WORLD SUGAR SITUATION
|World sugar production and trade in 1998/99 are each forecast to increase 3 percent, respectively, from the previous years levels. India and Brazil account for nearly 75 percent of the increase in production. Expected record exports from Brazil, South Africa, Australia, and Guatemala, as well as higher exports from Cuba, will more than offset expected lower shipments from the European Union and Thailand. World sugar consumption in 1998/99 is forecast at a record 127.5 million tons, up 2 percent from the previous years level. The demand for sugar is expected to remain strong in South America and Asia.|
The 1997/98 world sugar production estimate has been increased since December by 1.8 million metric tons to a record 124.1 million tons. Larger production estimates for China, India, EU, and Pakistan account for this increase. However, Cuba's and Thailand's sugar production estimates for 1997/98 were reduced by 900,000 and 380,000 tons respectively.
World centrifugal sugar production in 1998/99 is forecast at a record 128.0 million tons (raw value), up 3 percent from the revised 1997/98 output. Sugar produced from sugarcane is forecast at a record 90.8 million tons, up 5 percent from last season, and sugar processed from sugar beets is forecast at 37.2 million, down 1 percent from last season, and 9 percent less than the record 41.1 million tons produced in 1990/91. India accounts for more than 50 percent of the increase in world sugar production.
World sugar trade in 1998/99 is forecast at a record 36.6 million metric tons, 3 percent above the previous season's revised shipments. Record exports are forecast from Brazil, with that country accounting for more than 40 percent of the increase in world exports. Higher exports are also expected from South Africa, Cuba, Australia and Guatemala. Lower exports from Thailand and the EU are expected to partially offset the above export increases. Leading importers of sugar are expected to be the EU, the United States, and Russia.
World sugar consumption in 1998/99 is forecast at a record 127.5 million tons, 2 percent above the previous year's level. The expected increase is based on likely strong demand in the largest consuming countries, including India, the United States, China, and Brazil.
The world sugar ending stock estimate for 1997/98 was increased by 2.3 million tons to 25.8 million tons based on higher than expected production.
Note: totals may not add due to rounding.
U.S. sugar production in 1998/99 is forecast at 7.2 million tons, an increase of 1 percent from last year's production. U.S. production of sugar processed from sugarbeets in 1998/99 is forecast at 3.9 million tons, up 3 percent from 1997, while sugar produced from sugarcane is projected at 3.3 million tons, down 1 percent.
U. S. sugar exports in 1998/99 are forecast at 136,000 tons, down 19 percent from the previous year's shipments. The U. S. ships mainly to Canada, Mexico, and Jamaica.
For fiscal year 1998, the United States allocated 1.6 million tons of sugar under the raw sugar tariff rate quota (TRQ) (see table on this page). Throughout the year, according to stocks-to-use ratio published in the WASDE, tranches of 200,000 tons were canceled or allocated. During FY 1998, the January tranche was canceled, while the March and May tranches were allocated.
Canadian sugar production in 1998/99 is forecast at 110,000 tons, up 16 percent from last year. Canadas sole sugarbeet processing facility is being modernized and expanded, with the first phase to be completed in time for the 1998 harvest, and the second phase in 1999. In light of the additional capacity, Rogers Sugar is contracting with the Alberta Sugarbeet Growers for 16,923 hectares of sugarbeets in 1998/99. Completion of the plant expansion will enable Alberta sugarbeet area to rise to 20,250 hectares in 1999/00. In Ontario, Michigan Sugar has contracted with sugarbeet growers for 2,571 hectares of production.
Imports of raw sugar in 1998/99 are expected to approximate the previous years level. Most refined sugar imports enter Canada under a duty drawback arrangement that requires their subsequent re-export in the form of further processed products. With only minor production of sugarbeets and anti-dumping and countervailing duties limiting imports of refined sugar from the United States and the European Union, Canadian refined sugar demand is met largely through processing of imported raw sugar.
Canadian refined sugar exports go primarily to the United States. Pursuant to a September 1997 understanding between the two Governments, the United States has allocated to Canada a 10,300 ton share of the U.S. refined sugar tariff rate quota (TRQ) and a 59,250 ton share of the U.S. sugar containing products TRQ.
