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Situation and Outlook in Selected Countries
U.S. sugar production for 2001/02 is forecast at 7.65 million tons, down slightly from the previous year. Beet sugar production is forecast to decline 3.8 percent to 3.86 million tons. Cane sugar is forecast to increase by 2.6 percent to 3.8 million tons.
U.S. exports for 2000/01 are forecast at 113,000 tons, the same as last year. U.S. exports are mainly refined sugar going principally to Canada, Mexico, and Jamaica.
The 2001/02 Tariff Rate Quota (TRQ) has not been announced. For Fiscal Year 2001, the U.S. Trade Representative established a TRQ for imports of sugar at 1,360,983 tons raw value. The total includes a quantity for raw sugar of 1,117,195 tons raw value, the minimum level to which the United States is committed under the Uruguay Round Agreement; a quantity for refined sugar of 38,000 tons raw value; 105,788 tons raw value, which is the additional amount that the United States is committed to provide Mexico under the North American Free Trade Agreement (NAFTA); and 100,000 tons raw value to be allocated, if needed contingent on developments in international markets.
Mexican sugar production for 2001/02 is forecast at 5.0 million tons, assuming good weather conditions. Domestic consumption is expected to increase after several years of flat consumption. Sugar exports are forecast at 510,000 tons; however, final exports will depend on the amount of Mexicos sugar duty-free access to the U.S. sugar market under NAFTA.
The industry and the sugarcane growers have not yet set a sugar production estimate for 2001/02 (November- October) The forecast of sugar production, however, is expected to be at a conservative volume of 5.0 million tons raw value. This forecast is based on the relatively good weather experienced during the growing season. Planted sugarcane area for 2001/02 is forecast to be very similar to 2000/01 area. The domestic industrys financial problems and low international sugar prices do not allow for an increase in area planted. In fact, the industry plans to maintain the current area devoted to sugarcane. Credit to replace old cane areas is almost non-existent now that FINA (Mexican Sugar Financing Institution) has closed. Furthermore, the industry does not have credit to finance sugarcane production and has very little resources to maintain the mills and fund normal operating expenses.
The sugar industry in Mexico faces excess capacity and financial problems, as most mill owners have large debts. The industry insists that the mills increased debt (approximately 1.5 billion dollars) and inability to service that debt is due to decreased domestic sugar consumption and low international sugar prices coupled with increasing production costs. According to the industry, refined sugar production costs are on average approximately US$500/ton and standard sugar production costs are on average US$440/ton, when world sugar prices are half those amounts. These difficulties contributed to the industry's petition for antidumping protection against imports of U.S. high fructose corn syrup. In fact, several sugar mills have experienced serious financial problems since the privatization of the sugar industry in 1988-1992.
The sugar industry is requesting the Mexican government to provide a financial support program to reorganize the domestic sugar market for MY 2000/01. This support is essential to keep up with the sugar payments to the growers. During MY 1999/00 a financial assistance program was worked out with the help of Bancomext, Mexicos EXIMBANK. The Secretariats of Economy (SDE) and of Agriculture, Livestock, Rural Development, Fisheries and Food, (SAGARPA) indicated they are preparing a financial program of approximately US$350 millions to finance sugar inventories for MY 2000/01 and help the restructuring of the sugar industry in the medium and long terms. The sugarcane growers are demanding the financial program because some sugar mills in need of cash flow are selling sugar under the production costs at approximately 175 pesos/50 kg. bag (US$18.05/50kg.).
On March 30, 2001, rules to manage the Special Support Fund Program for the Investment in Sugarcane were announced. According to the announcement, this program is focused on solving the sugar cane production and productivity problems by funding the purchase of equipment and machinery to increase efficiency. The resources of this program are specifically destined to capitalize sugarcane growers and help them modernize the sugarcane harvest process. The rules of this program indicate that this direct support will be granted on a one-time basis. The federal support will consist of 10 percent of the price of the equipment per grower (up to a maximum of 20,000 pesos (US$2,062)) or for each of the members of the productive group. The implementation, operation, performance and follow up of this program will be supported by SAGARPA, 15 State Governments, State Agricultural Councils and the Countryside Alliance Trust Fund Technical Committee. Once the legal documents are signed with each of the states participating in the program, SAGARPA will publish in its Web page the support amounts agreed with each entity.
