SUGAR AND SWEETENERS--SUMMARY June 19, 1996 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 Consumption and Trade Forecast Higher; U.S. Sugar Production Lower; Domestic Consumption Expands USDA's revised estimate for 1995/96 puts world sugar production at a record 121.1 million metric tons, 2.1 million tons higher than the global consumption estimate of 119.0 million. (The estimates are unchanged from those released by USDA on June 3, except for revisions in U.S. numbers). Since publication of the Sugar and Sweetener Situation and Outlook in March, USDA has increased the 1995/96 world sugar production estimate by 1.8 percent or 2.1 million tons. The upturn is attributed to better than anticipated record out turns in India (16.5 million tons), Brazil (13.7 million), Thailand (6.2 million), and Mexico (4.75 million), and improved production results in Cuba (4.5 million) and the EU(17.15 million). These advances more than offset a downturn in the production estimates for the United States, China, and Pakistan. USDA also raised the world consumption estimate by about 900,000 tons. The upturn reflects higher than expected consumption in the United States and several Asian countries such as India, Malaysia, and the Philippines. The year-to-year growth rate is 4.2 percent, double the long-term trend, as sharply higher consumption was estimated in several of the world's largest consuming countries, most notably India, up 5.8 percent to 15.2 million tons; China, up 3.1 percent to 8.3 million; the Philippines, up 13.6 percent to 2.1 million; Thailand, up 8 percent to 1.6 million. For Asia, total consumption grew an estimated 4.7 percent or 1.8 million tons between 1994/95 and 1995/96, spurred by the familiar litany of factors including population and income growth and expansion in the use of sugar-containing products, such as soft drinks and processed foods. USDA's initial 1996/97 projections for global sugar production and consumption are a rough balance of 120 million metric tons each. This follows 2 years when world sugar production outpaced consumption, leading to a replenishment of global stocks. Higher stocks and the prospect of an approximate balance next year has led to a weakening of prices. For the first half of June, world raw sugar spot prices (f.o.b. Caribbean ports, Contract No. 11, New York) averaged 12.49 cents a pound, compared with nearly 14 cents a pound a year ago. Prices averaged 12.60 cents January-May 1996, versus 14.20 cents for the corresponding 5-month period in 1995. The weakening of world raw sugar prices reflects the production surplus in 1995/96. This season's estimated sugar surplus has not decreased world sugar prices as much as expected. The relative strength of world prices is because much of this season's sugar surplus is locked in some countries with strong domestic demand and restrictive export policies, such as India. The direction of prices over the next several months will be influenced largely by weather. The 1996/97 cane sugar production season has already started in the Southern Hemisphere, where good crops are forecast for the major producers--Brazil, South Africa, and Australia. If good harvest conditions continue in the Southern Hemisphere and if sugarbeet crops across Europe receive normal rains this summer, prices are likely to weaken. If adverse conditions develop in key countries, prices could rebound, especially since global stocks will still be relatively tight. Futures prices for raw sugar October 1996 and March 1997 are currently at 11.1 and 10.7 cents a pound, respectively, with contract highs and lows ranging from 12.5 to 9.5 cents. The preliminary forecast for 1996/97 world sugar production is 120.2 million tons raw value, down 1 percent from the revised 1995/96 record. USDA's initial forecast for global sugar consumption in 1996/97 is 120.1 million tons, up nearly 1 percent or about 1 million tons from 1995/96. Major consuming countries such as the United States, Mexico, Brazil, India, Indonesia, and China are expected to use an additional 1 million tons in 1996/97. Regionally, increased sugar consumption is expected in the Western Hemisphere, South America, the Middle East, and Asia. For Asia, total sugar consumption is projected at a record 41.6 million tons, up 22 percent or 7.4 million tons since 1990/91. World sugar trade is forecast to increase 2.6 percent in 1996/97 to a record 35.3 million tons because of expected greater export availabilities in the EU, Thailand, and Australia. Brazil is again expected to export 5.5 million tons, more than double its exports in the early 1990's. The structure of world sugar trade continues to be highly concentrated on the export side. The top six exporters (Brazil, EU, Australia, Thailand, Cuba, and Ukraine) are projected to account for 71 percent or 25.1 million tons of expected global sugar exports. On the import side, the top five traditional major sugar importers (not counting the United States)--Russia, EU, China, Japan, and South Korea--are expected to import a tonnage comparable to 1995/96--about 10.5 million tons. Import forecasts for the United States, the world's second largest sugar importer in 1995/96, will not be available until the U.S. Government sets the tariff rate quota (TRQ) for imports in 1996/97. Among the smaller but sizable (over 500,000 tons annually) importers, Malaysia, the Philippines, Indonesia, Iran, Egypt, Algeria, and Canada are expected to import at roughly the same levels or higher than in 1995/96. U.S. sugar production in fiscal 1996/97 (October 1996-September 1997) is projected at 7.13 million short tons, raw value, down 3 percent from the estimate for 1995/96. Beet sugar production is forecast