SUGAR AND SWEETENERS YEARBOOK December 23, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- SUGAR AND SWEETENERS YEARBOOK is published annually by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. SSSV21N4. Please note that this release contains only the text of SUGAR AND SWEETENERS --tables and graphics are not included. The summary of this report was released on December 19, 1996. Printed copies of this yearbook are available from the ERS-NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock #SSS. ERS-NASS accepts MasterCard and Visa. Note: In 1997, SUGAR AND SWEETENER SITUATION AND OUTLOOK will be published in June, September, and December. The next Sugar and Sweetener Situation and Outlook report is scheduled for release on June 19, 1997. ----------------------------------------------------------------------------- Contents Summary World Sugar Overview Developments in Selected Countries U.S. Sugar Production Consumption Trade Stocks and Prices Programs and Policies U.S. Corn Sweeteners Production Consumption Trade Prices and Costs Special Article The Central American Sugar Industry List of Tables Report Coordinator Ron Lord (202) 219-0888 FAX (202) 219-0042 E-mail: RLORD@ECON.AG.GOV Principal Contributors Ron Lord Nydia Suarez Database Coordinator/Graphics & Table Design Fannye Lockley-Jolly Layout & Text Design Wynnice Napper Word Processing Betty Barrett Summary World Sugar Stocks Grow, But Price Remains Above 10 Cents a Pound World sugar production for 1996/97 is forecast at 125.1 million metric tons and world sugar consumption at 123.0 million tons, for a surplus of 2.1 million tons. Over the 2 previous years, global stocks grew by over 6.0 million tons, and world spot market prices for raw sugar 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 3.7 million metric tons from September, and up 4.9 million tons from USDA's first estimate of the 1996/97 crop in May. Since the September report, improved 1996/97 production prospects are foreseen for a number of countries and regions, including India, the European Union, China, Brazil, Australia, and the United States. Countries with production now forecast lower than in September include South Africa, Zimbabwe, Pakistan, the Philippines, Russia, Colombia, and Argentina. Global sugar consumption for 1996/97 is up 4.4 million tons from the revised estimate for 1995/96, with no major changes from the September forecast. Asia is forecast to consume 42 million tons, up 25 percent since 1990/91 and accounting for over a third of global sugar use. In 1990/91, the former Soviet Union's share of world sugar consumption was 11 percent, but for 1996/97 it is forecast at 8 percent. The European Union once consumed considerably more sugar than South America, but by 1995/96 South America had jumped ahead. World sugar trade for 1996/97 is forecast at 35.5 million tons, or about 28 percent of forecast world sugar production. 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 1.2 million tons, India is likely to export even more in 1996/97. Among the world's major sugar-importing countries, imports are expected to remain strong for Russia at 3.2 million tons, while China's imports will remain similar to last year's 2.5 million tons but down from about 3.5 million in 1994/95. In 1995/96, the United States' sugar imports rose significantly to 2.5 million tons, second in the world only to Russia. Currently projected 1996/97 U.S. imports of 2.7 million tons would maintain the United States in second place. World spot prices for raw sugar (f.o.b. Caribbean, Contract No. 11) averaged 11.28 cents a pound for the first 13 market days of December compared with 11.65 in October and 11.29 in November. The world price averaged 12.10 cents a pound in the October-December 1995 quarter. Although declining slowly over the last 2 years, world raw sugar prices remain relatively robust in the face of surpluses in the last 2 years with another year of surplus forecast. One reason for relatively strong prices is that India has kept much of its surplus stocks off the world market. The premium of the spot market over futures prices has been declining over the last several months. Prospects for another large world sugar crop and higher global stocks are holding futures prices down. Brazil is a key factor not only because of prospects for a large crop, but the ability to switch sugarcane to ethanol or sugar. Ending 1996/97 stocks are forecast at 26.9 million tons, up 2.2 million tons from last year. The stocks-to-use ratio, at 21.9 percent, is up 1 percentage point from 20.9 percent last year. U.S. sugar production in fiscal 1996/97 (October 1996-September 1997) is projected at 7.3 million short tons, raw value, down 1.2 percent from 7.4 million tons in 1995/96. Beet sugar production is forecast at 4.0 million tons, raw value, representing 55 percent of total expected sugar production and up 84,000 tons from last year. The beet sugar production forecast is 100,000 tons above the September forecast due to better than expected autumn growing and harvesting conditions, and good storage conditions to date for sugarbeet piles. Beet acreage harvested is 1.32 million acres, 93,000 acres below last year and the lowest since 1989/90. Beet acreage was down this year in California, Ohio, Michigan, Idaho, and Texas, while States with higher acreage were Colorado, Minnesota, Montana, and North Dakota. In Michigan and Ohio especially, high prices for alternative crops such as corn, soybeans, and dry beans attracted farmers away from sugarbeets. Cane sugar production is forecast at 3.28 million tons, raw value, down 174,000 tons from last year, but up 130,000 tons from the September forecast. Florida's sugar production forecast is unchanged from September at 1.76 million tons, raw value. Louisiana's sugar production is forecast at 1 million tons raw value, up from the September forecast of 870,000 tons. Damage from last winter's freeze may not be as bad as first thought, since it was generally the lowest-yielding fields which were abandoned. There were good growing conditions in the fall and yields are now expected to be above average, and there were good growing conditions in the fall. Hawaii's 1996/97 forecast production of 390,000 tons takes mill closures into account. Texas has been experiencing a drought, and even though it has recently rained, irrigation is still restricted for many sugarcane farmers. The Texas sugar production forecast remains at 100,000 tons, raw value. Production in Puerto Rico is forecast at 30,000 tons. U.S. sugar consumption for fiscal 1996/97 is forecast at 9.90 million tons, up 3.6 percent or 347,000 tons from the revised forecast for 1995/96. Sugar deliveries in 1995/96 were less than had been anticipated because of short beet sugar supplies in August and September, the last 2 months of the fiscal year. The 1996/97 forecast assumes that shortfalls at the end of 1995/96 will be offset by higher deliveries in the October-December quarter. During most of 1996, prices for refined sugar were strong due to lower beet sugar output. As prospects for 1996/97 beet sugar output increased in recent months, spot market refined sugar prices appear to have softened somewhat. Combined with the refined sugar tariff-rate import quota (TRQ), the fiscal 1996/97 total TRQ--including raw sugar, refined sugar and specialty sugars--is set at 2.322 million metric tons (2.556 million short tons). Under a revised administrative plan, only 1.7 million metric tons of the raw sugar TRQ was initially allocated in September. The decision about whether to allocate the remaining 600,000 tons will be made next year. As of December 1, 1996, about 10 percent of the initial raw sugar allocation of 1.7 million metric tons had been filled, and the USDA is forecasting a shortfall of 64,000 metric tons. U.S. sugar stocks at the end of fiscal 1996/97 (September 30, 1997) are forecast at 1.58 million short tons, up 5.7 percent from the revised estimate for 1995/96. Stocks reflect a projected total supply of 11.73 million tons and total use of 10.15 million. The fiscal 1996/97 stocks-to-use ratio is forecast at 15.6 percent, compared with 15.1 percent for this season. U.S. raw sugar prices (nearby futures, c.i.f. duty paid, Contract No. 14, New York) averaged 22.14 cents a pound for the first 13 market days of December, up from 22.37 cents in October and 22.12 cents in November. Refined beet sugar list prices