SUGAR AND SWEETENERS October 10, 2000 September 2000, ERS-SSS-229 Approved by the World Agricultural Outlook Board -------------------------------------------------------------------------- SUGAR AND SWEETENERS is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. This release contains only the text of the SUGAR AND SWEETENERS report -- tables and graphics are not included. Subscriptions to the printed version of the report are available from the USDA order desk. Call, toll-free, 1-800-999-6779 and ask for stock #SUB- SSS-4033, $30/2 issues. USDA accepts MasterCard and Visa. -------------------------------------------------------------------------- Sugar and Sweetener Situation and Outlook. Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, September 2000, SSS-229. Contents Summary U.S. Sugar Current Year, FY 2000 Policy Developments Prices Forecast for FY 2001 Calculation of Real Price Indices for U.S. Sugar Crops Autofax Access to Sugar-Related Data Internet Access to Sugar-Related Data Report Coordinator Stephen Haley (202) 694-5247 FAX (202) 694-5884 E-mail: SHALEY@ERS.USDA.GOV Principal Contributors Stephen Haley Nydia Suarez Database Coordinator/Graphics & Table Design Fannye Lockley-Jolly Layout & Text Design Wynnice Napper Approved by the World Agricultural Outlook Board. Summary released September 21, 2000. The next Sugar and Sweetener Situation and Outlook is scheduled for release on January 2001. Summaries and full text of Situation and Outlook reports may be accessed electronically via the ERS web site at www.ers.usda.gov. The Sugar and Sweetener Situation and Outlook is published two times a year and supplemented by a yearbook. To order, call 1-800-999-6779 in the United States or Canada. Other areas please call (703) 605-6220. Or write ERS-NASS, 5285 Port Royal Road, Springfield, VA 22161. Summary On August 1, 2000, the U.S. Department of Agriculture (USDA) announced the Payment-in-Kind (PIK) Diversion Program to help sugarbeet and sugarcane farmers deal with low prices caused by an excess of domestic sugar. About 100,000 acres of sugarbeets were accepted under the PIK Diversion Program. Under the Program, sugarbeet producers could choose to divert a portion of their beet acreage from production in exchange for sugar held by the Commodity Credit Corporation (CCC). Farmers are limited to $20,000 in PIK payments. Final results of the PIK Diversion Program are not yet available. USDA projects fiscal year (FY) 2001 (October/September) beet sugar production at 4.670 million short tons, raw value (STRV). This projection does not take into account the potential effects of the PIK Diversion Program, but does take into account that the California beet processing plants in Woodland and Tracy will be out of operation from January to September 2001. Cane sugar production for FY 2001 is projected at a record 4.233 million STRV, about 3.6 percent above the estimated total for FY 2000. Production increases in Florida, Texas, and Puerto Rico are expected to more than offset declines in Louisiana and Hawaii. On September 15, 2000, the USDA established the FY 2001 tariff-rate quota (TRQ) for imports of sugar at 1,360,983 metric tons, raw value (MTRV), or 1,500,227 STRV. The total includes a quantity for raw sugar of 1,117,195 MTRV, the minimum level to which the United States is committed under the World Trade Organization (WTO); a quantity for refined sugar of 38,000 MTRV; a required quantity of 105,788 MTRV for Mexico under the North American Free Trade Agreement Side-Letter Agreement; and a reserve of 100,000 MTRV, to be allocated, if needed, contingent on developments in international markets. USDA has made all except the contingent quantity available to the U.S. Trade Representative for allocation for import into the U.S. customs territory. Other imports for FY 2001 in the September 2000 WASDE are projected to total 515,000 STRV, including 365,000 STRV under the combined Refined Sugar Re-export Program, the Sugar-Containing Products Program, and the Polyhydric Alcohol Program. Sugar derived from sugar syrup imports under the U.S. Harmonized Tariff Schedule Code 17029040 are expected to be at the same level as in FY 2000, about 125,000 STRV. High-tier tariff sugar imports for FY 2001 are projected to increase to 25,000 STRV. Sugar exports for FY 2001 are projected at 175,000 STRV. Deliveries to domestic food and other products manufacturers under the Sugar-Containing Products Re-export Program are projected at 125,000 STRV, and deliveries for the Polyhydric Alcohol Program are projected at 15,000 STRV. Total deliveries for FY 2001 are projected at 10.385 million STRV. After netting out deliveries made for the Sugar-Containing Products and Polyhydric Alcohol Programs, along with deliveries for livestock feeding (20,000 STRV), domestic food and beverage deliveries are projected at 10.225 million, about 1 percent higher than FY 2000. The USDA will not project FY 2001 ending stocks until the October World Agricultural Supply and Demand Estimates (WASDE), when more details about the PIK, possible TRQ shortfalls, and Certificates for Quota Eligibility (CQE) surrenders become known. Beet sugar production for FY 2000 is estimated at a record 4.950 million STRV. Cumulative extraction of sugar from 1999 crop beets is estimated at 291 pounds per ton, an 11-percent year-over-year increase.Cane sugar production for FY 2000 is estimated at 4.085 million STRV. Cane sugar production in Florida continued through April and is now estimated at 1.976 million STRV. Louisiana's harvest campaign ended in January, with actual sugar production equaling 1.620 million STRV. It is