventh largest cane sugar industry, which ranks sixth in overall productivity (table A-2). Mexico's Secretary of Agriculture, Livestock, and Rural Development published sugarcane producer price regulations in the Diario Official on July 27, 1993. These regulations set the standards for planting, harvesting, and delivering sugarcane in Mexico. In addition, cane prices are to be calculated as a percentage of the monthly wholesale price for one kilogram of standard sugar, fob mill. For 1994/95, the cane price is calculated at 55 percent of the wholesale price for standard sugar, up from 54 percent in 1993/94. This percentage will be gradually increased to 57 percent over the next 3 years. Sugar Mills Much of Mexico's cane sugar milling sector has been struggling financially since the Government privatization initiative began in 1990/91. Several privatized sugar mills have had serious financial problems and have filed for bankruptcy. Three mills have closed, but the remaining 61 mills all operated during the 1994/95 milling season. Of these, four operated under Government supervision because they had declared bankruptcy in 1993. Several others have been working under severe financial stress. There are no stand-alone sugar refineries in Mexico. All refined sugar production takes place in integrated milling and refining facilities. Currently, Mexico has 18 integrated cane milling-refinery facilities, 14 of them are owned by subsidiaries of either Pepsi Cola or Coca-Cola. With its acquisition and upgrading of cane sugar mills and linked refineries, Pepsi Cola currently produces about two-thirds of Mexico's refined sugar. With the peso devaluation, cane mill and integrated mill-refinery owners face higher costs. Moreover, the Government's sugar credit agency, Financiera Azucarera S.A., is providing fewer credits than in recent years. Also, commercial bank credit is difficult to obtain given the current economic situation. Sugarcane area servicing the country's mills is likely to remain relatively stable for the foreseeable future. While in recent years there has been a limited shift of land from sugarcane to other products such as citrus, vegetables, and tropical fruits, it is unlikely that any large shifts will occur, given the social benefits that are attached to the growing of sugarcane such as medical care costs provided by mill companies to growers. In addition, mills are required by law and their union contracts to pay a large share of social service costs for mill workers, including medical care, retirement, and housing. Thus sugar mills provide important employment and social service functions in the communities and farming areas across rural Mexico. However, some mills have not been able to keep up with paying production and social service costs due to the depressed financial situation and market price of sugar. Moreover, as long as mills experience financial difficulties, growers will find it difficult to obtain credit to increase area and improve yields. However, new investments could improve the situation for some segments of the sugar industry. For example, Tate & Lyle has purchased a 49-percent interest in Mexico's fifth largest sugar group, Grupo Industrial Azucarero de Occidente SA de CV. The investment, which includes three cane mills linked to refineries and distilleries, was reported to be US$56 million. The mills and adjoining refineries are located in the States of Tamaulipas bordering Texas and the Gulf of Mexico and Jalisco where Guadalajara, Mexico's second largest city, is located. The remaining 51 percent of Grupo Industrial Azucarero, also known as the Saenz Group, will be retained by the Saenz family. The joint venture plan is to expand production from 250,000 tons to 350,000 tons by 1998. Tate & Lyle is also reported to be supplying technological assistance to the Escorpion Group's San Cristobal mill and refinery, located in the State of Veracruz. San Cristobal is the largest sugar mill in Mexico, processing an estimated 20,000 tons of sugarcane per day and producing around 200,000 tons of sugar annually. Also, Savannah Foods and Industries, Inc. has formed a joint venture with Grupo Azucarero Mexico to improve the packaging and retail distribution of sugar. Savannah will reportedly invest $50 million in the joint venture. Prior to the privatization, the Government handled all the marketing of sugar within Mexico. Trade sources report that owners of 6 to 8 mills are upgrading their facilities to produce refined sugar. For example, two mills--Alvaro Oregon in the State of Quintana Roo and A.Lopez Mateos in the State of Oaxaca--are currently being upgraded to produce refined sugar. In addition, subsidiaries of Pepsi Cola Co. have multi-million dollar investment programs underway to upgrade their mills. All in all, it appears that the larger, better financed mills located in good producing areas will remain viable in the future, while the smaller, financially weak mills will either merge with stronger mills or eventually close. Sugar Consumption Mexico's sugar consumption for 1994/95 is estimated at 4.10 million tons, the 5th highest