in the October-December quarter are around 29 cents a pound, above the 27.5 cents in October-December 1995. Spot prices are reported below 29 cents. High fructose corn syrup (HFCS) production in 1996/97 is forecast at 8.41 million short tons, dry basis, up 3.7 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 beginning to produce and sell HFCS in December 1996. The HFCS-55 list price for fiscal 1996 was 20.56 cents a pound, dry basis, up from 18.81 cents the year before, but down from 22.87 cent in fiscal 1994. The HFCS-42 list price averaged 18.49 cents a pound dry basis in fiscal 1996, compared with 16.82 cents in fiscal 1995 and 20.59 in fiscal 1994. World Sugar 1/ ----------------- 1/ In this report, world sugar estimates are given in metric tons equal to 2,204.62 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. ---------------- Overview World Production Forecast for 1996/97 Raised World sugar production for 1996/97 is forecast at 125.1 million metric tons, up 3.7 million tons from the forecast published in the September Sugar and Sweetener Situation and Outlook report, and 2.6 million tons above the revised estimate for 1995/96 (table 5).2/ The 1995/96 world production estimate is 0.5 million tons lower than September's at 122.5 million tons. -------------------- 2/ Based on national marketing years in all countries. -------------------- Since the September report, improved 1996/97 production prospects are foreseen for a number of countries and regions, including India, the European Union (EU), China, Brazil, Australia, and the United States. Countries with production now forecast lower than in September include South Africa, Zimbabwe, Pakistan, the Philippines, Russia, Colombia, and Argentina. Global sugar consumption for 1996/97 is up 4.4 million tons from the revised estimate for 1995/96, with no major changes from the September forecast. Asia is forecast to consume 42 million tons, up 25 percent since 1990/91 and accounting for over a third of global sugar use. In 1990/91, the former Soviet Union's share of world sugar consumption was 11 percent, but for 1996/97 it is forecast at 8 percent. The EU once consumed considerably more sugar than South America, but by 1995/96 South America had jumped ahead. South America's share of total world consumption has also grown over the last 6 years, from 11 to 12 percent. World sugar trade for 1996/97 is forecast at 35.5 million tons, or about 28 percent of forecast world sugar production. 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 1.2 million tons, India is likely to export even more in 1996/97. Among the world's major sugar-importing countries, imports are expected to remain strong for Russia at 3.2 million tons, while China's imports will remain similar to last year's 2.5 million tons but down from about 3.5 million in 1994/95. In 1995/96, the United States' sugar imports rose significantly to 2.5 million tons, second in the world only to Russia. Currently projected 1996/97 U.S. imports of 2.7 million tons would maintain the United States in second place. World spot prices for raw sugar (f.o.b. Caribbean, Contract No. 11) averaged 11.28 cents a pound for the first 13 market days of December, compared with 11.65 cents in October and 11.29 cents in November. The world price averaged 12.10 cents a pound in the October-December 1995 quarter. Although declining slowly over the last 2 years, world raw sugar prices remain relatively robust in the face of surpluses in the last 2 years with another year of surplus forecast. One reason for relatively strong prices is that India has kept much of its surplus stocks off the world market. The premium of the spot market over futures prices has been declining over the last several months. Factors holding the price down are the prospects for another large 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 to either ethanol or sugar. Ending 1996/97 stocks are forecast at 26.9 million tons, up 2.2 million tons from last year. The stocks-to-use ratio, at 21.9 percent, is up 1 percentage point from 20.9 percent last year. Developments in Selected Countries: India --Production is forecast at 17 million tons, not far below last year's record 18.2 million tons. Production was assisted by one of the best monsoons in recent years, but harvested area is lower as some farmers were dissatisfied with late payments from mills. With another large surplus, India plans to export more sugar in 1996/97 than last year, and some exports to Pakistan have begun. Export capacity may be a constraint. Even so, 1996/97 ending stocks are projected to fall only half a million tons to 7.2 million, well above average and over 5 months use. The Government will hold some stocks, to ease the financial burden on mills. The Government of India has been considering partial deregulation of the sugar industry. Consumption is forecast to rise a strong 6 percent to 16 million tons, boosted in part by the larger supplies and resulting soft prices. Brazil -- Brazil's 1996/97 production is forecast at 14.5 million tons, up 6 percent and a new production high. Good weather and increased cane planting boosted the crop, but a rainy end to the Center-South season reduced sugar production while boosting alcohol production. Exports are forecast at 5.8 million tons, but could rise higher. The current excellent sugarcane crop has also allowed for increased production of fuel alcohol, reducing the need for imported alcohol. The Government of Brazil is beginning to dismantle its two-decade-old program of subsidies for alcohol fuels by ending controls on consumer prices. Prices to distillers will remain controlled. Any policy changes which reduce the incentives for Brazilian millers to produce alcohol, in favor of sugar, would have a large negative impact on the world sugar price in coming years. U.S. Sugar Production Fiscal 1996/97 Production Forecast Raised from November The USDA forecast for U.S. sugar production in fiscal 1996/97 (October 1996-September 1997) was raised in December to 7.28 million tons, up 150,000 tons from November's forecast and only 1.2 percent lower than last year's 7.37 million tons. Beet sugar production is forecast at 4 million tons, raw value, representing 55 percent of total expected sugar production and up 84,000 tons from last year. Beet sugar output was boosted by good weather in the fall that helped offset poor spring and early-summer weather, and sugarbeet piles are reported in good condition. Cane sugar production is forecast at 3.28 million short tons, raw value, down 174,000 tons or 5 percent from last year and the lowest since 1990/91. Regions: Great Lakes - Acreage harvested in 1996 fell by 58,000 acres in Michigan to 130,000 acres, and by 11,000 acres in Ohio to just 4,200 acres, due largely to high prices for alternative crops such as corn, soybeans, and dry beans. The Ohio acreage was so low that the Great Lakes Sugar Company factory in Fremont, Ohio did not operate. The factory will not offer contracts for 1997/98, as the company could not attain commitments targeted at 21,500 acres, which was stated as the minimum to allow for economically viable factory operation. The Michigan Sugar Company, which operates four factories in Michigan, will provide a contract for growers who previously delivered to the Great Lakes Sugar Company who are willing to deliver sugarbeets to the Blissfield piling grounds in Southeast Michigan. The sugarbeet yield in Ohio is estimated at 18 tons per acre, up from 15 last year. Michigan's yield is 15.5 tons per acre, compared with 15.8 last year. Sugar content is reported up about 1.5 percent from last year, at slightly above 270 pounds of sugar per ton of beets, compared with about 250 pounds last year. In 1996, some sugarbeets were grown in Canada for processing in Michigan. Next year, sugarbeets grown in Canada for delivery to Michigan could rise to about 3,000 acres. Red River Valley and South Western Minnesota-- The 1996 season began late, with poor weather and too much rain, but good fall harvest conditions with almost no weather stoppages helped to offset some of the early season problems. Minnesota harvested acreage rose to 440,000 acres, from 416,000 acres. The increase is in part due to extra acres which were added in late spring to offset projected lower yields due to delayed or late plantings. Minnesota's yield of 18.4 tons per acre is up from 17.7 tons last year. In North Dakota, acreage