expected that 60,000 STRV of sugar from sugarcane will be produced from the coming harvest in September. Texas sugar production continued through late February for a total of 104,680 STRV. Cane sugar production in Hawaii for FY 2000 is estimated at 320,000 STRV, a decrease of more than 60,000 STRV from the previous year. Cane sugar production in Puerto Rico is estimated at 4,240 STRV. Only one plant operated this year because of hurricane damage to the other.The expected level of raw and refined sugar TRQ imports for FY 2000 is now estimated at 1.112 million STRV. The USDA announced on February 29, 2000, that it would accept CQE in lieu of required sugar exports during FY 2000 by the C&H Sugar Company. USDA's acceptance of CQE reduces the amount of sugar imported under the FY 2000 raw sugar TRQ. CQE surrendered to date total 121,251 STRV, leaving the raw sugar TRQ shortfall at 57,000 STRV for FY 2000. Other imports for FY 2000 are estimated at 523,000 STRV. U.S. sugar exports are comprised of exports under the Refined Sugar Re-export Program and are currently estimated at 125,000 STRV. Total deliveries for FY 2000 are estimated in the September 2000 WASDE at 10.25 million STRV. Ending stocks are currently estimated at 1.934 million STRV, indicating an ending stocks-to-use ratio of 18.6 percent. Sugar stocks held by the CCC are estimated at 297,000 STRV. U.S. Sugar On September 12, 2000, the U.S. Department of Agriculture (USDA) released its latest supply and use estimates for fiscal year (FY) 2000 and projections for FY 2001. On September 15, 2000, the USDA announced FY 2001 tariff-rate quotas for raw, refined, and specialty sugar. Current Year, FY 2000 Production Beet sugar production for FY 2000 is estimated at 4.950 million short tons, raw value (STRV). The National Agricultural Statistics Service (NASS) estimates the sugarbeet crop at 33.420 million tons. Area harvested is estimated at 1.527 million acres, and yield is estimated at 21.9 tons per acre. Beets sliced through July equaled 29,002,619 tons, an amount slightly below last year's to-date total. The September 1999-July 2000 cumulative extraction of sugar from sliced beets is estimated at 291 pounds per ton. This rate of sugar extraction is about 28 pounds per ton greater than last year's rate through July and about 11 pounds per ton greater than the average through July for 1995-1998. It is projected that the September-August extraction rate will be slightly above 293 pounds per ton. Adding estimated sugar production from the desugaring of molasses, the total is estimated at 4.950 million tons, adjusted to match the fiscal year. This adjustment implies that September 2000 beet sugar production will be close to the level of September 1999. Cane sugar production for FY 2000 is estimated at 4.085 million STRV. Cane sugar production in Florida continued through April and is now estimated at 1.976 million STRV. NASS estimates sugarcane for sugar at 15.505 million tons and acreage harvested at 443,000 acres, implying a yield of 35.0 tons per acre. Sugar yield is estimated at 4.46 tons per acre, which is lower than last year (5.00 tons per acre) and the previous year (4.57 tons per acre). Sugar recovery (raw sugar production as a percentage of sugarcane for sugar), however, is calculated at 12.75 percent, a record. Cane sugar production in Louisiana for FY 2000 is estimated at 1.680 million tons. NASS estimates sugarcane for sugar at a record 14.225 million tons and area harvested for sugar at a record 435,000 acres, implying a yield of 32.7 tons per acre. This year's harvest campaign ended in January with actual sugar production from October 1999 through January 2000 equaling 1.620 million STRV. It is expected that 60,000 STRV of sugar from sugarcane to be harvested for FY 2001 will be produced in September 2000 and, therefore, be counted in the total for FY 2000. Cane sugar production in Texas is estimated at 104,680 STRV. NASS estimates sugarcane for sugar at 955,000 tons and acreage harvested at 28,000 acres, implying a yield of 34.1 tons per acre. The harvest ended in late February. Sugar yield is estimated at 3.74 tons per acre, a record; and the recovery rate is estimated at 10.96 percent (or 219 pounds per ton), also a record. Cane sugar production in Hawaii for FY 2000 is estimated at 320,000 STRV. NASS estimates calendar year 2000 sugarcane for sugar and seed at 35,400 acres, which are 1,900 acres fewer than the previous year. Actual sugar production from October 1999 through July 2000 has totaled 251,290 STRV, or about 86 percent of the corresponding to-date amount for the previous year. Low prices, low yields, and cash shortages have most seriously affected AMFAC/JMB Hawaii Inc.'s ability to produce sugar for this year and next (see below). Cane sugar production in Puerto Rico is estimated at 4,240 STRV. The harvest season started in March and concluded in May. Only one plant operated this year because of hurricane damage to the other. Imports On November 2, 1999, the raw sugar tariff-rate quota (TRQ) was set at 1.501 million STRV, but only 1.251 million STRV were made available to the office of the U.S. Trade Representative (USTR) for allocation, with the remainder held in reserve, to be made available to the USTR for allocation at the discretion of the USDA. As of September 5, 2000, total raw TRQ sugar amounting to 885,267 STRV had entered, or about 80 percent of the amount projected to enter for the fiscal year. The refined sugar TRQ, announced on October 1, 1999, was set at 38,580 STRV, after netting out Mexico's TRQ allocation under the side-letter agreement to the North American Free Trade