*** NOTE TO USERS (6/20, 11:30 a.m): The Summary available after 3:00 p.m. yesterday (6/19) was an old summary loaded in error. This Summary is the correct copy for June 1995. ERS sincerely regrets the error and apologizes for any inconvenience it caused. SUGAR AND SWEETENERS--SUMMARY June 19, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. The complete text of SUGAR AND SWEETENERS is available 2-3 working days following release of this summary. ----------------------------------------------------------------------------- World Sugar Surplus Forecast; U.S. Sugar Production Forecast Lowered; Quota Shortfall Redistributed 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. This issue of the Sugar and Sweetener Situation and Outlook also contains a special article entitled "Mexico: Sugar and Corn Sweeteners, An Update." Printed copies of the report should be available in about 1 week. For further information contact Peter Buzzanell (202) 219-0888. For details on electronic access, call ERS Customer Service, 202-219-0515. END-END-END