in the world for a country that ranks 10th in world population (table A-3). This estimate represents a 3.8-percent or 160,000-ton decrease from 1993/94, and the 2nd year in a row of falling consumption. For 1993/94, Mexican sugar use fell for the first time since the early 1980's, despite a 3.1 percent growth in gross domestic product (GDP) registered for 1994 (figure A- 5). The downturn was largely attributed to an increase in imports of food products that contained sugar, such as chocolates and hard candies whose prices were reduced due to lower tariffs under NAFTA. For 1995 fewer sugar-containing products are expected to be imported because of the peso devaluation that makes these products much more expensive. In December 1994, the peso was devalued 30 percent against the dollar and by mid- 1995 the exchange rate has been fluctuating from about 5.90 to 6.30 pesos to the dollar versus 3.46 before the December devaluation. Over the last year (May 1994-May 1995) the devaluation of the Mexican peso has been close to 90 percent. As a result, some imported chocolates have doubled in price because of the devaluation. Mexican consumers would be expected to switch back to cheaper domestic products and thereby increase the demand for sugar by the Mexican confectionery industry, however, the general deterioration of the Mexican economy is expected to more than offset these changes as the purchasing power of consumers has been sharply reduced. U.S. forecasters are now estimating a 2.1-percent contraction in GDP in 1995. Mexico's Centro de Estudios Economicos de Sector Privado (CEESP) is forecasting an even sharper contraction, -4.1 percent. If the Mexican economy contracts that much, USDA's sugar consumption estimate for 1994/95 may be too high. Looking ahead to 1995/96, USDA projects Mexico's sugar consumption at 4.34 million tons, up nearly 6 percent, reflecting Mexico's 2.2 percent annual population growth and an expected rebound in the economy. Mexico's GDP is projected by U.S. forecasters to grow 2.5 percent in 1996 and then jump to a 4.7-percent growth rate in 1997. Sugar demand in Mexico is split between industrial users, which are expected to account for about 55 percent of the 1995/96 consumption forecast, and direct household use for the remaining 45 percent. Within the industrial sector, soft drink manufacturers are expected to account for about 57 percent, bakeries 15 percent, confectionery 13 percent, and others the remaining 15 percent. Soft drink producers are expected to use 1.3 million tons of sugar, refined weight (1.4 million tons, raw value), in calendar 1995 (figure A-6). Soft drink producers caught in the economic downturn, expect consumption to increase only about 1.8 percent or less in 1995, compared with 5 percent in 1994. In 1994, Mexico's soft drink industry produced about 13.25 billion liters (3.5 billion gallons) of soft drinks or about 148 liters (39 gallons) per capita for a population of nearly 90 million, of which more than one-half are under 21 years old. Mexico is firmly in second place after the United States in global per capita soft drink consumption. The United States has the world's highest per capita soft drink consumption of about 189 liters (50 gallons). The long-run outlook for the Mexican soft drink market is for continued growth, and soft drink bottlers will continue to fight for expanded market shares. The industry is composed of the world's two major international bottlers, Coca-Cola and Pepsi Cola, four major national brands, and a number of smaller brands. Reflecting the size and potential growth rate of the market, Coca-Cola recently announced it will invest US$1.5 billion in several new plants. The Pepsi Cola company announced $750 million in investments in three new plants. Normally soft drink bottlers require refined sugar to meet their bottling specifications. However, due to periodic shortages of refined sugar, Pepsi, Coca-Cola, and many national brands have used standard or plantation white sugar which has color, turbidity and ash differences compared with refined sugar. The large soft drink bottlers and other mill owners are working on technologies to improve the quality of standard sugar as well as increase the capacity to produce refined sugar. The new technologies to upgrade standard sugar include filtration systems and ion-exchange systems. Efforts to increase Mexico's refined sugar capability are seen in the growth of refined sugar production. According to the Mexican milling industry, a record 1.72 million tons of refined sugar has been produced during the 1994/95 season through the end of May, up 13 percent from the previous record achieved in 1992/93. This season refined sugar will account for about 43 percent of total production, compared to 33 percent in the late 1980's (table-4). The current wholesale price difference between standard and refined is about 11 percent or 258 pesos per metric ton. At the retail level the difference is 9 percent or .25 pesos per kilogram. The gap between standard and refined sugar has narrowed leading to increased use of refined sugar by the household sector. As