at 4.0 million tons, representing 56 percent of total expected sugar production. Despite lower planted acreage, beet sugar production is forecast to increase 100,000 tons or 2.6 percent if sugar recovery from beets is close to the average of recent years. However, a sharp downturn in cane sugar production is expected to more than offset improved beet sugar production. Cane sugar production is foreseen declining by 310,000 tons to 3.13 million because of mill closings in Hawaii and damage from freezes this winter in Louisiana. U.S. sugar consumption for fiscal 1996/97 is forecast at 9.83 million tons, up 1.3 percent or 125,000 tons from the revised estimate for the current year. The year-to-year anticipated growth rate is in line with the projected long-term trend. Over the past decade of 1986-1995, the annual trend growth rate for sugar consumption averaged about 2.0 percent or 162,000 tons. Since the March Sugar and Sweetener Situation and Outlook, USDA has revised downward the fiscal 1995/96 sugar production estimate by 2.1 percent, or 160,000 tons, to 7.34 million tons, raw value. Beet sugar production was revised downward by 100,000 tons to 3.90 million tons. The revision reflects lower than anticipated production through March, and expected lower output in September 1996 because of the delay in planting beets. The late spring plantings will reduce the size of the early crop in Minnesota and North Dakota, and reduced acreage will lower the potential of the fall crop in California's Central Valley. Cane sugar production was revised downward from the March forecast by 60,000 tons to 3.44 million. Florida's sugar production, concentrated in the first half of the year, was somewhat lower than expected and data for Hawaii showed a continuing decline in output. USDA has raised the U.S. sugar consumption estimate for fiscal 1995/96 to 9.70 million tons, an increase of 180,000 tons over the March estimate and 363,000 tons, or 3.9 percent, over 1994/95. The big year-to-year boost brings consumption back onto trend after a year of zero growth, and is attributed to several factors: (1) increasing away-from-home and processed food consumption, including the heightened popularity of low-fat foods often high in sugar content; (2) increased activity under the sugar-containing products re-export program; (3) additional restrictions on imports of sugar-containing products which came into effect in January 1995; (4) unusually low deliveries in 1994/95 (caused in part by high September 1994 deliveries of sugar that would have been delayed if marketing allotments for fiscal 1994/95 had not been anticipated); and (5) the completion of the switches to just-in-time deliveries by major food processors which needed to work off internal inventories during 1994/95. A U.S. sugar import forecast for fiscal 1996/97 is not available because the level of TRQ imports has not been set. For fiscal 1995/96, total imports are estimated at 2.99 million tons, consisting of 2.33 million tons of TRQ sugar, 650,000 tons of sugar for the re-export programs, 10,000 tons for polyhydric alcohol for non-human consumption, and 1,000 tons of high tariff imports. On June 12, USDA raised the TRQ for raw cane sugar by 165,000 short tons (150,000 metric tons). USDA also raised the TRQ on April 1 by 220,000 short tons. These were the third and fourth quota increases for the fiscal year and reflected the changing domestic supply and demand situation in the U.S. sugar market. The TRQ on refined sugars has been unchanged at 22,000 metric tons since the start of the quota year. U.S. raw sugar prices (nearby futures, c.i.f., duty-paid, contract No. 14, New York) averaged 22.59 cents a pound in the first 12 market days of June (through June 18), comparable to the average price for the first 8-1/2 months of the fiscal year. Prices for the first 8-1/2 months of fiscal 1995 and 1994 were 22.45 and 22.02 cents, respectively. In recent months, prices have remained relatively strong. Downward revisions in the estimate of 1995/96 production and upward revisions in the consumption estimate have largely offset the potential price dampening impact of the April 1 increase in the TRQ. Wholesale refined beet sugar prices (f.o.b. plant, Midwest markets) averaged 25.26 cents a pound in fiscal 1994/95 and 28.32 cents for the first half of fiscal 1995/96, according to price data compiled by the Milling and Baking News. As the prospective size of the current beet sugar crop has fallen progressively since last fall, users have turned to cane refiners, tightening the refined sugar market. In March, the Chicago Midwest refined beet sugar price was 29.50 cents a pound, 4 cents higher than last year, and has remained near that level through mid-June. Despite high corn prices, production and use of corn sweeteners are expected to expand in 1996/97, reflecting continued strong demand from the soft drink industry--the primary user of high fructose corn syrup (HFCS). HFCS consumption is projected to increase 4 percent in 1996/97 to a record 8.4 million short tons, dry basis. HFCS prices continue to be lower than refined sugar prices, averaging 20.6 cents a pound, dry basis, for HFCS-55 January-May 1996, 8.3 cents below the wholesale price of refined beet sugar (Midwest markets) for the corresponding 5-month period. This issue of the Sugar and Sweetener Situation and Outlook report also contains a special article entitled "U.S. Import Quota Exempt Programs for Sugar." Printed copies of the report should be available in about 1 week. For further information, contact Peter Buzzanell (202) 219-0888. Text of the full report will also be available electronically. For details, call (202) 219-0515. END-END-END