rose to 222,000 acres from 204,200 last year, and yields were 18.3 tons per acre, down from 19.2 last year. Recovery of sugar from beets is better than last season. The sugarbeet piles were not yet frozen in early December, but the piles were in good condition, and low temperatures froze the piles later in the month. Great Plains-- Acreage harvested is down overall in the region to 230,000 acres, from 250,000 last year. Nebraska is down 21,000 acres, Texas is down by 6,000 acres, and Wyoming is down 5,000. Plains States with higher acreage this year are Colorado, up 11,000 and Montana, up 2,000. Factory processing in Nebraska and Colorado will likely finish the third week of January, later than last year in part due to a later start to the campaign. In Wyoming and Montana, factories will run until mid-February, longer than last year. Yields were good in Montana, but below average in other States. Recovery will be much better than last year, but a bit below the 5-year average. Northwest -- Sugarbeet acreage in 1996 was down 13,000 acres in Idaho to 184,000 acres, and down 1,500 acres in Oregon to 16,300, largely due to higher prices at planting time for alternative crops such as the field grains and potatoes. Acreage in Washington State was not reported separately until 1996 (table 18), but is estimated to have increased less than 2,000 acres in 1993, to about 11,000 acres in 1994, to the (reported) 13,000 acres in 1996. Yields are reported at 25 tons per acre in Idaho, up 1 ton from last year, and 26 tons per acre in Oregon, up 3 tons. The Washington average yield of 37 tons per acre is the highest in the country. Sugar content is reported higher than last year, and storage conditions through early December have been good. The campaign is on target to finish at the normal time of mid-to-late February. A group of sugarbeet growers is attempting to purchase Amalgamated Sugar Company's four sugarbeet factories, three in Idaho and one in Oregon. The group plans to operate as a cooperative. As of mid-December, negotiations over financing were still in progress and the outcome is not certain, although the buyers remain hopeful that the cooperative will succeed in its purchase plans. The first sugarbeet factory to be built in the United States since 1974 is under construction in Moses Lake, Washington. The factory, a joint venture between Holly Sugar Company and a local growers cooperative, the Columbia River Sugar Company, is projected to begin operations in 1998 with an initial slicing capacity of 6,000 tons per day. Consumption Sugar Use Projected To Increase 3.6 Percent U.S. sugar consumption for fiscal 1996/97 is forecast at 9.9 million tons, up 3.6 percent or 347,000 tons from the revised forecast for 1995/96. Sugar deliveries in 1995/96 were less than had been anticipated because of short beet sugar supplies in August and September, the last 2 months of the fiscal year. The 1996/97 forecast assumes that shortfalls at the end of 1995/96 will be offset by higher deliveries in the October-December quarter. Per capita consumption of caloric sweeteners in the United States continues to rise. In calendar 1986, per capita consumption of caloric sweeteners was 127 pounds. By 1996, the figure had jumped by 26 pounds to 153 pounds per person, a growth rate of about 1.9 percent a year. Over the 10 years, per capita sugar consumption grew about 1 percent a year, while per capita HFCS consumption grew about 3 percent a year. Trade Ten Percent of Fiscal 1997 Tariff-Rate Quota Entered as of December 10 On September 13, 1996, USDA announced the fiscal 1996/97 tariff-rate import quota (TRQ) for raw sugar of 2.3 million metric tons (2.54 million short tons), raw value. The raw sugar TRQ was established under a revised administrative plan. With the refined sugar TRQ, including specialty sugar, of 22,000 metric tons (24,251 short tons), the total TRQ is set at 2.322 million metric tons (2.556 million short tons). A shortfall in the 1996/97 TRQ of 64,000 metric tons (70,000 tons) is projected. For 1996/97, USDA projects that imports under the reexport program will be 450,000 short tons. Exports under the program are projected at 250,000 short tons, up from the 200,000 tons forecast in September, and the lowest since 1982/83. The incentive to export in 1996/97 will decline because of favorable selling conditions in the domestic market and because the refined premium on the world market is much lower than last year. For fiscal 1995/96, total imports were 2.78 million tons, consisting of 2.23 million tons of TRQ sugar, 530,000 tons of sugar for the reexport programs, a negligible amount of sugar at the high tariff rate (less than 1,000 tons), and 10,000 tons for polyhydric alcohol. Imports of quota-exempt sugar for reexport were significantly up from the 1994/95 level of 230,000 tons, as refiners drew on their credits accumulated from the previous export of domestic sugar. Sugar exports for 1995/96 were 377,000 tons. Stocks and Prices Fiscal 1997 Ending Stocks-to-Use Ratio Forecast Above 15.5 Percent U.S. sugar stocks at the end of fiscal 1996/97 (September 30, 1997) are forecast at 1.58 million short tons, up 46,000 tons, or 5.7 percent, from the revised estimate for fiscal 1995/96. Stocks reflect a projected total supply of 11.73 million tons and total use of 10.15 million. The fiscal 1996/97 stocks-to-use ratio is forecast at 15.6 percent, compared with 15.1 percent in 1995/96. On September 30, 1996, stocks were 1.50 million tons (table 28 provides the distribution of stocks by primary distributors through October 1, 1996). U.S. Sugar Prices U.S. raw sugar prices (nearby futures, c.i.f. duty-paid, Contract No. 14, New York) averaged 22.14 cents a pound for the first 13 market days of December compared with 22.37 cents for the full month of October and 22.15 cents in September. Raw sugar futures prices for 1997 have been relatively flat, with the further futures somewhat higher than nearby futures. Refined beet sugar list prices, Midwest markets, in the October-December quarter are around 29 cents a pound, compared with 27.5 cents in October-December 1995, though spot market refined sugar prices appear to have softened somewhat below 29 cents. Programs and Policies In November, voters in Florida rejected a ballot initiative which would have amended the State constitution to impose a 1-cent-per-pound tax on sugar produced in the State for the purpose of cleaning up the Everglades. On the other hand, voters passed an amendment to require a two-thirds majority vote for any future tax initiative. Two other related initiatives passed, the first to create a trust fund to pay for Everglades cleanup, and the second to require that those who cause the pollution pay for cleanup costs. As of November 30, 1996, 100,500 short tons, refined, of 1996 crop beet sugar had been placed under nonrecourse loan with the Commodity Credit Corporation (CCC), all in Utah (likely sugar from Idaho or Oregon), and 63,500 tons had been redeemed, leaving only 37,000 tons under loan. About 60,000 tons of 1996 crop cane sugar had been placed under nonrecourse CCC loan, 28,000 in Florida; 6,000 in Texas; and 26,000 in Louisiana. None had been redeemed. On August 6, USDA issued proposed rules which would modify rules for the special programs for "Sugar to be Imported and Re-exported in Refined Form or in Sugar Containing Products or Used for the Production of Polyhydric Alcohol." The comment period ended on October 7, and USDA will likely issue the revised rules in 1997. The proposed revisions involve mostly technical details of the licenses under these three programs (Sugar, Sugar Containing Products (SCPs), and Polyhydric Alcohol). The proposed maximum credit limit under a license to re-export sugar (a credit occurs when sugar has been exported first, before a like amount imported) is raised to 75,000 metric tons for refiners. The maximum limit for charges to a license (a charge occurs when sugar is imported first, before a like amount is exported) is reduced to 25,000 metric tons. Previously the limit for both credits and charges was 50,000 metric tons. Honey U.S. honey production was 210 million pounds in 1995, down from 217 million pounds in 1994. 