SUGAR AND SWEETENERS--SUMMARY September 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 Stocks Increase; U.S. Sugar Faces Strong Competition From HFCS World sugar production and consumption for 1995/96 are forecast at 118.3 and 117.1 million metric tons, respectively. The implied surplus of 1.2 million tons for 1995/96, together with a similar surplus estimated for 1994/95, allows the rebuilding of global stocks and puts downward pressure on world prices. The surplus in 1994/95 follows 2 years of sugar deficits. The large drawdown of world sugar stocks that resulted explains the strong world prices that were at a 5-year high during the first quarter of 1995. The 1995/96 world sugar production forecast is up 580,000 metric tons from the earlier forecast published in the June "Sugar and Sweetener Situation and Outlook" report, and 2.45 million tons above the revised estimate for the global 1994/95 crop. Since the June report, improved production prospects are foreseen for a number of large producing countries in Latin America including Mexico, Guatemala, Argentina, Brazil, and Colombia. In Africa, improved crops are foreseen in South Africa and Zimbabwe, both hard hit by drought in recent years. For Asia, large crops are again forecast for India and Thailand. These upward adjustments in forecasts for 1995/96 more than offset the trimming of estimates for the United States, the European Union (EU)-15, (mainly due to lower forecasts for Spain, Italy, and the United Kingdom) and the Russian Federation, Turkey, China, Pakistan, and the Philippines. Global sugar consumption for 1995/96 is forecast at a record 117.1 million tons, up 2.4 percent or 2.76 million tons from the revised estimate for 1994/95. Sugar consumption continues to expand in Latin America, largely driven by trends in the most populous countries, Brazil and Mexico. Sugar use in other countries in the region is also growing. For example, the Central American countries, which together are forecast to consume 1.28 million tons, are up 21 percent from 1990/91. A similar growth pattern is seen in the Middle East (6.6 million, up 15.8 percent since 1990/91). The estimates are even more impressive for the countries of Asia which together are expected to consume 39.8 million tons, up 16.5 percent since 1990/91 and accounting for one-third of global sugar use. In contrast, sugar consumption growth year-to-year continues to be weak or non-existent in many of the world's industrialized economies in North America, Europe, and Japan where sugar markets are mature and alternative caloric sweeteners and high-intensity sweeteners are popular. World sugar trade for 1995/96 is forecast at 30.7 million tons, or about 26 percent of forecast world sugar production. Among the world's leading sugar exporters, prospects for improved crops in Cuba, Brazil, and Ukraine will permit increased exports. India's record crop and high carry-in stocks are fostering a shift of India from net importer to net exporter. Among the world's major sugar importing countries, imports are expected to remain strong for the Russian Federation, up 11 percent to 3.00 million tons, while China will slacken to 2.50 million tons after an estimated 3.0 million tons of imports registered for 1994/95, the highest since 1987/88. World spot prices for raw sugar (f.o.b. Caribbean, Contract No. 11) averaged 12.80 cents a pound for the first 11 market days of September compared with 13.46 and 13.75 cents a pound in July and August. This compares with prices a year ago of 12.54 cents for the first 11 days of September, and 11.73 and 12.05 cents for July and August 1994. USDA forecasts stocks at the end of 1995/96 at 21.3 million tons, the highest since 1991/92. The stocks-to-use ratio is forecast at 18.2 percent, up from a low of 16.4 percent 2 years ago. Prospects of larger crops this year will facilitate the rebuilding of stocks in a number of countries, including the EU-15, Argentina, Colombia, and Zimbabwe. India alone will account for a quarter of the world stocks. U.S. sugar production in fiscal 1995/96 is forecast at 7.65 million short tons, 4.2 percent less than 1994/95. Beet sugar production is forecast at 4.40 million tons, down 150,000 tons from the record 1994/95 crop and 58 percent of U.S. sugar production. U.S. sugarbeet production is expected to total 29.1 million tons, a decrease of 9 percent from 1994. Area for harvest, at 1.43 million acres, is virtually unchanged from USDA's "Acreage" report published in June and 1 percent below last year. The average yield, forecast at 20.4 tons per acre, is 1.8 tons below last year's near record yield. A cool, wet spring delayed the completion of sugarbeet planting, leaving many northern States 2 weeks behind normal. Cane sugar production is forecast at 3.25 million short tons, down 187,000 tons from 1994/95. Lower production is expected in the major cane sugar production States; Florida (1.70 vs 1.73 million tons), Louisiana (920,000 vs 1.02 million tons), and Hawaii (460,000 vs 500,000 tons). Sugarcane production for sugar and seed in 1995 is expected to total 29.1 million tons, a decrease of 6 percent from 1994. Area for harvest, at 922,200 acres, is virtually unchanged from the June "Acreage" report but is 1.6 percent below last year. The yield forecast, at 31.5 tons per acre, is 1.5 tons below last year's yield. U.S. sugar consumption for fiscal 1995/96 is forecast up 1 percent or 90,000 tons from the revised forecast for 1994/95 to 9.42 million tons, an increase less than the average of 1.6 percent growth of recent years. For 1994/95, sugar consumption estimates were revised down 50,000 tons from the June estimate to 9.33 million tons, similar to the recorded use in 1993/94. Between 1986 and 1994, consumption grew about 2 percent a year, exceeding the annual population growth rate of 0.8 percent. The projected reduction in demand growth is attributed to continued encroachment of HFCS (high fructose corn syrup); weak demand for confectionery and bakery products--major industrial users of sugar; and industrial users' switch from traditional stocking patterns to just-in-time delivery systems, which may be causing a one-time reduction in apparent sugar deliveries. Crystalline fructose use, while small, also may be taking some sugar markets. U.S. raw sugar prices (nearby futures, c.i.f. duty paid, contract No. 14, New York) averaged 23.11 cents a pound for the first 11 market days of September compared with 24.47 cents in July and 23.81 cents in August. The downturn reflects USDA's decision to reallocate the 1994/95 tariff rate quota (TRQ) shortfall, early announcement of the fiscal 1995/96 TRQ (July 28), and early entry of fiscal 1995/96 quota sugar as requested by authorities in quota- holding countries. Price movements in the coming months will pivot on development of the upcoming sugar crops, the level of current and anticipated sugar consumption, and USDA's policy decision announced September 13 that domestic marketing allotments, in force during fiscal 1994/95, are unnecessary for the first quarter of fiscal 1995/96 (October-December). HFCS production and consumption in the United States is expected to continue to expand in 1995/96 to 8.15 million tons, dry basis, up 4.5 percent from the current year. Expanded production is made possible by a 25-percent increase in wet-mill capacity between 1994 and 1995. Consumption is being driven by strong growth in the beverage sector and gradual inroads into traditional sugar markets. 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 June to August 1995, the discount has been 6.4 cents for HFCS-55 and 8.3 cents for HFCS-42. These price differences continue to encourage the substitution of corn sweeteners for sugar where technically feasible. This issue of the Sugar and Sweetener Situation and Outlook report also contains a special article entitled "U.S. Sugarbeet and Sugarcane Costs of Production: Revisions to 1992 and New 1993 and 1994 Crop Estimates." Printed copies of the report should be available in about one week. For further information, contact Peter Buzzanell (202) 219-0888. Text of the full report will also be available electronically. For details, call (202) 720-9045. END-END-END