recently as the late 1980's about 90 percent of household use was standard sugar. A recent study indicated that Mexican demand for refined sugar will rise by about 3 percent per year over the next several years, largely for the soft drink industry as well as growing household demand. The Government of Mexico still controls the wholesale and retail prices of sugar. These prices are calculated and published by the Secretariat of Commerce and Industrial Development (SECOFI). Due to the economic situation, sugar prices were increased 10 to 11 percent in February, and again in May 1995. As of May 19, Mexico's wholesale sugar prices, fob mill, are 2,127 pesos per metric ton for standard sugar, and 2,385 pesos for refined sugar. Retail prices were increased to 2.70 pesos per kilogram for standard, and 2.95 pesos for refined. At an exchange rate of 6.1 pesos per 1 U.S. dollar, the 2.95 pesos per kilogram for refined sugar translates into 21.9 U.S. cents a pound. The Mexican Government's recent increases in sugar prices are in line with other increases in agricultural products due to the peso devaluation. For the sugar mills, the recent price increases have helped the industry pay growers for the current sugar crop. Sugar Trade For 1994/95, Mexico is expected to be a net importing country, importing an estimated 130,000 tons and exporting 100,000 tons (table A-3). Some exports are likely to be those under the U.S. tariff rate quota. Due to the peso devaluation, Mexican sugar is now cheaper than in the United States so there is an incentive to fill the U.S. quota. Over the past 2 years, the U.S. import quota for Mexico went unfilled since sugar prices in Mexico were higher than those in the United States. However, the larger share of exports are expected to go out under a special Temporary Export Program announced officially on April 29, 1995. The regulation establishes a US$260 per ton export tax, and says exporters may be exempted from the tax if they obtain a "certificate of exemption" issued by SECOFI (table A-5). According to SECOFI, exporters will receive the exemption if they pledge to re-import an equivalent amount of sugar within 6 months. The re-import requirement can be waived if the Government of Mexico determines that the sugar will not be needed. This season's expected record production, the fall-off in domestic demand, the high cost of storing sugar, and the liquidity provided to millers from cash export sales, are factors which led the Government of Mexico to implement the program. Of total imports in 1994/95, 120,000 tons are expected to be raw sugar with the balance refined sugar. When Mexico imports raw sugar, Guatemala, Costa Rica, and Colombia are likely to be key sources of supply. Recent trade agreements between the Government of Mexico and these countries now provide for limited duty free access for their sugar in the Mexican market. While refined sugar imports are expected to be small, this situation could change. Some Mexican soft drink bottling companies now using standard sugar in their formulations could switch to imported refined sugar if the flavor of their products is affected adversely. Looking ahead to 1995/96, Mexico's sugar imports are expected to rise to 330,000 tons, the highest since 1990/91 as stocks fall and consumption expands. Sugar-containing product imports are expected to remain depressed largely due to higher prices resulting from the peso devaluation. Mexico's specific sugar import tariffs were published by SECOFI on November 30, 1994 (table A-4). Under NAFTA, the tariff for exporters from the United States who do not participate in USDA's sugar reexport program is 92 percent of the general Mexican sugar import tariff. Sugar entering into Mexico under the USDA's refined sugar reexport program pays the full Most Favored Nation (MFN) duty. Also under NAFTA, Mexico's tariffs for sugar-containing products such as chocolates and candies from the United States fall to zero over a 10-year period. But if U.S. exporters use USDA's reexport program for products--taking advantage of lower-priced world sugar--these products must pay the standing MFN duty. Confectionery tariffs are currently 18 percent and will decrease 2 percent per year to zero in 2003. Prior to NAFTA, starting in 1989 they were 20 percent and before that 45 percent. NAFTA provisions govern the quantity of sugar which may be traded duty-free between each country. Since 1982, Mexico has been included within a basket category of the U.S. import quota program known as the "other specified countries and areas" and has been allocated a minimum quota amount, currently set at an annual rate of 7,258 metric tons, raw value. The NAFTA duty free import level is the greater of this access or Mexico's net surplus production, but no greater than 25,000 metric tons during the first 6 years or 250,000 tons during the remaining 8 years of the NAFTA implementation period. During each of the first 14 years of the NAFTA, Mexico and the United States will jointly determine whether either has been or is projected to be a net surplus producer. For the purposes of the NAFTA