1996 production will likely be down from 1995, as the industry has been plagued by infestations of mites which decimated hives in some regions. As of December 1996, the last CCC honey loans have been paid off, ending the United States Government's honey program. U.S. Corn Sweeteners Production U.S. High Fructose Corn Syrup Capacity Increases A new U.S. producer of high fructose corn syrup (HFCS) entered the market in late 1996. The Progold Limited Liability Company has built a factory located in Wahpeton, North Dakota, with a daily grinding capacity of 85,000 bushels of corn. Progold was successfully producing HFCS-42 by December 1996, and it was starting production runs of HFCS-55. Capacity of HFCS-42 and HFCS-55 combined, is reported to be approximately 500,000 short tons, dry basis, and represents an increase in U.S. production capacity of 4 to 5 percent. ProGold was created in 1994 by two beet sugar cooperatives (American Crystal Sugar Company, 46 percent ownership, and Minn-Dak Farmers Cooperative, 5 percent ownership) and by Golden Growers Cooperative of Fargo, North Dakota, with 49 percent ownership. Golden Growers has over 2,000 corn farmer members, some of whom also grow sugarbeets. The sweetener products will be marketed by United Sugars Corporation. The 1996/97 (September/August) U.S. corn crop is forecast at 9.3 billion bushels, up 26 percent from 7.4 billion bushels in 1995/96. Yield is projected at 126.5 bushels per acre, compared with last year's yield of 114 bushels, and 1994/95's record 139 bushels per acre. According to USDA's December Crop Production report, 1996/97 corn harvested acreage was forecast at 73.3 million, up 13 percent from 65 million acres last year. Domestic corn use for 1996/97 is forecast at 6.6 billion bushels, with feed and residual use taking 75 percent, or 4.97 billion bushels, and food, seed, and industrial (FSI) use the remaining 1.67 billion. Within the FSI use sector, the corn grind for corn sweeteners is forecast at a record 750 million bushels, up 4.3 percent from 1995/96. Corn sweeteners represent about 11.3 percent of the forecast domestic use of the 1996/97 crop, and 45 percent of FSI use. HFCS production in 1996/97 is forecast at 8.40 million tons, dry basis, up 3.7 percent from 8.11 million tons in 1995/96 and accounting for about 67 percent of expected total corn sweetener production for the coming year. HFCS production includes crystalline fructose. Glucose corn syrup and dextrose are the other corn sweeteners produced. Consumption HFCS Use Higher USDA forecasts fiscal 1996/97 HFCS consumption at 8.36 million tons, up 4.7 percent from the current year (table 35). 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 271.12 million (including Puerto Rico, basis April 1, 1997), domestic HFCS use is forecast at 61.6 pounds in fiscal 1996/97, up from 59.4 pounds last year and 49.3 pounds in fiscal 1990/91. The composition of estimated corn sweetener use by the domestic food and beverage industry for calendar 1996 is glucose syrup, 2.75 million tons; dextrose, 0.54 million tons; and HFCS, 8.06 million tons. Trade U.S. Exports of Corn Sweeteners U.S. exports of HFCS to Mexico in fiscal 1996 rose to 78,000 metric tons, dry basis, from 50,000 tons the year before and only 9,000 tons in 1991, according to the U.S. Census Bureau (table 44). Prior to 1984, U.S. exports of HFCS to Canada exceeded those to Mexico, and Canada is still the largest destination for U.S. exports of glucose and dextrose. The basic North American Free Trade Agreement (NAFTA) Mexican import tariff on U.S. HFCS is scheduled to fall to 9 percent in 1997, and decrease by 1.5 percent each year to zero in 2003. Mexican demand for HFCS is growing as bottlers, especially close to the U.S. border, adopt new technology to handle liquid sweeteners. While none of the major soft drink bottlers have announced a formal switch to using HFCS in their Mexican soft drinks, many of the smaller brands apparently have switched. On December 12, 1996, the Mexican Government announced increases in import duties on various U.S. products to compensate for the damage caused to Mexico by the implementation of broomcorn safeguards in the United States. Included in the list is an increase in the duty on U.S. corn sweeteners, tariff line items 1702.40.01 (HFCS-42), 1702.40.99 (HFCS-42), 1792.50.01 (crystalline fructose), and 1702.60.01 (HFCS-55). Mexican import duties on these items were increased from 10.5 percent to 12.5 percent effective December 13, 1996. Separately, preparation of an anti-dumping petition by Mexican sugar producers against U.S. HFCS is being reported in the press, but no official anti-dumping investigation has begun. Prices and Costs HFCS Prices Higher The fiscal 1996 HFCS-55 list price averaged 20.56 cents a pound, dry basis, up from 18.81 cents the prior year, but below fiscal 1994's 22.87 cents a pound. The list price for HFCS-42 in fiscal 1996 averaged 18.49 cents a pound, compared with 16.82 cents in fiscal 1995 and 20.59 cents in fiscal 1994. Net Corn Costs Fall, Reflecting Drop in Corn Price Sales of three byproducts, corn gluten feed, corn gluten meal, and corn oil, generate revenues that reduce the corn refiner's corn costs. The Midwest price of number 2 yellow dent corn, the grade used by wet millers, averaged $3.24 per bushel for 1995/96, 43 percent higher than the $2.26 for 1994/95. The 1995/96 corn harvest was a disappointing 7.4 billion bushels, down 2.7 billions bushels (27 percent) from the year before. USDA forecasts the farm price of corn to average $2.50 to $2.80 a bushel in 1996/97, below 1995/96. The price for corn oil averaged 25.26 cents a pound for the first 9 months of 1996, down slightly from 27.05 cents for the corresponding period of 1995. The corn gluten feed price averaged $121.74 per short ton for the first 9 months of 1996, up 51 percent from the 1995 period, and corn gluten meal prices have been similarly strong, up 50 percent in January-September 1996 over the year before to $329.14 a ton. The net cost of corn per pound of corn sweetener, the price of corn adjusted for these three by-product credits (table 43), averaged 6.99 cents a pound in fiscal 1996, up 80 percent over fiscal 1995. HFCS shipments have continued to rise without interruption in spite of increased input costs. Much of the purchasing of HFCS is done on annual contracts, and negotiations on 1997 contracts are still continuing in December. Net corn costs will likely be lower in 1997 as corn prices fall with the larger crop. List of Tables World Sugar and HFCS Page 1. Sugarbeet area, yield, and production for selected countries and world 2. Sugarcane area, yield, and production for selected countries and world 3. World sugar production, supply, and distribution, by selected countries 4. World sugar production, supply, and distribution, by region 5. World sugar supply and use, stocks-to-consumption ratio, and world price 6. World production of HFCS for selected countries World and U.S. Sugar and Corn Sweetener Prices 7. World raw sugar price, monthly, quarterly, and by calendar and fiscal year 8. World refined sugar price, monthly, quarterly, and by calendar and fiscal year 9. U.S. raw sugar price, duty fee paid, New York, monthly, quarterly, and by calendar and fiscal year 10. U.S. wholesale refined beet sugar price, Midwest markets, monthly, quarterly, and by calendar and fiscal year. . 