US sugar market dealing with prospective tight ending stocks
The USDA’s November WASDE report shows the 2024-25 U.S. sugar ending stocks-to-use ratio dropping to 11.7%, below the target range of 13.5%-15.5%, due to lower production and increased consumption. Domestic sugar production is forecast at 9.28 million tons, down 2.3% from October estimates. To address the shortfall, options include increasing Mexico’s export limit, adjusting tariff-rate quotas, or allowing high-duty imports, with Mexico being the preferred, lower-cost solution. Further adjustments are expected in December’s WASDE report.
KANSAS CITY — The US Department of Agriculture in its Nov. 8 World Agricultural Supply and Demand Estimates report projected the 2024-25 US sugar ending stocks-to-use (STU) ratio at 11.7%, down from 14.3% in October. The ratio for 2023-24, which ended Sept. 30, was estimated at 16.9%, down from 17.6% a month earlier.
The USDA’s “target” sugar ending STU ratio ranges from 13.5% to 15.5%, with the lower end deemed an adequate supply and the upper end on the verge of oversupply. Sugar users contend that stocks are in fact tight at 13.5%, and prices tend to be high, preferring a ratio closer to the top of the range, while sugar producers prefer a ratio at the lower end of the range.
The 2023-24 crop year was an anomaly with the ratio well above the high side of the preferred range, but only because of record-high imports of high-duty sugar, which tends to support higher sugar prices.
The new crop year is shaping up much differently and took a dramatic turn from October to November as reflected in the USDA WASDE reports.
For the year that just ended, the USDA in November estimated US sugar production at a record-high 9,368,000 tons, up 171,190 tons, or 1.9%, from October and up 118,000 tons, or 1.3%, from 2022-23. The increase was the result of early sugar beet harvest in several states and early sugar cane harvest in Louisiana, with new-crop sugar produced before Oct. 1 counted in the 2023-24 marketing year. Large sugar beet crops in most states prompted an early start to beet harvest where weather cooperated.
More than offsetting higher production in 2023-24 were lower imports and higher use. Imports were reduced by 89,030 tons “mainly on a reduction in re-export imports,” the USDA said. Total sugar use was estimated at 12,814,000 tons, up 151,000 tons from October based on higher exports and higher domestic food use of sugar partially offset by lower re-export products. Deliveries of sugar for human use, estimated at 12,354,000 tons, were raised 53,540 tons from October but were down 119,000 tons, or 1%, from 12,473,000 tons in 2022-23. The increase was the result of strong deliveries in September as the USDA gathered final estimates for the just-ended marketing year.
A drop of 69,000 tons in sugar carryover to 2024-25 set the stage for lower numbers for the new marketing year.
Domestic sugar production in 2024-25 (from the 2024 beet and cane crops) was forecast at 9,276,000 tons, down 219,000 tons, or 2.3%, from October and down 92,000 tons, or 1%, from 2023-24. The decrease was the result of some beet and cane sugar production pulled forward into 2023-24 due to the early harvest and to lower USDA sugar beet and sugar cane yields compared with October.
Lower sugar production, coupled with a forecast 50,000-ton increase in sugar deliveries for human consumption (carried forward from the 2023-24 increase) resulted in forecast 2025 carryover (2024-25 ending stocks) of 1,464,000 tons, down 324,000 tons, or 18%, from October and down 698,000 tons, or 32%, from 2023-24.
The massive swing from October leaves 2024-25 sugar supplies about 230,000 tons short of the low end of the target range (13.5% ending STU and about 482,000 tons short of the high end (15.5%). There are several options to closing the shortfall, with the USDA typically readjusting supplies to meet the 13.5% minimum in the December WASDE report.
The first option would be to raise the export limit for Mexico, which under the US-Mexico agreements suspending anti-dumping and countervailing duties on Mexico’s exports of sugar to the United States is supposed to get the first opportunity to ship additional sugar.
The current export limit for Mexico is 395,000 tons that was based on lower US needs reflected in the September WASDE report, prior to the downgrade in US sugar production. After a couple years of lower sugar production in Mexico due to drought, and massive imports of sugar in 2023-24, Mexico has ample supplies to ship to the United States this year. Mexico’s cane harvest usually starts in early December.
Another option would be a tariff-rate quota increase by the United States, which typically can’t occur until after April 1, a date deemed too late by sugar users. That wouldn’t be necessary if Mexico has the sugar to ship.
A third option would be higher high-duty imports, which US refiners and some users turned to in 2023-24 amid an expected shortfall from Mexico. High-tier imports were record high last year and tend to contribute to higher domestic sugar prices.
The user side of the sugar equation would prefer the lower-priced Mexican option, but time will tell
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Source Link : Food Business News
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