Mexican sugar production for 1998/99 is forecast at 5.1 million tons, up 1 percent from the previous season. The projected increase is due to higher cane yields as harvested area is expected to remain the same as last season.
Imports for 1998/99 are expected to remain
unchanged at 80,000 tons. Industry sources indicate that imports are mainly a way for producers to recuperate from low priced export losses and keep sugar mills working. It is important to note that domestic prices are higher than prices for sugar on the international market.
Exports for 1998/99 are forecast at a record 950,000 tons, up 6 percent from the previous seasons shipments because of increased sugar production and almost flat domestic demand. Sugar exports to the United States under the U.S. quota for 1997/98 are expected to approximate 25,000 tons, including both raw and refined sugar. The Mexican sugar industry, however, is pressing the Mexican Government for greater access to the U.S. market, equivalent to the formerly relatively free access to the Mexican market for HFCS. However, the application of anti-dumping tariffs on imports of HFCS from the United States have nearly stopped imports of HFCS into Mexico.
Domestic consumption of sugar for 1998/99 is expected to remain unchanged at 4.24 million tons. Sugar consumption has not been growing due to competition from alternative imported and domestic sweeteners. The soft drink industry estimates its sugar needs for 1998 at about 1.2 to 1.4 million tons plus about 300,000 to 400,000 tons of HFCS. The soft drink industry first began to use HFCS in 1996.
Cubas 1998/99 sugar production is forecast at 3.5 million tons, up 17 percent from the reduced 1997/98 output. Industry sources indicate that the 1997/98 season was plagued by weather, poor management, shortage of fertilizers and other inputs plus old, outdated factories that have severely hindered production.
Cubas sugar exports in 1998/99 are forecast
to increase 22 percent to 2.8 million tons based on the expected larger harvest. If these exports are realized, Cuba would be the worlds fourth largest sugar exporter in 1998/99.
Sugar production in the Dominican Republic for 1998/99 is forecast at 600,000 tons, up 5 percent from last season. The 1997/98 cane crop suffered from extended drought, particularly in the eastern part of the country where most land is devoted to sugarcane or cattle raising.
In 1998/99, Dominican Republic sugar exports are forecast at 272,000 tons, up 8 percent from the previous years shipments. The Dominican Republic is the largest holder of the U.S. tariff rate quota (TRQ) and received 16 percent of the MY 1998 allocation, compared to 17 percent in MY 1997. The initial TRQ allocation for MY 1998 at 196,878 tons is down markedly from the 285,588 initial MY 1997 quota.
Domestic consumption of sugar is stable at 310,000 tons, equally divided between raw and refined consumption. Raw sugar is consumed by the general public while refined sugar is primarily used by the soft drink, confectionary, and rum manufacturing industries.
Guatemalas sugar production in 1998/99 is forecast at a record 1.89 million tons, up 10 percent from last years revised outturn of 1.72 million tons. This increase is attributed to a 5 percent increase in sugarcane area and higher sugar recovery rates.
Sugar exports in 1998/99 are forecast at a record 1.4 million tons, 4 percent above the previous seasons shipments. Domestic consumption is projected at 467,000 tons up 4 percent from the previous year. Per capita consumption of sugar is estimated at 40 kilograms. Alternative sweeteners and other alternative sugar products are not significant factors in domestic consumption. Currently the domestic market consumes an average of 26 percent of total production for industrial use and 74 percent for direct consumption. The soft drink industry is the major consumer of sugar, consuming 45,500 tons in 1997 out of the 68,000 tons consumed by the industrial sector. The remaining 22,500 tons were used in industries such as bakeries, juices, wineries, dairy products, and pharmaceuticals.
Brazilian sugar production for 1998/99 is forecast at a record 16.3 million tons, 5 percent above the previous seasons output. The Center-South is expected to contribute 12.6 million tons to the total, with the remainder coming from the North-Northeast. The total amount of sugarcane for crushing in 1998/99 is forecast at 288 million tons, down 4 percent from last season. Sugarcane utilized for sugar production is forecast at 110 million tons, up 2 percent from 1997/98, while sugarcane utilized for alcohol is forecast at 178 million tons, down 7 percent from the previous season. In spite of the projected lower volume of total sugarcane for crushing, a shift in production from alcohol to sugar is expected to occur because of large alcohol stocks.