Agreement (NAFTA). As of September 5, 2000, total refined TRQ sugar amounting to 34,534 STRV had entered, or about 90 percent of the amount projected to enter for the fiscal year. As explained in the May 2000 edition of the Sugar and Sweetener Situation and Outlook Yearbook, the USDA announced on February 29, 2000, that it would accept from the C&H Sugar Company Certificates for Quota Eligibility (CQE) issued by any certified authority under the FY 2000 raw sugar TRQ. The CQE would be accepted in lieu of required sugar exports during FY 2000 by the company in order to comply with the removal of the 100,000 metric tons, raw value (MTRV) imported by the company under the Refined Sugar Re-export Program. The expected level of raw and refined sugar TRQ imports for FY 2000 is now estimated at 1.112 million STRV. CQE surrendered to-date total 121,251 STRV, leaving the raw sugar TRQ shortfall at 57,000 STRV. CQE in the amounts shown from the following countries have been accepted: St. Kitts, 8,000 STRV; Jamaica, 12,769 STRV; Peru, 23,585 STRV; Malawi, 11,350 STRV; Bolivia, 2,149 STRV; Philippines, 51,032 STRV; India, 9,075 STRV; and Congo, 3,291 STRV. Other imports for FY 2000 are estimated at 523,000 STRV. Most of these imports, 390,000 STRV, enter under special programs: the Refined Sugar Re-export Program, the Sugar-Containing Products Re-export Programs, and the Polyhydric Alcohol Program. Sugar derived from sugar syrups entering under U.S. Harmonized Tariff System No.17029040 is estimated at 125,000 STRV. Monthly sugar syrup imports have been steady through June and are expected to maintain the established pace. High-tier tariff imports are estimated at 8,000 STRV. Most of the high-tier tariff imports have entered for retail sale in areas close to the Mexican border. Deliveries Total deliveries for FY 2000 are estimated in the September 2000 WASDE at 10.25 million STRV. As of September 12, 2000, USDA data showed deliveries through the end of July at 8.365 million STRV, about 1.7 percent higher than last year through July. However, immediately after the release of the September WASDE, it was discovered that beet sugar processors had inadvertently recorded sales of 76,500 tons of refined sugar to the Commodity Credit Corporation (CCC) as domestic human consumption deliveries. June deliveries in the Sweetener Market Data (SMD) that the USDA uses for analysis were, therefore, overstated by 81,855 STRV. After adjustment for the data reporting error, deliveries for October to July totaled 8.283 million STRV, about 1.5 percent below what was expected for that period. If deliveries for August and September are not higher than expected, then the current FY 2000 estimate may be overstated by some 50,000 to 75,000 STRV. Exports U.S. sugar exports are comprised of exports under the Refined Sugar Re-export Program and are currently estimated at 125,000 STRV. Monthly USDA estimates of export activity published in the WASDE have reflected expected changes in real export activity and adjustments made due to the surrender of CQE by the C&H Sugar Company. In the October 1999 WASDE, USDA had projected sugar exports at 175,000 STRV, an amount equal to what it was projecting for imports under the Refined Sugar Re-export Program. On October 26, 1999 USDA extended a waiver to C&H Sugar Company, Inc. that allowed it to import an additional 50,000 metric tons, raw value (MTRV) over and above its original re-export license of 50,000 MTRV. The waiver also extended the period over which an equivalent quantity of refined sugar had to be re-exported from the standard 90 days to 5 years. Because it had been assumed that C&H would import 25,000 STRV under its original license and then re-export the equivalent sugar in raw value under one of the re-export programs within the fiscal year, the USDA increased, in the December 1999 WASDE, projected non-TRQ imports by the additional 75,000 STRV to reflect the effect of the October waiver, but made no corresponding adjustments to export projections for FY 2000, given the 5-year period permitted for re-export. On December 29, 1999, the USDA specified that the re-export period granted in the original waiver be reduced to 180 days. The USDA increased its projection of sugar exports under the Refined Sugar Re-export Program from 175,000 to 250,000 STRV in the January 2000 WASDE. On February 29, 2000, the USDA extended the re-export period by an additional 30 days, and stated that the USDA would accept CQE in lieu of required sugar exports during FY 2000 by the company, as explained above. As reported in the May edition of the Sugar and Sweetener Situation and Outlook Yearbook, the first set of CQE totaling 20,770 STRV were accepted by USDA in lieu of imports under the raw sugar TRQ. This transaction reduced the exports estimate to 229,000 in the May 2000 WASDE. Subsequently, additional CQE totaling 100,481 STRV have been accepted by USDA. A portion of this CQE surrender equaling 54,230 STRV were applied against the balance of exports required by the C&H Sugar Company. This action alone would have reduced the exports estimate back to the original 175,000 STRV. However, the actual level of sugar exports has been lower than the levels originally anticipated through July. Downward pace-to-date adjustments were made in August (25,000 STRV) and in September (25,000 STRV), leaving the current exports estimate at 125,000 STRV. Ending Stocks Ending stocks are currently estimated at 1.934 million STRV, indicating an ending stocks-to-use ratio of 18.6 percent. Sugar stocks held by the Commodity Credit Corporation (CCC) are estimated at 297,000 STRV. This amount