WASHINGTON, July 24, 2017 – USDA announced today that it is opening up the U.S. market to an additional 414,000 tons of foreign sugar. The move was greeted warmly by U.S. food and candy makers, who have been clamoring for months for the USDA to allow in more sugar.
“We commend (Agriculture Secretary Sonny) Perdue and his staff at USDA for monitoring the U.S. sugar market situation and taking necessary action to increase raw sugar supplies … to meet demand,” the Sweetener Users Association (SUA) said in a statement. “An adequate supply of sugar at reasonable prices is critical to U.S. food and beverage companies of all sizes being able to make and sell the goods they produce, maintain their competitiveness and create and sustain American jobs.”
About a quarter of the additional sugar that USDA said it will allow in will come from Mexico. The rest will be split among 40 countries that are part of the U.S. tariff rate quota (TRQ) system.
The U.S. needs more sugar than it produces, but USDA tightly controls imports through a complex TRQ system. USDA each year sets an overall sugar import quota for 40 World Trade Organization countries, not including NAFTA partner Mexico. That quota for raw sugar is about 1.2 million tons and currently cannot be raised each year until April 1.
The increase announced Monday will bring that up to roughly 1.5 million tons for fiscal year 2017, not including the sugar that Mexico is allowed to ship here.
Some of those 40 WTO countries will get even more access to the U.S. market. That’s because several of them always end up getting TRQ shares, even though they don’t have sugar to sell. The USDA said Monday that it will take away shares from those countries and reallocate them to countries that have additional supplies that they can ship to the U.S.
A sugar industry official told Agri-Pulse that the TRQ increase is expected to bring the stocks-to-use ration in the U.S. up to a more comfortable level for sugar users at between 14.2 percent and 14.7 percent.
Rick Pasco, president of the Sweetener Users Association, said in a recent interview that food companies like to see that figure at a minimum of 15.5 percent.
The stocks-to-use ratio is the primary indicator for the availability of sugar in the U.S. and, up until the TRQ increase announced today, it was calculated to be extremely low and predicted to drop even further in the coming months, according to USDA’s latest World Agricultural Supply and Demand Estimate (WASDE) report.
That report – released earlier this month – put it at just 11.4 percent and predicted it would drop to 9 percent in the 2018 fiscal year, which begins Oct. 1.
The TRQ increase will add some stability to the market for the food and candy companies that need to know there will be enough supplies on the market, but the industry had hoped that USDA would have acted earlier. The reason it didn’t happen earlier, one source speculated, is that the U.S. was busy renegotiating its “suspension agreement” with Mexico that restricts the amount and type of sugar that Mexico can ship here.
The new suspension agreement, which was finalized on June 14 and set to be implemented in the 2018 fiscal year, was welcomed by the sugar refining industry, but not the sugar users.
That’s because anything that limits sugar imports into the U.S. is opposed by the companies here that need to buy it for their products at the cheapest prices possible.
“Uncertainty in the sugar market has only increased since the amended U.S.-Mexico suspension agreements made the bad deal that is the U.S. sugar program worse for American companies and consumers,” the SUA said today. “Because it is widely anticipated that Mexico will be unable to supply the full amount of U.S. needs during the coming fiscal year, it is likely that USDA will again need to consider a TRQ increase in the near future. America’s sweetener users will continue to work with USDA and, as appropriate, request additional TRQ increases to ensure the market is adequately supplied.”
The new suspension agreement requires that 70 percent of sugar imports from Mexico be raw and allows the remaining 30 percent to be refined. That’s a major shift from the current suspension agreement, which maintains a 47-53 split for raw and refined.