SUGAR AND SWEETENERS OUTLOOK -- SUMMARY May 23, 2002 May 2002, ERS-SSS-234 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The complete report will be available electronically about 1 week following this summary release. New Farm Act Requires Operation of U.S. Sugar Program at No Cost To the Government The Farm Security and Rural Investment Act of 2002 ('2002 Farm Act') requires the U.S. Department of Agriculture (USDA), to the maximum extent possible, to operate the U.S. nonrecourse sugar loan program at no cost to the Federal Government; that is, to operate the program so as to avoid the forfeiture of sugar to the Commodity Credit Corporation (CCC). To facilitate this, the 2002 Farm Act gives USDA the authority to accept bids from sugarcane and sugarbeet processors to obtain raw cane sugar or refined beet sugar in CCC inventory in exchange for reduced production of raw cane sugar or refined beet sugar. Additionally, USDA is required to establish flexible marketing allotments for sugar. The overall quantity of sugar to be allotted for a crop year is determined by subtracting the sum of 1.532 million short tons, raw value (STRV) and carry-in stocks of sugar (including CCC inventory) from USDA's estimate of sugar consumption and reasonable carryover stocks at the end of the crop year. USDA's authority to operate sugar marketing allotments is suspended if USDA estimates that sugar import levels for human consumption, not including the Re- export Programs, will exceed 1.532 million STRV such that the overall allotment quantity would have to be reduced. Other provisions of the 2002 Farm Act specify USDA to continue to make nonrecourse loans available to processors of domestically grown sugarcane at 18 cents per pound and to processors of domestically grown sugarbeets at 22.9 cents per pound for refined sugar. The 2002 Farm Act allows processors to obtain loans for 'in-process' sugar and syrups at 80 percent of the loan rate. There are no penalties for forfeiting sugar to the CCC, and the processor cannot be required to notify USDA of the intention to forfeit the sugar under loan. Beet sugar production for FY 2003 is projected at 4.5 million STRV, and aggregate cane sugar production in Florida, Louisiana, Texas, Hawaii, and Puerto Rico for FY 2003 is projected at 4.25 million STRV. Total U.S. sugar production projections for FY 2003 are 746,000 STRV more than production estimates for FY 2002. Deliveries for domestic food and beverage use for FY 2003 are projected at 9.9 million STRV, an increase of 100,000 STRV (1 percent) over FY 2002. USDA has not yet announced tariff-rate quotas (TRQs) for imports of refined and raw sugar. Other program sugar imports outside the sugar TRQ for FY 2003 are projected to total 260,000 STRV. Non- program imports for FY 2003 are projected at 60,000 STRV, including 50,000 STRV of sugar contained in molasses imported for the commercial extraction of refined sugar (HTS 1703.10.30). High-tier tariff imports from Mexico are projected at 10,000 STRV. On April 22, 2002, Mexico's Secretariat of Economy announced the establishment of a new TRQ for U.S. high fructose corn syrup (HFCS) imports. The in-quota amount is set equal to 148,000 metric tons for the October-September marketing year 2002. Mexico justified its reclassification of the United States from North American Free Trade Agreement (NAFTA) preferential trading partner to Most Favored Nation (MFN) by claiming that the United States was not fulfilling its NAFTA obligations to allow Mexico's excess sugar into the U.S. market. USDA's Foreign Agricultural Service at the U.S. Embassy in Mexico City estimates Mexican sugar production for 2001/2002 at 5.393 million metric tons, raw value (MTRV), reflecting an upward revision of 301,000 MTRV from the USDA forecast made in November 2001. The 2002/03 production forecast for Mexico is 5.305 million MTRV, with the area for harvest forecast at 605,000 hectares. Mexico's sugar consumption for 2001/02 is estimated at 4.615 million MTRV, an upward revision of 72,000 MTRV since November 2001. That estimate could again be revised upward between 250,000 to 300,000 metric tons if beverage manufacturers continue to restrict their consumption of HFCS due to trade restrictions and market uncertainties. Mexico's sugar exports for 2001/02 are estimated at 850,000 MTRV, an increase of 320,000 MTRV over the November forecast. Although this increase partially reflects larger net production estimates, it also reflects larger than previously forecast beginning stocks. Electronic copies of the entire Sugar and Sweeteners Situation and Outlook Newsletter will be available May 30, 2002. For more information contact Stephen Haley 202-694-5247 or Nydia Suarez 202-694-5259. END_OF_FILE