represents CCC purchases in June of 141,240 STRV, July forfeitures of 44,940 STRV, and August forfeitures of 110,469 STRV. Beet sugar comprises 83 percent of the total CCC sugar inventory. Policy Developments On August 1, 2000, USDA announced the Payment-in-Kind (PIK) Diversion Program to help sugarbeet and sugarcane farmers deal with low prices caused by an excess of domestic sugar. The farmers are offered the choice of not harvesting some of their crop in exchange for sugar held by the CCC. Farmers are limited to $20,000 in PIK Diversion payments. The PIK Diversion program is authorized under the Cost Reduction Options of the Food Security Act of 1985. On August 17, USDA announced a 2-week sign-up period beginning August 21 for the PIK Diversion program. By reducing this year's harvest, the PIK Diversion program will help alleviate sugar overproduction, reduce Federal expenditures by reducing probable crop loans forfeitures in FY 2001, and reduce Government storage expenditures. The program is limited by the quantity of sugar in CCC stocks. As of September 12, 2000, the CCC is holding an inventory of about 297,000 STRV of sugar, an amount equivalent to 3.3 percent of the total sugar production estimated for FY 2000. The inventory includes the 132,000 tons, actual weight (or 141,240 STRV) purchased in June in addition to the total sugar forfeited. The amount of sugar available for the PIK Diversion program is likely to increase in October as sugar pledged as collateral for CCC loans is forfeited. Growers put in bids as to how many tons of refined sugar they would accept from Government stocks in return for not harvesting a certain number of acres, based upon their average sugar production over the past 3 years, which determines the bid cap. USDA estimates that growers will save around $100 per acre in harvesting costs, and so would be prepared to accept less CCC sugar in payment than they would have produced. Therefore, the actual reduction in current CCC stocks as the result of the PIK Diversion program could amount to somewhat less than the reduction in next year's production. USDA initially hoped to reduce CCC stocks by as much as 350,000 tons through the PIK Diversion program. The CCC values its sugar at around 19 cents per pound or less depending on the region, and calculates that an individual grower could receive up to 52.6 tons of sugar (the equivalent of 18.1 acres of production) because of PIK's $20,000 payment limitation. The beet processing companies received the growers' bids and turned them over to the USDA's Farm Service Agency (FSA) on September 5, with notification of acceptance of bids due by September 15. The CCC will rank the bids on the basis of the bid amount as a percentage of the bid cap for those acres, with the lowest percentages to be selected first. Bids that effectively request more sugar than would be produced from diverted acreage will be rejected. In-kind payments will be made first with sugar stored in the region and by processor, with whom the grower is contracted, thereafter in-kind payments will be made with sugar stored with other processors and in other regions. Title transfer of the sugar will be made between October 1 and December 31, 2000. Preliminary reports indicate that about 100,000 acres of sugarbeets were signed up under the PIK Diversion Program during the August 21-September 1 sign-up period. Prices The #14 November futures prices strengthened to 19 cents per pound on August 29, 1.6 cents above a month earlier, but 2.24 cents below a year ago. The USDA announcement of the PIK Diversion Program, the breakdown in U.S.-Mexico sweetener negotiations, the possibility of substantial loan forfeitures from the 1999 crop, and uncertainty about FY 2001 U.S. sugar production have boosted futures prices in the past month. However, futures prices are likely to weaken in upcoming months due to expectations for the release of Government inventory of sugar into the market, higher FY 2001 beginning stocks, ongoing sugar syrup imports, larger FY 2001 sugar imports from Mexico, uncertainty about U.S. sugar deliveries, and the likelihood of continued high U.S. sugar carryover stocks in FY 2001. The world market price gained another cent during August, with the spot price averaging 11.14 cents per pound, the highest monthly average since January 1998. It reached its highest point at 11.60 cents per pound on August 3, and managed to stay above the 11-cent level for most of the rest of the month. Some observers believe that the market has peaked, but that its underlying strength will keep it close to its present levels for the next few months. Forecast for FY 2001 Production NASS forecast sugarbeet area planted for FY 2001 at 1.561 million acres and sugarbeet area harvested at 1.504 million. The NASS acreage harvest forecast decreased 22,600 acres from June to August, reflecting large forecast acreage losses in Nebraska (10,600 acres), Michigan (7,000 acres), and Colorado (6,200 acres). NASS forecasts sugarbeet production at 34.299 million tons, implying a yield of 35.7 tons per acre. In its forecast, NASS assumes that the California spring harvest in areas where beets are processed by plants in Woodland and Tracy will not take place. It reduced forecasts for California acreage planted and harvested by 9,000 acres, reflecting the net effect of no spring harvest and acreage adjustments in other areas. Normally at this time of year, the Interagency Sugar Estimates Committee relies on NASS sugarbeet yield forecasts in projecting sugar per acre at the national level. The sugar yield projection is multiplied by the NASS forecast of acreage