formulas, high fructose corn syrup (HFCS) is included in determining the consumption of sugar. For 1994/95 (October/September) the joint determinations were that neither country was a net surplus producer. The Future of HFCS in Mexico Currently, there is no large scale use of alternative sweeteners in the Mexican market. The primary caloric sweetener remains sugar, with domestically produced honey a distant second. Mexico's domestic consumption of honey is estimated at between 12,000 and 13,000 tons annually for a per capita use of about 1.3 kilograms. This compares with per capita sugar use of 45 kilograms. The low-calorie or high intensity sweeteners, saccharin and aspartame, are used but in small amounts. Aspartame is used in diet soft drinks, but diet products represent less than 5 percent of Mexico's total soft drink market. The key potential substitute sweetener is the corn sweetener, high fructose corn syrup (HFCS). While still relatively small in scale, Mexico's imports of HFCS, all from the United States, have been growing (figure A-7). For marketing year 1993/94 (November-October), Mexico's imports of HFCS-42 were 21,164 metric tons, dry weight basis, up from 16,585 in 1992/93, and 9,119 tons in 1991/92. HFCS-42 imports have gone largely to those baking and confectionery industries located in Mexico's states and large cities that border the United States. For 1994/95, U.S. trade data for November 1994 through March 1995 total 3,727 short tons, compared with 10,507 tons for the comparable period a year earlier. The downturn since December apparently reflects the impact of the December peso devaluation which raised HFCS-42 prices by about 30 percent. HFCS-55 imports have been higher, but show a similar recent pattern. For 1993/94, HFCS-55 imports--traditionally used in the soft drink bottling industry as a liquid sweetener substitute for sugar-- totaled 23,444 metric tons, dry basis, compared with 17,012 tons and 12,757 tons, respectively for the 2 previous years. HFCS-55 imports have gone largely to soft drink bottlers in the border areas. Helping to foster these imports have been a declining tariff on HFCS. Under NAFTA, the tariff on HFCS drops 1-1/2-percent a year from 15 percent to zero by 2004. For 1994, the tariff on HFCS was 13.5 percent, and this year it is 12.0 percent ad valorem. However, for the first 5 months of 1994/95, HFCS-55 imports totaled only 10,915 tons, compared with 20,364 tons a year ago, a 46- percent decline. The fall in imports has been particularly noticeable since the peso devaluation in December. To facilitate the potential trade in HFCS into Mexico, Cargill Inc. within the last year has opened corn sweetener storage terminals at Reynosa, on the U.S.- Mexico border in the State of Tamaulipas and at Tula, about 30 miles north of Mexico City in the State of Hidalgo. The first terminal is situated to service potential product distribution points in Mexico's northeastern States. Northwestern border areas are expected to be serviced by the existing terminal located in Los Angeles. The second terminal is situated to service the potential market for HFCS in central Mexico. The prospect for production of HFCS in Mexico has been a lingering question since discussions about NAFTA and its sweetener provisions began in the early 1990's. While Mexico has had a corn wet milling industry that produces traditional products such as starch and corn oil, production of HFCS, either from imported or domestically grown corn, has been negligible. This has been due, in part, to Mexican government corn policies that have maintained high domestic support prices for corn, which have made production of HFCS unprofitable. In addition, the price of sugar was held very low prior to the privatization of the Mexican sugar industry. As a result, there has been concern by corn-wet millers as to the long term risks posed to HFCS production in Mexico by a resurgent Mexican sugar industry. Historically, Mexican corn prices have been very high, more than twice the U.S. price in the early 1990's. Recently, Mexican corn was priced at about US$116 per ton or approximately $2.92 per bushel. This compares with a pre- devaluation level of $4.68 per bushel. These changes are mostly linked to the devaluation as well as to the Government of Mexico's PROCAMPO program. Under PROCAMPO, the Government announced plans to abolish price supports and in their place provide direct income support to the Mexican farm sector with corn producers a pivotal part of the program. PROCAMPO is expected to have a significant impact on Mexico's crop production mix over the medium and long term. USDA analysts believe that a sizeable share of Mexico's corn area will find its way into other crops as prices decline, with only about one-quarter of Mexico's corn land capable of competing with U.S. corn yields. As Mexico's corn production declines, imports are expected to increase beyond the initial 2.5 million tons duty free level under NAFTA (figure A-8). In 1994, the Mexican corn import quota was filled (table A-6). The quota increases 3 percent annually under NAFTA, but the Government of