Brazilian sugar exports for 1998/99 are forecast at a record 7.1 million tons, 6 percent above 1997/98 shipments based on expected higher sugar production. However, sugar industry sources expect sugar export earnings to decrease despite an increase in the volume of exports due to likely lower prices. International sugar prices are expected to be lower because of expected larger world sugar production in 1998/99. The North-Northeast is a traditional raw sugar exporter. The Center-South and Center-West are expected to increase raw sugar production for export.
Ending sugar stocks for 1997/98 have been reduced by 15 percent, due to higher than expected sugar consumption and exports. Some stock re-building is likely in 1998/99 because of the expected larger Brazilian harvest.
The sugar-alcohol sector faces a critical problem regarding its capacity to store the excess alcohol production from the 1997/98 season. Estimates for the ending alcohol stocks vary from 1.2 to 1.8 billion liters. The Brazilian Government (GOB) has recently purchased 90 million liters of alcohol from the North-Northeast, without resolving the storage capacity issue. The sugar-alcohol producers are asking the GOB to purchase surplus alcohol production. However, even if the GOB purchases a part of the stocks, the storage problem will remain since the GOB does not have enough storage tanks to accommodate the high volume of alcohol. If alcohol stocks remain in the hands of the millers, they will likely have problems in storing alcohol produced in the upcoming season. The Sugar and Alcohol Millers Association of Sao Paulo State (UNICA) has advocated the export of surplus alcohol to the United States. Last February, UNICA officials made a presentation in which they proposed a partnership between Brazilian and American ethanol producers. The project proposes that Brazilian ethanol be marketed in current MTBE powered vehicle niches such as in California with a guarantee to supply these niches for a 2 year period. During this interim, American ethanol producers would expand production to meet American domestic ethanol demand, replacing the Brazilian product
Total sugar production in the European Union for 1998/99 is forecast at 18.3 million tons, 5 percent below last years revised outturn. The projected decline reflects reduced area and a return to average sugar yields. In the last half of 1997/98, several upward revisions were made in production due to higher yields resulting from excellent weather in a number of EU countries. The largest yield increases occurred in Finland, France, Italy, Belgium, and Denmark.
The basic tools of the EUs sugar policy are: 1) import restrictions with limited free access for certain suppliers; 2)internal support prices that ensure returns to producers for a fixed quantity of production and permit maintenance of refining capacity; and 3) export subsidies for a quantity of domestically produced sugar. EU member states allocate an "A" and a "B" quota to each sugar-producing operation, each isoglucose operation and each inulin syrup-producing operation established in their territory. Current quota levels have been in place since the accession of Austria, Sweden, and Finland to the EU and are currently legislated at these levels until 2000/01. "C sugar", "C isoglucose", and "C inulin syrup" refer to any quantity of sugar, isoglucose or inulin syrup produced outside the sum of total A and B quotas. Policy makers are satisfied with the current sugar program, but EU industrial users of sugar favor sugar policy reform. The large gap between EU and world sugar prices, they say, is the result of rigid import quotas that prevent them from buying sugar at world prices.
Since July, 1995, a system of import duties increasing in line with the difference between the world import price and the trigger price have been in place. Import tariffs from January 1, 1998 to June 30, 1998 are 382 ECU/ton for raw sugar for refining and 472 ECU/ton for other raw sugar and refined sugar. "Preferential sugar" can be imported at zero duty. The total duty-free import quota is 1.3 million tons (white sugar equivalent). In addition to preferential and special preferential imports, the Commission also sets an annual tariff quota, called "MFN quota" for the supply of raw cane sugar to Community refineries.
Producer levies ensure that the EU sugar system is self-financing to a large extent. Community funding, however, is provided for
export subsidies for a quantity of sugar equal to the EUs "preferential imports". Payments are made out of the Guarantee Section of the EU Agricultural Guidance and Guarantee Fund and amount to about ECU 600 million annually. Since 1995/96, subsidized exports of sugar to third countries are limited, in volume and in value, under the GATT commitments.