harvested to project beet sugar production. This analysis would suggest a sugar yield of 3.18 tons per acre, implying total beet sugar production of 4.780 million STRV. However, it now seems certain that the California beet processing plants in Woodland and Tracy will be out of operation the rest of 2001. The Committee projects that an additional 29,000 acres will be lost for sugarbeet production in California in FY 2001. Applying the 1997-99 average sugar yield for these areas of 3.8 tons per acre, beet sugar production should be reduced 110,000 STRV beyond the projected level using the NASS sugarbeet forecasts. Therefore, U.S. beet sugar production is currently projected at 4.670 million STRV. Cane sugar production for FY 2001 is projected at 4.233 million STRV, about 3.6 percent above the estimated total for FY 2000. Production increases in Florida, Texas, and Puerto Rico are expected to more than offset declines in Louisiana and Hawaii. NASS forecasts Florida sugarcane acreage harvested for sugar and seed at 454,000 acres, a decrease of 6,000 acres. Assuming about 16,800 of those acres are for seed use, and based on the NASS yield forecast of 38.0 tons per acre, sugarcane for sugar production is projected at about 16.6 million tons, about 1.0 million than more than last year. Technological improvements and the currently forecasted sugarcane yield imply a sugar per acre yield of 4.79 tons. This level is greater than last year's 4.46 tons per acre but, if realized, would be the second highest level ever attained behind the 5.00 tons per acre in FY 1999. Florida sugar production is, therefore, projected at 2.100 million STRV. The projected recovery rate is slightly less than 253 pounds, raw value, per ton of cane. NASS forecasts Louisiana sugarcane acreage harvested for sugar and seed at 490,000 acres, an increase of 35,000 acres over last year. This expansion has occurred in northern and western producing areas and has been induced by continuing low prices for alternative crops such as soybeans, corn, and rice. Like last year, Louisiana has more sugarcane acreage than Florida - 25,000 acres. NASS forecasts Louisiana sugarcane yields of 31.0 tons per acre, a decrease of 1.7 tons per acre from last year. Crop growing conditions have been difficult, due to a continuing lack of adequate moisture. In mid-May, NASS reported that the proportion of the sugarcane crop in good to excellent condition was 75 percent. A month later, the proportion was only 48 percent. It dropped to 43 percent by the end of August and is 37 percent as of September 12. At the other end of the spectrum, the proportion of the crop in very poor to poor condition increased from 4 percent in mid-May to 22 percent in mid-September. In spite of less than ideal conditions, yields are still forecast to be higher than any other year except for FY 2000. Part of the explanation is the continuing expansion of acreage planted with the high-yielding sugarcane variety LCP85-384. In consideration of this information, sugar yield is projected at 3.61 tons per acre, about 0.25 tons per acre less than last year's record. Assuming that 31,600 sugarcane acres are for seed (the same percentage of the total acreage as in FY 2000), Louisiana cane sugar production is projected at 1.650 million STRV. NASS forecasts Texas sugarcane acreage at 47,000 acres, up 16,000 acres, or 34 percent, from last year. Yield is forecast at 31.9 tons per acre, down from 34.1 last year as lack of moisture has been a problem. Assuming that sugarcane for seed comprises 1.84 percent of total acreage (the same percentage as FY 1999), the sugarcane for sugar crop would be 1.472 million tons, an increase of 517,000 tons over last year. Sugar production is projected at 160,000 STRV, implying a recovery rate of 217.4 pounds per cane ton, slightly less than last year. Hawaii cane sugar production for FY 2001 is projected at 300,000 STRV. Unlike the other cane producing regions, the Hawaii crop year is the calendar year, meaning that the current NASS 2000 sugarcane forecasts are relevant for FY 2000 and not for FY 2001. As reported in the May 2000 Sugar and Sweetener Situation and Outlook Yearbook, AMFAC/JMB Hawaii, Inc. on Kauai announced in November 1999 that it was closing the Kekaha Sugar Mill on the western side of the island. At the same time, the company announced that sugarcane harvested from the western operations would be trucked to the eastern operations of its Lihue Plantation. In July, the company announced that it was furloughing about 100 workers and suspending planting. Next year's crop age is poor and sugar yield will be seriously affected. For this reason, FY 2001 sugar production is expected to be 20,000 tons less than the FY 2000 estimate. After the September WASDE was released, AMFAC/JMB announced that it plans to close its remaining sugar plantations and sell its 18,000 acres on Kauai. It expects all its agricultural operations on Kauai to cease by December 31, 2000. With the departure of AMFAC/JMB, Gay and Robinson as the sole sugar producer on Kauai will have to bear the entire cost of the harbor sugar-shipping infrastructure. Although Gay and Robinson has expressed interest in leasing some of the sugarcane-producing land that constitutes AMFAC/JMB's Kekaha plantation, it is not certain that this land will return to sugarcane production soon. In a separate announcement, the Hawaii Sugar and Commercial Company (HSC) indicated that it is closing its Pa'ia Mill on Maui. HSC cited depressed sugar prices and an extended drought as determining factors in the decision to close at this time. HSC will continue processing at its larger