SUGAR AND SWEETENERS OUTLOOK -- SUMMARY September 23, 2003 September 2003, ERS-SSS-238s 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. ----------------------------------------------------------------------------- USDA Sets 2003 Crop Year Sugar Marketing Allotments Under authority granted in the Farm Security and Rural Investment Act of 2002, the U.S. Department of Agriculture (USDA) announced on August 13, 2003, details of the operation of the sugar program for the 2003 crop year. USDA set the Overall Allotment Quantity (OAQ) for sugar marketing allotments at 8,550,000 short tons, raw value (STRV). The resulting sector allocations for the 2003 crop are: o Beet sugar: 4.647 million STRV o Cane sugar: 3.903 million STRV Total 8.550 million STRV By statute, the OAQ of sugar for a crop year is determined by subtracting the sum of 1.532 million STRV and carryin stocks of sugar (including inventory owned by the Commodity Credit Corporation) from USDA's estimate of sugar consumption and reasonable carryover stocks at the end of the crop year. The OAQ is divided between refined beet sugar at 54.35 percent of the overall quantity and raw cane sugar at 45.65 percent of the overall quantity. According to the formula, the estimated sugar consumption of 9.85 million STRV as reported in USDA's August 12, 2003, World Agricultural Supply and Demand Estimates report (WASDE) and implied reasonable carryout of 1.835 million STRV (17.97 percent of total use of 10.21 million STRV) are added. Subtracted from this total are the estimated carryin of 1.603 million STRV and the statutory 1.532 million STRV. Also on August 13, 2003, USDA established the fiscal year (FY) 2004 tariff-rate quota (TRQ) for imports of raw and refined sugar into the United States. USDA set the FY 2004 raw sugar TRQ at 1,117,195 metric tons raw value (MTRV), or 1,231,497 STRV. This is the amount to which the United States is committed under the WTO Uruguay Round Agreement. Certificates for Quota Eligibility (CQEs) will be issued to allow Brazil, the Dominican Republic, and the Philippines to ship up to 25 percent of each country's allocation at the low-tier tariff during each quarter of FY 2004. 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 2004. Allocations not entered with the U.S. Customs Service during any quarter or 6-month period may be entered in any subsequent period. For all other countries, CQEs corresponding to each country's allocation may be entered at the low-tier tariff at any time during the fiscal year. The USDA set the FY 2004 refined sugar TRQ at 39,000 MTRV, or 42,990 STRV, for which the sucrose content, by weight, in the dry state, must have a polarimeter reading of 99.5 degrees or more. This amount includes 22,000 metric tons raw value, the minimum level to which the United States is committed under the Uruguay Round Agreement, and an additional 17,000 metric tons for specialty sugars. On September 11, 2003, USDA released its latest supply and use estimates for FY 2003 and projections for FY 2004 in the WASDE. Contrary to previous practice, USDA's Interagency Commodity Estimates Committee (ICEC) for sugar no longer estimates production from the current year's crop or makes projections for sugar production from the out-year crop; rather, USDA accepts the production estimates and projections provided by beet sugar processors and cane sugar millers to USDA's Farm Service Agency (FSA). Accordingly, sugar production for FY 2003 is estimated at 8.386 million STRV. It is comprised of 4.397 million STRV of beet sugar and 3.989 million of raw cane sugar. Sugar production for FY 2004 is projected at 8.812 million STRV. It is comprised of 4.651 million STRV of beet sugar and 4.161 million STRV of raw cane sugar. As of September 2, 2003, raw sugar FY 2003 TRQ imports have totaled 911,291 MTRV. This amount is about 82 percent of the total allocation of 1.117 million MTRV. Refined sugar FY 2003 TRQ imports have totaled 32,903 MTRV. Mexico still has 2,646 MTRV of its refined sugar TRQ allocation to fill, and Canada has 1,451 MTRV of its quota allocation to fill. After adjustments for expected shortfall (75,000 STRV), rollovers from FY 2002 resulting from U.S. Customs Service polarity adjustments (negative adjustment of 7,356 STRV), and late entries of FY 2002 TRQ sugar (24,124 STRV), the FY 2003 TRQ is estimated at 1.214 million STRV. The FY 2004 sugar TRQ is projected at 1.224 million STRV, assuming a shortfall of 50,000 STRV. Other program sugar imports outside the sugar TRQ for FY 2003 are estimated to total 440,000 STRV, and are projected to total 325,000 STRV for FY 2004. Other USDA import programs include the Refined Sugar Re-export Program, the Sugar-Containing Products Program, and the Polyhydric Alcohol Program. Non-program imports for FY 2003 are estimated at 25,000 STRV. This total includes 17,000 STRV of sugar contained in molasses imported for the commercial extraction of refined sugar (HTS 1703.10.30), and high-tier tariff imports at 8,000 STRV. Non-program imports for FY 2004 are projected to total 35,000 STRV, comprised of 25,000 STRV of sugar contained in molasses and 10,000 STRV of high-tier tariff imports. USDA estimates FY 2003 sugar exports at 140,000 STRV and projects FY 2004 exports at 150,000 STRV. These exports occur under the Refined Sugar Re-export Program. USDA also estimates that deliveries made to domestic food and beverage manufacturers under the Sugar-Containing Products Re-export Program will total 190,000 STRV in FY 2003 and a projected 200,000 STRV in FY 2004. Based on the pace through July 2003, USDA estimates deliveries for domestic food and beverage use for FY 2003 at 9.5 million STRV. Based on its analysis, the sugar ICEC concludes that beet sugar processors sold about 200,000 STRV of refined sugar in September 2002 before FY 2003 marketing allotments became effective. This is sugar that would have otherwise been sold and recorded as deliveries in FY 2003 rather than FY 2002. This implies that equilibrium FY 2003 sugar deliveries should be 200,000 STRV higher than reflected in actual deliveries, that is, 9.7 million STRV instead of the WASDE 9.5 million STRV. USDA projects FY 2004 deliveries for domestic food and beverage use at 9.7 million STRV. This total implies no growth in deliveries over the previous year. USDA estimates FY 2003 cane sector shipments less receipts at -200,000 STRV; this figure is shown in the September 2003 WASDE under the Miscellaneous Uses category. This estimate is based on sugar ICEC analysis that concludes that some sugar millers shipped 200,000 STRV of raw cane sugar in FY 2002 in order to avoid marketing allotments that became effective in October 2002. USDA, therefore, has predicted that these cane miller shipments will show up as cane refiner receipts during FY 2003. Through July 2003, cane refiner net receipts have exceeded cane miller net shipments by more than 178,000 STRV, an amount close to that predicted. The USDA has made no projection for the FY 2004 Miscellaneous Uses category as of the September 2003 WASDE. After taking into account all supply and use estimates, USDA estimates FY 2003 ending stocks at 1.691 million STRV, implying an ending stocks-to-use ratio of 17.5 percent. FY 2003 ending stocks represent FY 2004 beginning stocks. Consideration of all other FY 2004 supply and use projections implies ending stocks of 2.012 million STRV. The implied ending stocks-to-use ratio of 20.0 percent, if realized, would be close to the over 20-percent levels of FY 2000 and FY 2001.