11. U.S. retail refined sugar price, monthly, quarterly, and by calendar and fiscal year 12. U.S. wholesale list price for HFCS-55, Midwest markets, monthly, quarterly, and by calendar and fiscal year 13. U.S. wholesale list price for HFCS-42, Midwest markets, monthly, quarterly, and by calendar and fiscal year 14. U.S. wholesale list price for glucose syrup, Midwest markets, monthly, quarterly, and by calendar and fiscal year 15. U.S. wholesale list price for dextrose, Midwest markets, monthly, quarterly, and by calendar and fiscal year 16. U.S. producer price index for HFCS and sugar, monthly 17. U.S. consumer price index for sugar and selected sweetener-containing products U.S. Sugar Supply and Use 18. U.S. sugarbeet crops: Acres harvested, yield per acre, and production, by State and region 19. U.S. sugar: Area, yield, production, output, recovery rate, and sugar yield per acre, crop years 1985/86 --1995/96 20. U.S. beet and cane sugar production by State, quarterly, fiscal, and calendar year 21. U.S. production of beet sugar, and cane sugar by State, monthly, quarterly, fiscal, calendar, and crop year 22. U.S. beet and cane sugar production (including Puerto Rico), fiscal year, and share of total 23.U.S. beet and cane sugar deliveries for human consumption (excluding importers direct consumption), quarterly, fiscal, and calendar year 24. U.S. sugar deliveries by region, calendar year and quarterly 25. U.S. cane and beet sugar deliveries, monthly, quarterly, and by fiscal and calendar year 26. U.S. sugar deliveries by type of user, quarterly and calendar year 27. U.S. sugar imports under tariff-rate quota (TRQ), by country 28. U.S. sugar stocks held by primary distributors, by quarters 29. U.S. sugar (including Puerto Rico) supply and use, calendar year 30. U.S. sugar (including Puerto Rico) supply and use, fiscal year U.S. Sugar Loan Rates 31. U.S. national average cane and beet sugar loan rates, fiscal year 32. U.S. sugar loan rates and support levels, by region and States, fiscal year U.S. Corn Sweetener Supply, Use and Trade 33. U.S. wet-milled use of field corn, crop year 34. U.S. high fructose corn syrup (HFCS) production, quarterly, fiscal, and calendar year 35. U.S. high fructose corn syrup (HFCS) deliveries, quarterly, fiscal, and calendar year 36. U.S. HFCS-55 deliveries to domestic users, by type of use 37. U.S. HFCS-42 deliveries to domestic users, by type of use 38. U.S. imports of corn sweeteners, selected sweeteners, and molasses 39. U.S. corn refinery exports 40. U.S. high fructose corn syrup (HFCS) supply and use, calendar year 41. U.S. glucose syrup supply and use, calendar year 42. U.S. dextrose supply and use, calendar year 43. Net cost of corn starch to U.S. wet-millers, Midwest markets 44. U.S. corn sweetener exports to Mexico and Canada, fiscal year, 1991-96 U.S. Consumption of Caloric Sweeteners 45. U.S. (including Puerto Rico) total consumption of caloric sweeteners, calendar year 46. U.S. (including Puerto Rico) per capita consumption of caloric sweeteners, calendar year 47. U.S. (including Puerto Rico) sugar and HFCS consumption and per capita use, fiscal year U.S. Molasses Production, Imports, Price 48. U.S. molasses production from sugarcane and sugarbeet processing 49. U.S. imports of molasses for industrial or feed use 50. U.S. molasses prices U.S. Maple Syrup Production, Use, and Prices 51. U.S. maple syrup production by State, calendar year 52. New York maple syrup production and value 53. U.S. maple syrup supply, use, and prices, calendar year. U.S. Honey Production, Use, Prices and Trade 54. U.S. honey production, supply, and disposition, crop year 55. U.S. honey prices and price support loan activity 56. U.S. honey exports by country of destination 57. U.S. honey imports by country of origin World and U.S. high Intensity Sweetener Production, Trade and Prices 58. World production of high intensity sweeteners 59. U.S. imports of aspartame by country of origin 60. U.S. prices for selected high intensity sweeteners Article Tables A1. Central American sugarcane area, yield, production, and sugar supply, use, population, and per capita use A2. Central American sugar exports, total and under U.S. TRQ A3. U.S. sugar tariff-rate quota (TRQ) imports from Central America A4. Central American sugar exports by countries of destination, calendar year The Central American Sugar Industry by Nydia R. Suarez 1/ ------------------------------ 1 Agricultural economist, Commercial Agriculture Division, Economic Research Service, USDA. ------------------------------- Abstract: The sugar industry is important to the Central American countries, Panama and Belize as a source of employment and foreign exchange. The industry has also had a positive impact from a social and economic perspective, becoming one of Central America's most important sources of stability and income. The Central American countries have invested in research and development and have implemented new payment systems to become more efficient and productive, positioning themselves as important reliable world market suppliers. Keywords: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, sugar production, tariff-rate quota, exports. Introduction The Central American countries, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua--plus Belize and Panama-- have a common heritage. 2/ These seven countries occupy about 205,000 square miles, support approximately 34 million people, and their governments consider sugar a means toward improved trade and higher standards of living. --------------------------- 2 In this article the term "Central America" refers to all seven countries.] The Central American countries are small, and mostly mountainous. In addition, the population pressure is very high, with 57 people per square kilometer. For example, El Salvador has about 275 people per square kilometer, and Costa Rica 67, compared with the average of less than 15 for all of South America and 24 for the United States--where only about 4 percent of the population directly depends on agriculture for its livelihood. The Central American population is growing by 2.4 percent per year. Finding employment is a major social problem in the region in spite of good economic growth in most of the countries. Sugarcane cultivation, which is very labor-intensive, has been an ideal crop for these countries as a source of employment and an important foreign exchange generator. Nicaragua was the first country in Central America to produce centrifugal sugar, having started in the 1880's. Guatemala, Costa Rica, and El Salvador started producing sugar during the following decade, but it was not until the 1920's that centrifugal sugar began to be produced in Honduras. Over the past 2 decades, Central America's sugar production, consumption, and exports have increased considerably. The production growth has occurred even though Central America's internal prices are among the lowest worldwide. Sugar's regional output for 1996/97 is forecast at almost 3.0 million metric tons, raw value, up 7 percent from 1995/96, and almost 100 percent more than in 1979/80. In spite of large increases in domestic consumption, the Central American sugar industry has been able to expand exports by more than 100 percent. The Central American sugar industry faces changes in government policies after a decade of political and social-economic turmoil, and technological and commercial challenges that will affect production in both the short and long run. Central America produced a 1995/96 sugar crop of almost 2.8 million tons, consumed approximately 46 percent and exported the difference. The United States is the main export market. Central America's domestic sugar markets are regulated by annual internal quotas. The quotas are assigned proportionally to each mill by each country's different sugar regulatory agency according to each mill's annual production, and distributed on a monthly basis. In each country, the distribution of sugar is generally done by the mills or by distributing companies established by the mills. To achieve higher efficiency and utilize new technology in the areas of sugarcane sampling and analysis, Costa Rica, El Salvador, Guatemala, and Panama changed their payments to sugarcane producers from one based on the weight of sugarcane to one based on quality and sugar content. Guatemala's payment system is based on the mills' average sucrose content for the season, while the other three countries conduct individual analyses of the raw material for each farmer. Honduras and Nicaragua still pay according to weight. After implementing the sugar content payment system in late 1994, yields at both levels--farm and mill--have improved. Cane producers have been motivated to prepare and treat their fields in order to obtain a higher quality product. On the other hand, the payment system has stimulated efficiency of the industrial operation in the mills and improved the relationship between farmers and mills, which now view each other as partners. Processors in the Central American countries would like to increase total sugar output with the hope of expanding exports, preferably to the premium market in the United States. The Central American countries value the premium they receive from the U. S. tariff-rate import quota (TRQ) system. While Central America has not objected to the new administrative mechanism for managing the import quota that was implemented for fiscal year 1996/97, they would like to receive a preferential quota due to their extreme dependence on the U.S. market. The region holds 16 percent of the global U.S. sugar TRQ, which was established in 1982 and based on U.S. imports over the 