Pu'unene Mill, in which substantial investments have been made during the last 2 years. HSC is likely to further lower its unit costs as a result of the Pa'ia closing and processing expansion at Pu'unene. Puerto Rico sugar production for FY 2001 is projected at 22,500 STRV. It is expected that the two sugar mills on the island will be back in production next year. Sugarcane area is expected to expand to about 11,900 acres, with plans for as much as 300,000 tons of sugarcane. TRQ Imports On September 15, 2000, the USDA established the FY 2001 TRQ for imports of sugar at 1,360,983 metric tons, raw value (MTRV), or 1,500,227 STRV. The total includes a quantity for raw sugar of 1,117,195 MTRV, the minimum level to which the United States is committed under the World Trade Organization (WTO); a quantity for refined sugar of 38,000 MTRV; a required quantity of 105,788 MTRV for Mexico under the NAFTA Side-Letter Agreement; and a reserve of 100,000 MTRV, to be allocated, if needed, contingent on developments in international markets. USDA has made all except the contingent quantity available to the U.S. Trade Representative (USTR) for allocation for import into the U.S. customs territory. Pursuant to the Harmonized Tariff Schedule of the United States, USDA has established the FY 2001 raw sugar TRQ at 1,222,983 MTRV, or 1,348,108 STRV. (This is the sum of the WTO minimum access quantity and the additional quantity required for Mexico.) CQE will be issued to allow Brazil, the Dominican Republic, and the Philippines to ship up to 25 percent of each country's initial allocation at the low-tier tariff during each quarter of FY 2001. Argentina, Australia, Guatemala, and Peru will be allowed to ship up to 50 percent of their initial allocations in the first 6 months of FY 2001. Allocations not entered with the U.S. Customs Service during any quarter or 6-month period may be entered in any subsequent period. The shipping pattern for Mexico will be determined at a later date. For all other countries, CQE corresponding to each country's allocation may be entered at the low-tier tariff at any time during the fiscal year. USDA established the FY 2001 refined sugar TRQ at 143,788 MTRV, or 158,499 STRV, for which the sucrose content, by weight, in the drystate, must have a polarimeter reading of 99.5 degrees or more. (This is the sum of the 38,000 MTRV of refined sugar and the additional quantity required for Mexico; i.e., 105,788 MTRV.) The refined sugar TRQ includes the specialty sugar allocation, a subset of the refined sugar TRQ, at 17,656 MTRV, or 19,462 STRV, which must have a polarity of at least 99.5 degrees and be accompanied by a specialty sugar certificate. Mexico's total TRQ allocation is 116,000 MTRV and is comprised of: (1) 7,258 MTRV under the WTO raw sugar minimum access commitment; (2) 2,954 MTRV of the 18,000 MTRV of refined sugar described above; and (3) a residual amount of 105,788 MTRV that can be exported either as raw or refined sugar. Under the terms of the NAFTA Side-Letter, Mexico's total allocation is equal to its net surplus production, up to a maximum of 250,000 MTRV. The net producer surplus is equal to projections of Mexico's sugar production less its projected consumption of sugar and high fructose corn syrup. Sugar production and consumption are supposed to be expressed in terms of raw value equivalents. Mexico's allocation this year is being treated differently than last year. According to the NAFTA, FY 2000 was the last year of the 25,000 MTRV limitation on the amount of net producer surplus that Mexico could export to the United States. Last year, Mexico was allocated the 25,000 MTRV, and it was specified that this amount could be exported as either raw or refined sugar; that is, the full 25,000 MTRV was included in both the refined and raw sugar TRQs. Because Mexico's share of the raw sugar WTO minimum access (7,258 MTRV) was included as part of the 25,000 MTRV, it was allowed that this amount could be shipped as refined sugar. This year the share of the WTO minimum access is not included as part of the Refined Sugar TRQ, implying that it must be exported as raw sugar. In both FY 2000 and FY 2001, Mexico was allocated 2,954 MTRV under the refined sugar TRQ. Last year, this amount was in addition to the NAFTA allocation of the lesser of Mexico's net surplus production or 25,000 MTRV. This year, this amount is included as part of the NAFTA Side-Letter allocation of the lesser of Mexico's net surplus production or 250,000 MTRV. Non-TRQ Imports On September 7, 2000, the USDA announced that it had granted the C&H Sugar Company a Settlement Waiver that was meant to facilitate the company's removal of 100,000 tons of sugar from the U.S. market (see above). The announcement (PR 0342-00) stated that the company will be permitted to import up to 50,000 tons of raw sugar during each of the next two fiscal years, provided it first surrenders CQE to the USDA for an equivalent amount of sugar. The Settlement Waiver requires that the supply of sugar to the U.S. market not increase as a result. Other imports for FY 2001 in the September 2000 WASDE are projected to total 515,000 STRV, including 365,000 STRV under the combined Refined Sugar Re-export Program, the Sugar-Containing Products Program, and the Polyhydric Alcohol Program. This projection includes the 50,000 tons granted to the C&H Sugar Company for FY 2001 as a result of the Settlement Waiver. Sugar syrups imports under HTS 17029040 are expected to be at the same levels as in FY 2000. The USDA projects an increase in U.S. sugar supply as a result of sugar syrup imports of 125,000 STRV, the same as FY 