SUGAR AND SWEETENERS--SUMMARY September 20, 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. Note: Tables in this report will not appear properly formatted unless printed or displayed with both a fixed-pitch font, such as Courier, and an 80-character line width. ------------------------------------------------------------------------------ U. S. Sugar Imports Forecast At Highest Since 1983/84 World sugar production for 1996/97 is forecast at 121.4 million metric tons and world sugar consumption--not adjusted for unrecorded trade--at 119.5 million tons. An apparent surplus of 1.9 million tons disappears after adjusting for unrecorded trade. Over the 2 previous years, global stocks grew by a combined 5.6 million tons, and world spot market prices have been trending downward from a peak of 14.87 cents a pound reached in January 1995. The 1996/97 world sugar production forecast is up 1.2 million metric tons from the earlier forecast published in the June Sugar and Sweetener Situation and Outlook report, and 1.5 million tons below the revised estimate for the global 1995/96 crop. Since the June report, improved 1996/97 production prospects are foreseen for a number of countries and regions, including Brazil, Cuba, Eastern Europe, South Africa, Turkey, Australia, India, the Philippines, and Thailand. The only major declines in production from the June report are forecast in the European Union and Ukraine. Global sugar consumption for 1996/97--not adjusted for unrecorded trade -- is up 2.80 million tons from the revised estimate for 1995/96. Sugar consumption continues to expand in Latin America, largely driven by trends in the most populous countries, especially Brazil. Asia is forecast to consume 42 million tons, up 23 percent since 1990/91 and accounting for over a third of global sugar use. Sugar consumption growth is weak or nonexistent in many of the world's industrialized economies, such as in Europe and Japan, where sugar markets are mature and sugar prices are generally much higher than in other countries. However, sugar consumption continues to expand in the United States. World sugar trade for 1996/97 is forecast at 34.9 million tons, or about 29 percent of forecast world sugar production. Among the world's leading sugar exporters, prospects for improved crops in Australia, Brazil, Cuba, South Africa, and Thailand will permit increased exports. India's record 1995/96 crop and high carry-in stocks forced it to export in 1995/96, and though production will be down about 3 million tons, India likely will be a major exporter again in 1996/97. Exports from Ukraine will drop to 1 million tons. Among the world's major sugar importing countries, imports are expected to remain strong for the Russian Federation, at 3.2 million tons, while China's imports will slacken to 2.4 million tons after an estimated 2.5 million tons in 1995/96, and about 3.5 million in 1994/95. In 1995/96, the United States' sugar imports rose significantly to 2.6 million tons, second in the world only to the Russian Federation. Forecast 1996/97 U.S. imports of 2.74 million tons would maintain the United States in second place. World spot prices for raw sugar (f.o.b. Caribbean, Contract No. 11) averaged 12.29 cents a pound for the first 11 market days of September (through September 18), compared with 12.83 and 13.33 cents a pound in July and August. This compares with prices a year ago of 12.80 cents for the first 11 days of September. Although declining slowly, world raw sugar prices remain strong compared with the early 1990's. One reason for relatively strong prices is the fact that India has kept much of its surplus stocks off the world market. World raw sugar futures prices (March 1997) have been trading below the spot price and are likely to remain weak into the fall. The inversion in world sugar futures has continued for well over a year. Factors holding the price down are the prospects for another large 1996/97 world sugar crop and higher global stocks. Brazil is a key factor not only because of prospects for a large crop, but the ability to switch sugarcane away from ethanol to sugar. Ending 1996/97 stocks are forecast at 23.4 million tons, slightly below last year, and the stocks-to-use ratio at 19.1 percent, down from 20.3 percent last year. U.S. sugar production in fiscal 1996/97 (October 1996-September 1997) is projected at 7.05 million short tons, raw value, down 4.6 percent from the revised estimate for 1995/96. Beet sugar production is forecast at 3.90 million tons, raw value, representing 55 percent of total expected sugar production and down 50,000 tons from last year. The beet sugar production forecast is 100,000 tons below the June forecast due to lower acreage and yield. Forecast beet acreage harvested is 1.33 million acres, 83,000 acres below last year and the lowest since 1989/90. Acreage will be down in California, Ohio, Michigan, Idaho, and Texas. States registering acreage increases include Colorado, Minnesota, Montana, and North Dakota. In Michigan and Ohio especially, high prices have drawn farmers to crops such as corn, soybeans, and dry beans. Cane sugar production is forecast at 3.15 million tons, raw value, down nearly 300,000 tons from last year, and up 20,000 tons from the June forecast. Florida's acreage for sugar and seed is projected unchanged at 437,000, and Florida's sugar production is forecast at 1.76 million tons raw value, similar to the amount produced in recent years. Frequent rains during the growing season and no significant storm damage allowed Florida's cane to make good growth, and Florida is preparing to begin milling in late October. Louisiana's sugar production is forecast at 870,000 tons raw value, down from last year's record because of freeze damage in early 1996. Hawaii's 1996/97 forecast production of 390,000 tons takes mill closures into account. By the end of 1996, sugar will be produced only on two islands, Maui and Kauai, by three companies with a total of six factories. Texas has been experiencing a drought, and even though it has recently rained, irrigation is still restricted for sugarcane farmers. The Texas sugar production forecast is lowered to 100,000 tons, raw value, from June's forecast of 140,000 tons. Production in Puerto Rico is forecast at 30,000 tons. 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 forecast for 1995/96. Sugar consumption estimates for 1995/96 are unchanged from June at 9.7 million tons, up 3.9 percent from 1994/95. If a trend line is established for the years 1986 to 1997, USDA's 1996/97 forecast is on that trend line. Prices for refined sugar have been up since late 1996 and could remain higher for some time, discouraging some users. On September 13, 1996, USDA announced the fiscal 1996/97 tariff rate quota (TRQ) for raw sugar at 2.3 million metric tons, raw value, under a revised administrative plan. Combined with the refined sugar TRQ, the total TRQ is set at 2.322 million metric tons. U.S. sugar stocks at the end of fiscal 1996/97 (September 30, 1997) are forecast at 1.44 million short tons, up 3 percent from the revised estimate for 1995/96. Stocks reflect a projected total supply of 11.46 million tons and total use of 10.03 million. The fiscal 1996/97 stocks-to-use ratio is forecast at 14.3 percent, compared with 13.8 percent for this season. U.S. raw sugar prices (nearby futures, c.i.f. duty paid, Contract No. 14, New York) averaged 22.37 cents a pound for the first 11 market days of September, up from 21.80 cents in July and 21.97 cents in August. Refined beet sugar list prices are around 29 cents a pound, well above the year-ago level of 25 cents. Spot prices for immediate delivery are reported to be well above 29 cents. High fructose corn syrup (HFCS) production in 1996/97 is forecast at 8.50 million short tons, dry basis, up 4.1 percent from 1995/96 and accounting for about 67 percent of expected total corn sweetener production. Wet-milling capacity continues to expand, and a new company is expected to enter the market this year. Consumption is being driven by strong growth in the beverage sector and gradual inroads into traditional sugar markets. HFCS-55 and HFCS-42 list prices averaged 20.55 and 18.47 cents a pound respectively, dry weight basis, for the period October 1995 through May 1996. For the June through August period, prices averaged 20.60 for HFCS-55 and 18.52 for HFCS-42. This issue of the Sugar and Sweetener Situation and Outlook report also contains the special article "Costs of Producing 1995 Sugar Crops." Printed copies of the report will be available in about a week. For further information, contact Ron Lord (202) 219-0888. Text of the full report also will be available electronically. For details, call (202) 219-0515. END-OF-FILE