1975-1991 period. Shipments to the United States under the TRQ comprise a significant share of total exports for many Central American countries. In 1983/84, the U.S. TRQ allocation to Central American countries was 440,000 tons, 55 percent of their total exports of 800,000 tons that year. By 1995/96, the TRQ allocation of 350,000 tons was 24 percent of total exports of 1.48 million tons. Most countries sent between 20 and 65 percent of their exports to the United States under the 1995/96 TRQ (table A-2). Sometimes, as for Panama in 1995/96, the TRQ allocation has exceeded a country's total exports. Belize Belize is the smallest sugar producer in the region. However, sugarcane is by far its most important agricultural product, generating approximately 15 percent of the country's Gross Domestic Product (GDP) annually. Every year, approximately 1 million metric tons of sugarcane are grown to produce over 100,000 metric tons of raw cane sugar. The industry is highly dependent upon trade, as 90 percent of all raw sugar is exported. Sugarcane accounts for about half of total value-added in agriculture. Trends in Sugarcane Production Sugarcane production grew at about 10 percent a year in the late 1980's to 1991, following the replacement of disease-prone plants with a more resistant variety and the introduction of improved cultivation practices. Growth, however, slowed to less than 3 percent a year during 1991/92 to 1993/94 because of declining sugar prices and minimal expansion of the planted acreage. Despite recent price increases, production did not expand in 1995/96, owing to exceptionally dry weather during the planting season. Cane yields per hectare increased in the mid-1980's but dropped in 1995/96 due to the drought. However, higher than expected sugar recovery rates offset most of the decline. The sugar industry consists of two mills. The Belize Sugar Industries (BSI) owns one mill and produces all the sugar in the country. It plans to expand sugar output by about 5 percent a year for the next few years in an effort to lower unit costs. Another factory, Tower Hill, produces only molasses for export to Jamaica. Tower Hill is owned by Belizean private entrepreneurs and Jamaican-owned Petrojam. Government regulations assure that sugar production has a priority claim on sugarcane over molasses production. Sugar production remained flat at about 100,000 tons a year from 1985/86 to 1994/95 because of weak sugar prices and declining productivity at the BSI factory. Processing facilities were modernized and expanded in 1995/96 and, consequently, sugar output is to grow by 5 percent, despite the smaller area harvested. Trade Belize is heavily dependent on preferential price sugar markets. Over 50 percent of its exports are to preferential price sugar markets, principally the European Union (EU) and the United States. While sugar remains the most important export product, its share in total domestic exports fell from 39 percent in 1989/90 to 33 percent in 1994/95. The average cost of sugar production in Belize is estimated to be above average world market prices. Sugar exports averaged about 100,000 tons between 1979/80 and 1989/90 because of favorable export prices. In 1991/92 and 1992/93, however, export earnings stagnated because of sluggish volumes and weaker prices following a reduction in quota sales to the U.S. market and increased sales at lower prices in the free market. In 1995, Belize's EU quota was raised by about 7,700 tons a year for a period of 6 years due to Portugal's EU accession, while Belize's U.S. quota was raised by 4,000 tons because of shortfalls from other suppliers. As a result, the proportion of sugar output sold in the free market declined from 43 percent in 1994 to 26 percent in 1995. Belize holds only 1.1 percent of the U.S. sugar TRQ, which accounted for about 25 percent of Belize total sugar exports in 1995/96. Of the initial TRQ allocation in 1996/97, Belize's share is 17,849 metric tons. Other destinations besides the EU and the United States in recent years included Canada and Mexico. Trends in Domestic Consumption From the 1996/97 crop, an estimated 12,000 tons of sugar are expected to be used for domestic consumption. This amount represents only 11 percent of expected output and a per capita consumption estimate of 50 kgs per year. Domestic consumption is growing steadily as industrial demand for soft drinks and food processing increase. Belize produces both brown and "plantation white" sugar for the domestic market. Brown sugar accounts for about 15 percent of domestic consumption, while plantation white sugar accounts for the remainder. Costa Rica The sugar industry in Costa Rica is relatively small, but it is still very important to the country's economy. Every year, over 3 million tons of sugarcane are harvested to produce over 300,000 tons of raw cane sugar. Like other countries in the region, the industry is very dependent upon trade. Over 40 percent of total raw sugar is exported. Trends in Sugarcane Production For 1996/97, sugarcane production is expected to reach 3.4 million tons. Sugar production is expected to reach a record 350,000 tons, raw value, up slightly from the previous year because of better yields per hectare. Yields have increased more than 30 percent from 1979/80 through 1995/96. While the area harvested for sugarcane and sugar production have been relatively stable, averaging about 35,000 hectares per year in the last 10 years, sugar output has increased considerably. Most of the growth was to meet the rapid expansion in domestic demand for sugar; however, the expanded export opportunities in the U.S. market were also an incentive. Good cultural practices and higher mechanization are also factors behind increased production. Sugarcane is grown in two different regions in Costa Rica. The traditional producing area is on the Central Plateau, where cane is grown on relatively mountainous terrain. Some sugar is also grown in the northern and southern Pacific coast areas. In the traditional producing area of the Central Plateau, cane is characteristically cultivated by small landowners. Sugarcane is largely unirrigated in this region and usually grows for 18 to 24 months before the first cutting. Common practice in the Central Plateau growing region is to have 4 to 5 ratoon crops before replanting. The sugarcane harvest season runs from December through April. Since the late 1980's, cane cultivation has spread to the relatively dry Pacific Coastal plain, and new areas were planted in Guanacaste, San Carlos, and San Isidro del General. In this area, holdings are relatively large by Costa Rican standards and the gently rolling terrain lends itself to mechanized cultivation. Cane is frequently grown under irrigated conditions on the coastal plain, allowing the production of a 12- to 14-month crop. The Costa Rica's Sugar Cane Industry League (LAICA), which is an autonomous agency, controls the production and marketing of sugar. The Costa Rican Government sits on the board of directors of LAICA, participating in issues related to price control. Sugarcane is expected to remain an important crop, as it is a relatively low risk activity for small farmers. Also, alternative products such as rice, beef, or melon production require more capital or are associated with higher risks. Trade Although Costa Rica's sugar exports have grown steadily, export share of total production declined from over 40 percent in 1979/80 to 22 percent in 1988/89 due to the growth in domestic utilization. Export share of total production has averaged about 43 percent in the last few years. Costa Rica exported an average of 80,000 tons of sugar annually from 1979/80 to 1993/94. Record sales of 158,000 tons in 1994/95 accounted for 10 percent of the region's sugar exports. Exports dropped 5 percent in 1995/96 to 150,000 tons and are expected to drop even more in 1996/97 because of increased domestic consumption. Costa Rica holds 1.5 percent of the U.S. sugar TRQ and the United States accounted for 22 percent of Costa Rican sugar exports in 1995/96. Of the initial U.S. TRQ in 1996/97, Costa Rica's share is 24,340 tons. In January 1995, the Costa Rica Constitutional Court decided that the allocation of both the U.S. sugar and domestic consumption quota among the mills was to be made according to the mill's sugar production during the preceding crop year. Before this decision, LAICA allocated these quotas