2000. High-tier tariff sugar imports for FY 2001 are projected to increase to 25,000 STRV. One component of these high-tier tariff imports is border shipments meant for direct retail sale in areas close to the Mexican border. Another component is expected imports from refined sugar presently being held in U.S. Customs bond. It is likely that this sugar will enter the United States after January 1, 2001, when the high-tier NAFTA tariff for refined sugar drops 1.60 cents to 11.21 cents a pound. Exports and Deliveries Sugar exports reflect shipments to foreign destinations made under the Refined Sugar Re-export Program. These exports for FY 2001 are projected at 175,000 STRV. Deliveries to domestic food and other products manufacturers under the Sugar-Containing Products Re-export Program are projected at 125,000 STRV. Deliveries for the Polyhydric Alcohol Program are projected at 15,000 STRV. Total deliveries for FY 2001 are projected at 10.385 million STRV. After netting out deliveries made for the Sugar-Containing Products and Polyhydric Alcohol Programs, along with deliveries for livestock feeding (20,000 STRV), domestic food and beverage deliveries are projected at 10.225 million, about 1 percent higher than FY 2000. Projected ending stocks are the difference between projected total supply and projected total use. Total supply is constituted by beginning stocks, production, and imports. Total use is constituted by exports and deliveries. The USDA will not project FY 2001 ending stocks until the October WASDE, when more details about the PIK Diversion Program, possible TRQ shortfalls, and CQE surrenders become known. Calculation of Real Price Indices for U.S. Sugar Crops Tables A-1 through A-9 detail information necessary to construct real price indices for U.S. sugar crops. Real sugar price indices take into account alternatives to sugar crops. The method to calculate appropriate indices uses sugar crop prices and alternative crop pricing information weighted by the proportion of acreage used to produce alternative crops where sugar crops are grown. These indices are useful for economic analysis of producers' acreage allocation decisions and are used to estimate own-price sugar crop acreage allocation elasticities. These elasticities constitute a vital part of the U.S. Department of Agriculture's (USDA) sugar baseline model that projects U.S. sugar supply and use out through a 10-year period in the future. Organizing information about alternative crops to sugarbeets and sugarcane on a county-basis is a first step in the calculation process. The primary source of data is USDA's National Agricultural Statistics Service (NASS). NASS reports county-level sugar crop acreage each year and publishes a comprehensive array of county-level data in its Census of Agriculture. Tables A-1 and A-2 show acreage information for sugarbeets and sugarcane, respectively. For convenience, the data are aggregated from the county-level and are presented at the NASS-reporting district level. Data include the number of sugar crop operators, harvested cropland, sugar crop acreage, the proportion of sugar crop acreage of the total, and the chief alternative crops. ------1 ------------ 1 Harvested cropland at the NASS District reporting level includes acreage only of those counties in which a sugar crop is grown. ------------ The next step is to calculate the weights used to derive price indices of the sugar crop alternatives. These weights are derived from data published in the Census of Agriculture at the county level. In order to get a representative weighting, data from the last three Census years (1997, 1992, and 1987) are used to calculate the weights. These data are also aggregated to the NASS District reporting level, to the State level, and finally to the national level in order to calculate weights corresponding to each of those levels. State-level and national-level weights are shown in Table A-3 for sugarbeets and Table A-4 for sugarcane. National price indices for alternative crops are published by NASS in July in Agricultural Prices: Summary. Although price indices at a lower level of aggregation than the national level are preferable, they are not generally available and would not match up with the projected price indices published as part of the USDA baseline. Table A-5 shows prices received, indexed so that the 1990-92 average equals 100, for food gains, feed grains and hay, cotton, oil-bearing crops, fruit and nuts, commercial vegetables, and potatoes and dry beans. For each sugar crop regional grouping, the weights for sugarbeets from Table A-3 and the weights for sugarcane from Table A-4 are used to calculate alternative crop indices. Unit sugar crop values are reported yearly by NASS on a State-level and national basis. The unit value, or price, is a calculated number representing the producers' share of sugar sales and byproduct credits by the processor divided by the tonnage of the sugar crop. Unlike other agricultural commodities, sugar crops are perishable and must be processed soon after harvest. Because they are perishable, sugar crops cannot be traded; therefore, their unit values are subject to more variation across regions than unit values for other agricultural commodities. Tables A-6 and A-7 show State-level and national sugarbeet and sugarcane prices, respectively. In order to calculate real sugar crop price indices, the nominal sugar crop prices in tables A-6 and A-7 are indexed such that the weighted average value for 1990-92 are equal to 100. These nominal values are then divided by the corresponding alternative crop price indices described above. The