Human consumption of white sugar is estimated at 34 kg per person in 1997/98, virtually the same as the previous year. Contrary to other regions in the world, the EU domestic sugar market can be characterized as a saturated market. Exports from the EU in 1998/99 are forecast at 6.0 million tons, down 6 percent from last season based on lower supplies. Imports are forecast to remain unchanged at 1.8 million tons.
Eastern Europe/Former Soviet Union
Sugar production in Poland in 1998/99 is forecast at 1.9 million tons, down 16 percent from last years outturn. The reason for the decline is lower prices paid to farmers for sugarbeet production within quota and less favorable weather. Despite flood losses and reduced planted area, good growing conditions resulted in a relatively large 1997 beet crop with high sugar content.
Polands sugar exports in 1998/99 are forecast at 217,000 tons, less than half the volume exported in 1997/98. Poland is generally self-sufficient in sugar and usually has some exportable supplies. Imports occur occasionally, particularly during years of low production. Because of relatively high prices in the domestic market, relatively cheap sugar from Czech and Slovak Republics was imported in 1997 in fairly significant quantities.
Sugar consumption in Poland is estimated at approximately 41 kilograms per capita (raw value) in 1996/97. Sugar consumption has gradually increased over the past three years. However, direct sugar consumption has declined in recent years while, at the same time, industrial consumption has increased as production of products containing sugar has expanded. Total domestic consumption in 1997/98 is estimated at 1.82 million tons, 2 percent more than the previous year.
Sugar production in Russia in 1998/99 is forecast at 1.6 million tons, up 23 percent from the revised 1997/98 outturn, but down 6 percent from the 1996/97 output. The downward revision in the 1997/98 crop was a result of heavy rains which damaged the crop during the growing season and ultimately left almost a third of the crop in the field after harvest.
Russian sugar imports in 1998/99 are forecast at 3.7 million tons, up 14 percent from the previous year. To prevent over-imports, the Union of Russian Sugar Producers is lobbying the Government to limit sugar imports. The Agricultural Ministry is concerned that unregulated imports of raw sugar may exceed local refinery capacity since the Russian processing industry is able to process 3.5 million tons annually.
Retail sugar prices bottomed out in March 1997, just before the introduction of a 25 percent tariff on white sugar imported from some CIS members. Prior to this action, all CIS members, including the Ukraine, enjoyed duty free access to the Russian market for refined sugar. Soon after the installation of the 25 percent tariff, prices started increasing and reached their peak in September 1997, prior to when newly processed sugar appeared on the market. Russian sugar producers are concerned about refined sugar imports from the Ukraine because production costs in that country are significantly lower than in Russia. Industry officials believe that Russian sugar producers
can not compete with Ukrainian production. In 1998, Ukraine is expected to deliver 600,000 tons of sugar to Russia, under a zero duty quota. The imports must be of Ukrainian origin and produced from beets.
Domestic consumption of sugar for 1998/99 is forecast at 4.9 million tons, up 8 percent from the previous season. Annual per capita consumption was 32 kilos in 1997.
Sugar production in the Ukraine for 1998/99 is forecast at 2.4 million tons, up 16 percent from last years very poor output, the lowest in 40 years. Sugarbeet production fell to 17.7 million tons due to an unusually wet autumn, deteriorating farm machinery and other input constraints. The area planted to sugarbeets also continued to decline. The difference between the area planted and area harvested remained wide and has exceeded 100,000 hectares in recent years. This dilemma is attributed to on-farm losses stemming from a lack of farming input resources.
In an effort to protect the domestic sugar market the Government placed a 50 percent duty on all types of imported sugar. A recent proposal to cut the import duty to 15 percent is still being debated.
Sugar exports in 1998/99 are forecast at 800,000 tons, up 41 percent from the previous seasons shipments based on the expected larger harvest. Besides Russia, other destinations for Ukrainian sugar are Armenia, Azerbaijan, Republic of Georgia, and other central Asian countries. A proposal currently being discussed is lowering the sugar export price which would reduce sugar exports.