among the mills. The domestic consumption quota, like the U.S. quota, allows producers to receive a higher price than the sugar sold in the world market. This policy change originated when the millers of the Guanacaste-Puntarenas region filed a law suit complaining that they were at a disadvantage under the previous system, as a large percentage of their production had to be sold in the world market at a lower price. LAICA used to assign higher quota volumes to the smaller mills. Under the new system, the largest mills will receive a larger share of both quotas. Small producers from other areas of the country found that the new system would negatively affect them and introduced a new bill that could change the system again. Trends in Domestic Consumption Domestic consumption of sugar in Costa Rica continues its upward trend, although at a slower pace than the population growth rate. For 1995/96, domestic use is estimated at a record 195,000 tons, influenced by higher industrial use and increased direct human consumption. Nearly 70 percent of the sugar is used in direct human consumption, and the rest in the manufacturing of soft drinks, confectionery, and other food products. Per capita consumption is estimated at about 65 kgs per person, per year, the highest in Central America and one of the highest of the world. El Salvador El Salvador is the most densely populated country in Central America, and sugar was one of the most dynamic agricultural commodities during the 1990's. In 1995, the sugar industry contributed $38 million to the country's foreign exchange earnings. Trends in Production Privatization of sugar mills and new price incentives for producers are likely to lead to higher sugar recovery rates and sugar output over the next 3 to 5 years. Sugarcane is being planted to areas formerly dedicated to cotton production and idle land in the eastern region of the country. However, the amount of land suitable for mechanized harvesting is very limited. Long-term success of the sugar industry will depend on continued strong sugar prices and less government intervention. There are 10 sugar mills in the country of which six are privately owned. Two of the privately owned mills have recently expanded milling capacity to produce greater quantities of refined sugar for export. The Government of El Salvador is finalizing plans to privatize its four mills. Unusually heavy rains during August and September 1995 lowered 1995/96 sugarcane production to 3.2 million tons. The industry has had a history of problems with unscheduled burnings of sugarcane fields, resulting in significantly reduced sugar recovery rates. However, sugarcane burnings were better controlled in 1996. Better recovery rates offset some of the loss in sugar production caused by reduced sugarcane output. Area is forecast to increase in 1996/97 by 2 percent, and assuming normal weather, production is forecast at 340,000 tons, up 7 percent. Trade Sugar exports in 1995/96 amounted to 105,000 tons, down 11 percent from 1994/95, but are expected to jump 10 percent in 1996/97 to 115,000 tons due to increased production. Exports as a percent of production have declined from 43 percent in 1991/92, to 33 percent in 1995/96 mainly because of increased domestic consumption. El Salvador holds 2.6 percent of the U.S. sugar TRQ, which accounted for more than 50 percent of the country's total sugar exports in 1995/96. Of the initial U.S. TRQ allocation in fiscal 1996/97, El Salvador's share is 42,189 tons. The Salvadorean millers continue to search for new market opportunities since intra-regional trade is limited. Nicaragua, Honduras, Guatemala, and El Salvador signed a free trade agreement, but it does not include sugar. A 20-percent tariff is imposed and an import permit is required. Trends in Domestic Consumption Domestic sugar consumption has been trending fairly steadily upward and continues to keep pace with the rapid growth of the country's economy. For 1996/97, domestic consumption is expected to reach 219,000 tons, up more than 3 percent from 1995/96 and account for 64 percent of estimated production. Per capita consumption is estimated at 35 kgs per person, per year. At the end of 1995, the Salvadorean Sugar Association decided to increase the wholesale price of plantation white sugar by the equivalent 2.5 U.S. cents to 42.8 cents per kilogram. Local mills claimed their returns have diminished because of rising costs of raw material, transportation, and labor. The Sugar Association claims that price increases will put El Salvador wholesale sugar prices in line with neighboring countries and reduce contraband trade. The wholesale price for refined sugar is 4.19 colones or 48 cents per kilogram and the retail price is approximately 4.88 colones or 56 cents per kilogram. Most sources do not see these price increases significantly impacting domestic sugar consumption. However, sugar mills are complaining that retailers are raising prices of sugar disproportionately to the wholesale price increases at the expense of consumers. The Salvadorean Government controls wholesale and retail sugar prices through the Ministry of Economy, but the retail price controls are difficult to enforce. Guatemala Among the Central American countries, Guatemala stands alone as a country which, in less than a decade, has become a major shipper to the world market and the third largest exporter in the Western Hemisphere, after Cuba and Brazil. Trends in Production Guatemala has one of the most rapidly expanding and lowest cost sugar sectors in the world. The Guatemalan industry produced an estimated 1.3 million tons, raw value, in the 1995/96 season, and output in the 1996/97 season is currently forecast to rise 8 percent to 1.4 million tons. The continuing expansion of cane area, due to buoyant producer prices, have encouraged farmers to divert more land from crops, such as cotton and soybeans, into cane, and underpins the expansion in production. Setting a high domestic sugar price, vis-a-vis the world market, enables the Guatemalan sugar industry to maintain a profit margin and continue to increase production and exports. In 1979/80, production was only 418,000 tons, but industry leaders recognized the potential of the area, due in part to river-fed gravity irrigation. The government established a positive economic climate, helping production climb more than 200 percent by 1996. Trade Sugar has become one of Guatemala's most dynamic export commodities, and in the last couple of years it has replaced bananas as the second most important export after coffee. The volume of sugar exported increased more than 400 percent from 1979/80 to 1995/96. The share of Guatemala's total sugar exports which have gone to the United States under the U.S. TRQ system, where prices are usually twice as high as the world free market price, has declined from 47 percent in 1993/94 to 11.5 percent in 1995/96 (table A-2). Guatemala's expansion in sugar trade has been helped by investment in its sugar export facility, and the construction of EXPROGRANEL, a new terminal on the south coast of the country. This facility gives Guatemala the capacity to export sugar more efficiently for both bulk and bagged shipments. EXPROGRANEL has storage capacity for 44,000 tons of bulk sugar and 20,000 tons of sugar in 50 kilo bags. Of all Central American countries, Guatemala has the largest share of the U.S. TRQ, 4.8 percent. Of the initial U.S. TRQ allocation in 1996/97, Guatemala's share is 77,888 tons. Trends in Domestic Consumption Domestic consumption of sugar in 1996/97 is forecast at 430,000 tons, up 5 percent from the estimate for 1995/96. Per capita sugar consumption, based on a population of almost 11.6 million, is 35 kgs per year. Like other countries in the region, sugar consumption has expanded significantly in recent years due to population growth and increased industrial use. However, the share of annual production consumed domestically has dropped significantly, from almost 51 percent in 1979/80, to 31 percent in 1995/96. Distribuidora Azucarera de Guatemala S.A. (DAZGUA), a semi-autonomous company owned by the sugar industry, is responsible for marketing sugar domestically and also is responsible for the allocation of U.S. import quota certificates. Individual mills receive a quota for local sugar sales that are issued to distribute sugar throughout the year. Honduras Unlike other countries in the Western