sugarbeet price indices are shown in Table A-8, and the sugarcane price indices are shown in Table A-9. Figures A-1 and A-2 compare national nominal and real price indices from 1972 through 1999 for sugarbeets and sugarcane, respectively. Nominal and real tracked closely until about 1982. Since 1982, the nominal and real price series have been less correlated. Of particular note has been the increase in real sugar crop prices since 1996, a period where there have been increases in both sugarbeet and sugarcane area planted. Nominal values, in contrast, have fallen over the same period. Tables A-10 (sugarbeets) and A-11 (sugarcane) show estimated relationships between real sugar crop price indices and area planted for sugarbeets and area harvested for sugarcane. A regression approach is used that models area in logarithmic form as a function of lagged real prices in logarithmic form, along with trend relationships. Except for sugarcane in Florida, the results show statistically strong relationships between area planted or harvested and the lagged real price indices. In about half of all cases shown, real prices lagged more than a single year are statistically related to area planted. AutoFAX Access to Sugar-Related Data (ERS) From your fax machine, call (202) 694-5700 and listen to voice prompts to have the following documents automatically downloaded to your fax machine. You may request up to three documents in one phone call. Directory Identification Numbers and Titles: Sugar and Sweeteners: 12626 World Agricultural Supply and Demand Estimates for Sugar 12627 3 pages (1) Wholesale refined beet sugar prices, Midwest market, 1960-present, monthly, quarterly, annual, fiscal (2) U.S. raw sugar price, duty-fee paid, New York, 1960-present, monthly, quarterly, annual, fiscal (3) U.S. retail refined sugar prices, 1975-present, monthly, quarterly, annual 12628 5 pages (1) Wholesale list prices for HFCS-42, Midwest market, 1975-1995, monthly, quarterly, annual, fiscal (2) Wholesale list prices for HFCS-55, Midwest market, 1981-1995, monthly, quarterly, annual, fiscal (3) Wholesale list prices for glucose corn syrup, Midwest market, 1975-present, monthly, quarterly, annual, fiscal (4) Wholesale list prices for dextrose, Midwest market, 1975-present, monthly, quarterly, annual, fiscal (5) U.S. producer price index for HFCS and sugar, monthly, annual, 1986-present 12629 2 pages (1) World raw sugar prices, 1960-present, monthly, quarterly, annual, fiscal (2) World refined sugar prices, 1980-present, monthly, quarterly, annual, fiscal 12630 2 pages (1) U.S. and world sugar prices, 1990-present, monthly, quarterly, annual, fiscal 12631 3 pages (1) Net cost of corn starch to U.S. wet-millers, Midwest markets, 1985-present 12632 3 pages (1) U.S. sugar (including Puerto Rico) supply and use, fiscal years, 1980/81-present 12633 10 pages (1) The Beet Sugar Industry of Minnesota and North Dakota: Current Situation and Prospects, by Ron Lord, September 1994 Sugar and Sweetener Situation and Outlook Report 12634 Text Boxes, Graphs, and Tables, September 1997 S&O Report, 10 pages "HFCS Trade Dispute With Mexico," by Jacqueline Salsgiver; "Origin of the U.S. Sugar Import Tariff-Rate Quota Shares," by Nydia Suarez; and "Changing Structure of the U.S. Refined Sugar Market," by Ron Lord and Robert Barry, September 1997 Sugar and Sweetener Situation and Outlook Report For more information on specialty crops, contact the following subject matter specialists: Sugar & Sweetener: Fannye Jolly, (202) 694-5249 Vegetables: Gary Lucier (202) 694-5253 Tobacco: Tom Capehart (202) 694-5311 Fruit & Tree Nuts: Susan Pollack (202)694-5251 & Agnes Perez (202)694-5255 Industrial Uses and Alternative Agriculture: Lewrene Glaser (202) 694-5246 Internet Access to Sugar-Related Data Home Pages Main Data Directory: http://usda.mannlib.cornell.edu/cgi-usda/agency.cgi?ers U.S. Department of Agriculture (USDA): http://www.usda.gov Economic Research Service (ERS): http://www.ers.usda.gov Office of the Chief Economist, USDA: http://www.usda.gov/agency/oce/ World Agricultural Outlook Board (WAOB): http://www.usda.gov/agency/oce/waob/waob.htm National Agricultural Statistics Service (NASS): http://www.usda.gov/nass/ Foreign Agricultural Service (FAS): http://www.fas.usda.gov/ Reports ERS Sugar & Sweetener Situation and Outlook Reports (including text of Reports): http://usda.mannlib.cornell.edu/reports/erssor/specialty/sss-bb ERS Sugar Yearbook Data (May 2000): http://usda.mannlib.cornell.edu/data-sets/specialty/89019/ Sugar Statistical Compendium (1991): http://usda.mannlib.cornell.edu/data-sets/specialty/91006/ U.S. Corn Sweetener Statistical Compendium (1993): http://usda.mannlib.cornell.edu/data-sets/specialty/94002/ Farm Sector Cost of Production: Sugarbeets: Analysis, 1997-98: http://www.econ.ag.gov/briefing/farmincome/car/beets2.htm Data, 1981-98: http://www.econ.ag.gov/briefing/fbe/farmincome/beets3.htm Sugarcane: Analysis, 1995-96: http://www.econ.ag.gov/briefing/farmincome/car/cane2.htm Data, 1981-96: http://www.econ.ag.gov/briefing/farmincome/car/cane3.htm World Agriculture Supply and Demand Estimates Report (WASDE): http://www.usda.gov/oce/waob/wasde/wasde.htm February 2000 Outlook Forum: http://www.usda.gov/agency/oce/waob/agforum.htm Sugar: U.S. Sugar Re-export Programs, Foreign Agricultural Service (FAS): http://www.fas.usda.gov/htp/sugar/sugarpg.html Foreign Agricultural Service Report from Foreign Countries (includes sugar reports): http://www.fas.usda.gov/scriptsw/attacherep/default.asp Sweetener Market Data, Farm Service Agency (FSA): http://www.fsa.usda.gov/ao/epas/dsa/sugar/coversu.htm END_OF_FILE