Sugar consumption continues to decline. However, should the price of sugar on the local market increase moderately, this could slow exports and mean that the 600,000 ton tax-free Russian quota may not be filled. This quota is
very important to the Ukraine because of the need to purchase Russian tax-free commodities such as fuel and timber.
The Government said that barter trading relations were the major reason for declines in the sugar industry. Because of a lack of funds, farmers were paid in sugar for sugarbeets delivered to processors. The Government attempted to get producer-processor relationships back on a monetary basis failed last year because of a lack of finances. Most likely the ban on barter trading will be lifted in 1998, resulting in farmer held sugar undercutting factory held sugar in the market place.
Sugar production in South Africa in 1998/99 is forecast at a record 2.7 million tons, 5 percent above the previous record in 1997/98. The increase is attributed to above-average, but timely rainfall, and a 3 percent increase in harvested area.
Over the past season, growers have been faced with significant changes in legislation that affect much of their activities. Among these are, water rights, conditions of employment of farm workers, environmental issues, and land reform. The rewrite of the Sugar Industry Act in 1994 substantially reduced the legislation governing sugarcane production. The present A and B pool quota system terminates at the end of the current 1998 season and the industry will then operate under free market conditions.
South Africas 1998/99 sugar exports are forecast at a record 1.28 million tons, 10 percent above the previous seasons shipments. South African sugar exports made a dramatic recovery in the 1996/97 season as production recovered following four years of drought.
Chinese sugar production in 1998/99 is forecast at a record 8.8 million tons, more than 2 percent above the previous seasons outturn and 6 percent higher than the previous record of 8.3 million in 1992/93. The reason for the increase is due to an expected 3 percent increase in sugar produced from sugarcane. Although China produces both sugarcane and sugarbeets, sugar from sugarcane accounts for over 80 percent of total sugar output.
Chinese sugar exports in 1998/99 are forecast at 742,000 tons, 10 percent above the previous seasons shipments. To help the sugar industry recover from losses caused by low domestic prices during the past three years, and to stimulate increased production, the Government is expected to promote sugar exports while controlling sugar imports in 1998. Chinese imports are expected to decline in 1998/99 to 1.4 million, 8 percent less than the previous season.
Sugar consumption has grown rapidly in China since the 1980's, due to rising incomes and increased production of processed foods containing sugar. Per capita sugar consumption is estimated to have grown from 4.5 kg in 1980 to about 7.5 kg in 1997. However, increased production of alternative sweeteners in recent years has substituted for sugar. China produces 100,000 tons for chemical sweeteners each year and production continues to increase due to increasing demand from soft drink and confectionary industries. Since artificial sweeteners, especially saccharin, are much less expensive than sugar, these products are consumed by the majority of Chinas 800 million farmers.
In India, sugar production for the 1998/99 season is forecast at 16.3 million tons, 15 percent above last seasons outturn, but 10 percent below the 18.2 million ton record set in 1995/96. The projected increase is due to higher sugarcane prices and prompt payment by mills to farmers during the current season. Various financial support programs provided sugar mills by the central and some state governments, combined with higher sugar prices during the later half of the 1996/97 season, helped to alleviate the financial situation of most sugar mills, enabling them to pay their sugarcane payment arrears to farmers before the 1997/98 season started.
Due to tight domestic supplies, the Government did not establish a sugar export quota for 1997/98. Exports in 1997/98 are likely to be confined to preferential quota countries, estimated at 50,000 tons. In 1996/97, the Government established an export quota of 1.0 million tons, but actual exports totaled only 740,000 tons, due to increased domestic demand. In the past, exports were subsidized when necessary by spreading losses among the mills. Following the liberalization of sugar exports in January 1997, exports by private mills were not viable without subsidies. Exports during the upcoming season will depend on the competitiveness of Indian sugar vis a vis sugar from other origins.
Sugar stocks held by mills at the beginning of March 1998 were 9.4 million tons compared to 10.0 million a year ago. Ending stocks in 1997/98 are estimated at 5.9 million tons, compared to 7.0 million in 1996/97. Despite the forecast increase in the sugar production in 1998/99, likely lower imports and continued growth in domestic consumption are expected to further reduce stocks. Sugar consumption has been growing at an average rate of 3-4 percent during the past few years, about twice the rate of population growth.