The sugar export forecast for 2001/02 is approximately 510,000 tons. This outlook, however, is tempered by the final results of actual sugar production, substitution by alternative domestic and imported sweeteners, and the amount of duty-free access Mexico will have in the U.S. sugar market under NAFTA. It is important to note that domestic sugar prices, although low, are higher than international prices. Therefore, the sugar industry considers exports as a double-edged sword they are necessary to reduce storage costs, but unprofitable due to low international prices. The sugar export estimate for MY 2000/01 was revised downward based on recent information. This estimate contemplates FY 2001 tariff-rate quotas for sugar, where Mexico was allocated 105,788 tons of quota to comply with the United States NAFTA obligation and the U.S. WTO TRQ of 7,258 tons. Mexico still believes it should have complete access for all of its excess sugar. The total amount of access of sugar to the U.S. market under NAFTA is still being debated. Negotiations between both governments are underway to agree on the shipping patterns of the allocation. The Mexican industry has been exporting excess sugar on a per mill-quota basis to prevent downturns in domestic sugar prices.
Sugarcane production for 2001/02 projected at 274.5 million tons, up from last crop, due to better weather conditions, improved crop management and higher replanting rates. Sugar production for 2000/01 is revised upward to 17 million tons, raw value, due to higher volume of sugarcane directed to sugar. Sugar production for 2001/02 is forecast at 16.75 million tons raw value. This assumes the Government of Brazil (GOB) will increase the alcohol content in the gasoline from 20 to 24 percent. Sugar exports for 2001/02 are forecast at 8.4 million tons, raw value.
The graphs below show a historical series for sugarcane production and industrial yield since 1975/76. Note that the sugarcane production forecast for 2001/02 is not likely to reach the records obtained during the 1997/98 to 1999/00 crops, due to lower area for harvest and the decline in crop management noted in the past few crops. Also note that the yield of sugar, which contributed so greatly to past production increases, has flattened out.
Total Brazilian sugar exports for 2000/01 are estimated at 7.7 million tons, raw value, up 1.5 million tons from the previous estimate. This reflects higher domestic sugar production, depressed domestic alcohol prices, and favorable prices in the international market, due primarily to the Reals devaluation against the U.S. dollar. Raw sugar exports continue to dominate the export mix. Sugar exports for 2001/02 are projected at 8.4 million tons, raw value, up 0.7 million tons from 2000/01. Final export figures will also be affected by the relationship between the international market price and the domestic price.
European Union (EU)
Marketing year 2000/01 is the first year of an overall reduction in EU sugar production quotas. This factor was taken into account by EU beet growers when they made their sowing decisions for the 2000 harvest. Total EU beet area in 2000/01 amounted to 1.815 million hectares, a 7.5 percent decrease from the previous year. Resulting beet output did not fall to the same extent because yields improved by about 2.5 percent from in 1999/2000, due to generally favorable summer crop growing conditions. In France and Germany, the two largest sugar beet producing member states, yields increased by 2 percent, and 8 percent, respectively. In the U.K., yield levels fell by 5 percent, back to "normal" levels after the record-high yields obtained in 1999/2000.
In 2001/02, total EU sugar beet area is expected to drop by 3.4 percent. Although it is still early in the growing season, it is generally forecast that yield levels will drop by about 7 percent from the previous year, falling back to "normal" levels. In France and the U.K., spring 2001 beet sowing operations have been delayed due to wet weather preventing farmers from preparing the land. If delays continue to occur, yield levels may suffer. In Germany and Scandinavia, beet sowing has reportedly been on schedule. Based on both lower area and decreased yield levels, total EU sugar output is expected to fall by 10 percent in 2001/02.
EU sugar exports to third countries consist of both subsidized and unsubsidized exports. In 1999/2000, total sugar exports increased by 15 percent to 6.14 million tons(raw sugar equivalent). The main part of the increase was due to a rise in unsubsidized C-sugar exports. Given the bumper EU beet crop, C-sugar supplies had risen to 5.47 million tons raw sugar compared to 3.66 million tons in 1998/99. Although exports went up substantially, the increase was not as large as previously forecast. Very low international prices during 1999/2000 resulted in some EU exporters holding off on exports until market prospects improve. Subsidized exports of EU sugar decreased in 1999/2000.
Given the high C-sugar supplies in 2000/01, EU sugar producers will be forced to sell large volumes on the world market during the current marketing year 2000/01. Sugar exports are estimated to rise by 460,000 tons (raw sugar equivalent) to 6.6 million tons, the main part of the increase accounted for by a forecast growth in "C-sugar" exports, i.e. exports not benefitting from export subsidies. Subsidized exports, on the other hand, may decrease again in 2000/01, as license issuing for the exports of subsidized sugar has been substantially lower so far this marketing year.