Hemisphere where sugarcane has been a traditional crop for centuries, sugarcane production in Honduras did not gain prominence until the 20th century. Sugar production is a key component of the country's economy, providing jobs for 20,000 people and contributing almost 1 percent of GDP. Trends in Production Total harvested area of sugarcane diminished from an all-time high of 31,000 hectares in the early 1980's to 24,000 hectares in 1987/88, bringing down crop production to less than 2 million tons of sugarcane. Depressed market conditions and a small share of the U.S. import quota forced the reduction of cane plantings, especially those of independent growers far away from the mills. Approximately 60 percent of sugarcane production is controlled by independent growers and the remaining is controlled by mills. Since 1988/89, area harvested has been increasing slowly due to the protection created by the Agrarian Reform Law. Sugarcane has also been a profitable investment for most farmers. High domestic prices for sugar set by the Government have permitted mills to guarantee relatively high cane prices to farmers at the beginning of each crop year. Raw sugar production increased from 167,000 tons in 1979/80 to a peak of 220,000 tons in 1985/86. However, reduction in area harvested and unfavorable weather began to take a toll in the latter half of the decade, and raw sugar production fell to 186,000 tons in 1992/93. Since then, production has increased, reaching 235,000 tons in 1995/96, up almost 10 percent from 1994/95. Production is expected to increase even further in 1996/97 to 265,000 tons. Rising producer prices for sugarcane and a substantial increase in domestic sales are encouraging the industry to expand. Producer prices have increased about 5 percent from US$ 13.58 per ton in 1994/95 to $14.29 per ton in 1995/96. Honduras's total crushing capacity is around 23,000 tons per day, with individual capacity of the mills ranging from 2,000 tons to over 6,000 tons per day. With this level of processing capacity, Honduras could produce up to 300,000 tons of sugar annually. However, the industry has never been able to completely utilize its resources, and at present operates at approximately 65 percent of capacity. However, Honduras's eight sugar mills are looking at ways to increase efficiency, and the industry expects to be operating at full capacity by the year 2000. Trade Honduras's export share of total sugar production is small compared with other Central American countries, due mostly to rapid growth of domestic consumption. Exports have averaged only 10 percent of production in the last 5 years. From 1979/80 to 1981/82, sugar exports averaged about 76,000 tons per year, all for the United States. However, with the reintroduction of U.S. import quotas in 1982, Honduras placed large amounts of its exports on the world market. Based on historical trade levels during 1975-81, Honduras received a 1-percent share of the U.S. sugar TRQ. Honduras's share of the initial allocation of the U.S. TRQ in fiscal 1996/97 is 16,227 tons. Trends in Domestic Consumption Domestic consumption remained relatively stable in the first half of the 1980's, averaging about 116,000 tons per year. However, domestic sales reported by the mills understate the actual level of consumption, since sugar is smuggled into the country from Guatemala and EL Salvador. From the 1995/96 crop, an estimated 191,000 tons of sugar is expected to be used for domestic consumption, about 81 percent of production. As in the other countries of the region, consumption has expanded considerably due to population growth and increased industrial use. Consumption has doubled since 1979/80. Nicaragua Nicaragua is essentially an agricultural country with a small manufacturing base. Although the sugar industry is small, it contributes about 6 percent to the country's GDP . Trends in Production Sugarcane production in Nicaragua is mainly along the Pacific Coast. Sugar production has been increasing steadily since 1994/95, reaching a record harvest of 295,000 tons in 1995/96. Production in 1996/97 is forecast to increase by 3 percent to 300,000 tons. Increased area devoted to sugarcane, better cultural practices, and the privatization of several mills are contributing to the expansion. Like all other agricultural products, sugar production was severely hit by the U. S. trade embargo on Nicaraguan products from 1985-1990. On March 13, 1990, President Bush lifted the trade embargo. Nicaragua has six mills that are grouped in an organization called National Committee for Sugar Producers (CNPA). The CNPA is the body that controls sugar marketing for the U.S. quota, other exports, and domestic use. CNPA also regulates local prices to avoid speculation by wholesalers. Although the Government of Nicaragua does not provide subsidies to the sugar industry and does not have an official production policy, it supports the CNPA. Trade Nicaragua's export share of total production has been increasing recently, but the country occasionally has to import sugar to replace sugar used to fill its U.S. TRQ. Nicaragua's sugar exports have been averaging about 100,000 tons annually, but the export share of production has been declining due to higher domestic consumption. Nicaraguan exports to the United States, Nicaragua's main market, have averaged about 87,000 tons annually. Nicaragua holds 2.1 percent of the U.S. sugar TRQ, which accounted for 41 percent of Nicaragua's exports in 1995/96. Nicaragua's share of the initial allocation of U.S. raw sugar TRQ is 34,076 tons. Trends in Domestic Consumption Domestic use of sugar has increased 70 percent since 1979/80. For 1995/96, domestic consumption is estimated at 160,000 tons, accounting for 54 percent of production. Per capita consumption is estimated at 35 kgs per person, per year. The CNPA has marketing and distribution channels across the country. Panama Panama is a small Central American country best known for the Panama Canal and as the second largest free trade zone after Hong Kong. The contribution of the agricultural sector to the GDP remains at only 8 percent as would be expected in this services-oriented economy. Sugar exports bring around US$20 million annually to Panama's economy. Trends in Production Sugar production for 1996/97 is estimated at 150, 000 tons, up 7 percent from 1995/96, but 25 percent lower than the 200,000 tons of 1979/80. While there has been some improvement in sugarcane yields per hectare, much of the growth in total output in the last few years has come from an expansion in harvested area and mill crushing capacity. Two government-owned and two privately-owned mills produce enough sugar to satisfy domestic demand and to export to the United States under the TRQ. The Government of Panama intents to sell its two mills as part of a program to privatize government-owned companies that present constant economic losses. Sugarcane is grown in most provinces of Panama but mainly in the valleys and plains to the south of the western chain of the mountains. Despite the expansion in cultivation since the 1970's, the bulk of the annual sugarcane crop is still grown in the four central provinces of Cocle, Los Santos, Herrera, and Veraguas. Plant cane is normally sown in the late spring in central Panama and harvested 13 to 14 months later. Low rainfall from November to early May make irrigation desirable. Where irrigation is used, a plant cane crop can be harvested in less time. Normally, larger growers produce 3 to 4 ratoon crops before a new plant crop is sown. Smaller growers follow a range of ratooning practices. Cane yields per hectare have been averaging around 43 tons in recent years, down from a decade ago when the yield per hectare was over 60 tons. Trade Panama's sugar exports have declined from 144,000 tons in 1979/80 to 48,000 tons in 1995/96 due to diminished production and increased domestic use. Exports are expected to increase more than 30 percent in 1996/97. Panama holds 2.9 percent of the U.S. sugar TRQ, accounting for 100 percent of the country's sugar exports. Of the initial U.S. TRQ allocation for 1996/97, Panama's share is 47,057 tons. Trends in Domestic Consumption Panama's domestic consumption has increased about 29 percent since 1979/80 and accounts for about 40 percent of total production. For 1996/97, domestic consumption is estimated at 90,000 tons, slightly higher than in 1995/96. END_OF_FILE