Mexico can waive import duties on shipments above quota. Some of the yellow corn imported from the United States goes to wet millers, while domestic corn, mainly white corn, will probably continue to be preferred for food use. ------------------------------------------------------------------- 9/ According to corn wet mill industry officials, Mexican white corn "technically" can be used to produce HFCS and other corn wet mill products. --------------------------------------------------------------------- As Mexican corn prices fall in line with U.S. prices plus freight, corn wet millers' starch costs will decline substantially. This will come at a time when corn wet milling co-product markets in Mexico for corn oil and gluten feed and meal are expected to expand and the potential for a Mexican-based HFCS market becomes economically feasible. Indicative of these changing conditions are recent announcements concerning HFCS capacity: o ALMEX, a Staley Company and a subsidiary of Tate and Lyle, in a joint venture with Archer Daniels Midland (ADM) has an HFCS production facility under construction in Guadalajara located in the State of Jalisco. The facility is expected to go on line in August 1995. o ARANCIA, Mexico's largest corn wet miller, has formed a joint venture with CPC International. They have a plant under construction in San Juan del Rio in the State of Queretaro, about 100 miles northwest of Mexico City. HFCS production from the new plant is expected to come on line by mid-1996. Over the long run, HFCS use in Mexico is likely to capture a sizeable share of the soft drink market provided sugar prices are high enough. Much of future Mexican HFCS production will likely be based on imported U.S. corn. Aside from quality factors, a continued lower Mexican corn price would provide an incentive for corn-wet millers to supplement U.S. corn with more corn produced in Mexico. HFCS imports from the United States are also likely to remain a key source of supply, especially for industries along the U.S.-Mexico border. In fact, some of the new capacity now on line in the United States is earmarked to develop that border market. List of Tables Page 1. World sugar supply and use and stocks-to-consumption ratio and world prices 2. European Union (EU-15) sugar production, supply, and distribution 3. World sugar trade, by leading sugar exporters and importers 4. U.S. sugarbeet area, yield, and production trends 5. U.S. sugarbeet, beet sugar, sugarcane, cane sugar: Area, yield, production, output, recovery rate, and sugar yield per acre 6. U.S. sugar deliveries for human consumption, by industrial user, calendar years and quarters 7. U.S. sugar deliveries for human consumption, by non-industrial users, calendar years and quarters 8. U.S. sugar deliveries by region, calendar years and quarters 9. U.S. sugar imports under quota and tariff-rate quota, by country 10. U.S. cane sugar refiners: Company, factory location, and capacity 11. U.S. wet milled use of field corn, crop years 12. U.S. high fructose corn syrup (HFCS) production, quarterly, fiscal, and calendar years 13. U.S. sugar and HFCS consumption and per capita use, fiscal years 14. World sugar production, supply, and distribution, by selected countries 15. World raw sugar prices, monthly, quarterly, and by calendar and fiscal years 16. World refined sugar prices, monthly, quarterly, and by calendar and fiscal years 17. U.S. raw sugar prices, duty fee paid, New York, monthly, quarterly, and by calendar and fiscal years 18. U.S. wholesale refined beet sugar prices, Midwest markets, monthly, quarterly, and by calendar and fiscal years 19. U.S. retail refined sugar prices, monthly, quarterly, and by calendar and fiscal years 20. U.S. wholesale list prices for HFCS-55, Midwest markets, monthly, quarterly, and by calendar and fiscal years 21. U.S. wholesale list prices for HFCS-42, Midwest markets, monthly, quarterly, and by calendar and fiscal years 22. U.S. wholesale list prices for glucose syrup, Midwest markets, monthly, quarterly, and by calendar and fiscal years 23. U.S. wholesale list prices for dextrose, Midwest markets, monthly, quarterly, and by calendar and fiscal years 24. Net cost of corn starch to U.S. wet millers, Midwest markets, quarterly and calendar years 25. U.S. cane sugar production by state (including Puerto Rico), and beet sugar, monthly, quarterly, and by fiscal and calendar years 26. U.S. high fructose corn syrup (HFCS) deliveries, quarterly, fiscal, and calendar years 27. U.S. cane sugar (including Puerto Rico) and beet sugar deliveries, monthly, quarterly, and by fiscal and calendar and years 28. U.S. sugar (including Puerto Rico) supply and use, fiscal years 29. U.S. high fructose corn syrup (HFCS) supply and use, by calendar years 30. U.S. total consumption of caloric sweeteners, calendar years 31. U.S. per capita consumption of calorie sweeteners, calendar years List of Figures 1. Sugarbeet yields per acre 2. U.S. beet sugar recovery, net of desugar, actual and trend 3. U.S. cane refiners: Capacity and volume 4. U.S. production of sugar and HFCS 5. U.S. sugar and HFCS prices END-END-END