Sugar production in Pakistan in 1998/99 is forecast at 3.7 million tons, up 3 percent from the 1997/98 output, based on a 3 percent increase in planted area. Sugarcane, to be diverted for the manufacture of non-centrifugal sugar, is expected to remain at last years level as mill prices are expected to give farmers higher returns. Sugarcane area in 1997/98 was up 18 percent compared to the previous year, because of improved producer returns and a 46 percent increase in the sugarcane support price.
Sugar exports in 1998/99 are forecast at 600,000 tons, 12 percent above the previous season. This forecast is based on increased sugar production and more favorable
international prices. Pakistan has been requested by the United Nations to supply of 300,000 tons of sugar to Iraq. The Government is considering various options to fulfill this request. The Pakistan Sugar Mills Association has asked the Government to allow the export of sugar to Central Asian States by road through Afghanistan.
Consumption of centrifugal sugar during 1998/99 is forecast to increase 3 percent to 3.2 million tons. This increase is based on a 3 percent rise in the population, estimated at 149.94 million, including the population of the Northern Areas, Azad Kashmir and Afghan refugees.
Thailands sugar production for 1998/99 is forecast at 4.2 million tons, virtually the same as in the previous seasons output, but 32 percent less than the 6.2 million ton outturn in 1995/96. Thailands 1998/99 sugarcane output is projected at 42 million tons, about the same as the revised 1997/98 estimate. The weather has been very dry since the 1997 monsoon season ended in October and very little rain has been reported in the first quarter of 1998. As a result, the ratoon and new planting of sugarcane on unirrigated land will likely be affected, reducing sugarcane yields.
Exports in 1998/99 are forecast at 2.6 million tons, down 16 percent from last year due to reduced supplies. Sugar is one of Thailands major export products. Quota C (export) sales are concluded 6 months prior to the crushing season in November by seven exporting companies. The Thai Cane and Sugar Corporation is designed to handle long-term contracts and is responsible for pricing and selling the 800,000 ton of raw sugar under quota B. More than 50 percent of 1997/98 quota B, sugar has already been sold at an average price of 12.48 cents per pound.
Domestic consumption of sugar is projected to increase by 3 percent in 1998/99. Industrial consumption is currently about 30 percent of utilization. Per capita consumption increased 5 percent, from 26.3 kilograms in 1996 to 27.5 kilograms in 1997. Sugar consumption increased in line with the expansion of pharmaceutical products and the food and bakery industries. About 70 percent of local consumption is in the form of direct household consumption, 10 percent by the beverage industry, 6 percent for dairy products, 4 percent for food and fruit products, and the remainder used in other forms. Stocks are expected to decrease significantly in 1998/98 and 1998/99 due to expected higher exports and domestic consumption.
The use of high fructose syrup (HFS) continues to expand. The current sole factory producing HFS in Thailand expects production capacity to reach 200 tons per day in 1998/99. Output of HFS is estimated at 54,000 tons in 1997 and is forecast at 55,000 tons in 1998.
Sugar production in Australia in 1998/99 is forecast at a record 5.97 million tons, slightly above the 1997/98 output. The Australian sugar industry is currently in an expansionary phase, with land assigned to sugarcane area growing significantly and new growers entering the industry. The Australian sugar refining industry is also undergoing a period of change as a number of joint ventures have resulted in increased refining capacity.
Australian sugar exports are forecast at a record 4.9 million tons in 1998/99, 4 percent above 1997/98 shipments. Canada is Australiass largest sugar customer, while the Korean Republic displaced Japan as the second largest export market.
The rapid growth in sugar consumption in Asia has prompted the Australian sugar industry to move its focus to that region. Asia accounted for around two thirds of the industrys exports in 1995/96 and 1996/97, compared to just over 30 percent in the 1970's. The current Asian economic crisis, though, may make it more difficult to export to Asia. The Australian industry is, nevertheless, confident that although sales may slow, its traditional customers are expected to have demand for sugar that approximates the previous years imports.