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SUGAR: WORLD MARKETS AND TRADE

World Sugar Situation

(November 22, 2000) World centrifugal sugar production for 2000/01 is estimated at 124 million tons (raw value) down 7 percent from the record level set last year. The largest production decease from last year is Brazil, which is down by 4.1 million tons or by 23 percent. The largest increase is China, up 876,000 tons or by 12 percent. World sugar consumption for 2000/01 is estimated at 128.7 million tons, up 1 percent from the previous year. World exports are forecast at 32.8 million tons, down 16 percent from the record level set last year. South American exports are forecast to decline by 5.1 million tons, while the European Union is expected to export 1.6 million tons less than a year ago.

Production

The 2000/01 world centrifugal sugar production is estimated at 124.5 million metric tons (raw value), up 86,000 tons from the May forecast (Circular FS1-00). The 1999/2000 production estimate is revised up from the May circular by 1.4 million tons to total 134.5 million tons. Brazilian production for 2000/01 is now estimated to be down 23 percent or 4.7 million tons from last year's record of 20.1 million tons. Production in the European Union (EU) is revised upward by 874,000 to total 17.6 million tons, due to improved yields.

Trade

World sugar trade for 2000/01 is forecast at 33.2 million tons, down by 2.3 million tons from the previous year, representing more than a 6 percent decline from the very high level set during the previous year. Exports are down by 5.1 million tons from Brazil, 1.6 million tons from the EU, 800,000 tons from Australia, and 300,000 tons from Thailand. Leading importers of sugar in 2000/01 are Russia, the United States, Japan, South Korea, Indonesia, Malaysia and the European Union.

Consumption

World sugar consumption for 2000/01 is estimated at 128.7 million tons, down 700,000 tons from the previous forecast, but 1.7 million tons over the previous year's level.

Domestic Sugar Prices

World prices for raw sugar (f.o.b. Caribbean Contract No. 11) averaged 7.53 cents per pound for fiscal year 2000, up only 0.48 cents per pound over the previous year. However, prices for the last four months of the fiscal year improved considerably, averaging 10.66 cent per pound in response to declining stocks, production and reasonably strong consumption.

Situation And Outlook In Selected Countries

North America

United States--U.S. sugar production for 2000/01 is forecast at 7.7 million tons, an increase

of 6.6 percent from the previous season. Beet sugar production is forecast to decline 12.6 percent to 3.9 million tons. Cane sugar is forecast to increase by 1 percent to 3.7 million tons. U.S. exports for 2000/01 are forecast at 159,000 tons, up 47,000 tons from last year's level. U.S. exports are mainly refined sugar going principally to Canada, Mexico, and Jamaica.

For Fiscal Year 2001 the U.S. Trade Representative established a Tariff-Rate Quota (TQR) 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.

Mexico--Mexico's 2000/01 sugar production forecast is revised down slightly from last May's estimate of 5.1 million tons to total 4.98 million tons. Sugar consumption is forecast to remain flat for MY 2000, at 4.48 million tons. Imports of high fructose corn syrup (HFCS), which grew 17 percent, totaling 346,000 tons in MY 1999, are forecast to be similar in MY 2000 despite the countervailing duties of up to $100.60/ton on HFCS-42 and $175.50/ton on HFCS-55 imposed since January 1998.

Mexico's sugar exports for MY 1999 are estimated at 575,000 tons, down from the previous estimate of 630,000 and the forecast for MY 2000 is revised downward from 700,000 tons to 540,000 tons.

Caribbean/Central/South America

Brazil--Brazilian sugarcane production for MY 2000/01 is estimated to be down 20 million tons to 260 million tons due to dry weather and below average rainfall since early January. Marketing year 2000/01 sugar production is revised upward to 15.4 million tons, raw value due to revised sugarcane for sugar/alcohol breakdown to 43/57. Sugar exports are estimated at 6.2 million tons, raw value, down 5.1 million tons from the previous season due to lower availability of sugarcane for crushing and steady strong domestic sugar and alcohol as reflected in rising prices. Alcohol supply and demand for the current crop should be guaranteed through the reduction of alcohol content in gasoline from 24 to 20 percent and the release of public and privately owned alcohol stocks into the market.

European Union (EU)

The reform of the EU sugar regime as of 2001/02 is currently the center of debate in the EU sugar sector. The draft proposal submitted by the EU Agriculture Commissioner met with strong objections from several sides, the main criticism being that the reform does not address the defects of the current system. The proposal maintains the current system of production quotas, producer levies, preferential imports, and the present levels of support prices. The changes in comparison with the current regime are five-fold: 1) the storage reimbursement system will be abolished; 2) the minimum stock requirement will be canceled; 3) production quotas will be reduced by 115,000 tons from current levels in order to account for 50 percent of the structural supply surplus in the EU; 4) production refunds for sugar use by the chemical industry will no longer be co-financed from the EU budget; 5) an interim evaluation of the reform will take place by December 31, 2003 at the latest. By January 1, 2001 the European Council needs to adopt the arrangements to apply from July 1, 2001 to the production of sugar, isoglucose and inulin syrup.

As announced earlier this year, the European Commission cut production quotas for marketing year 2000/01 in order to respect the EU's World Trade Organization's (WTO) limits on subsidized exports. The reduction amounted to 498,800 tons proportionately spread over "A" and "B" production quotas of sugar, isoglucose and inulin syrup.

EU sugar production in 2000/01 is forecast to be 2 million tons below the record level of 19.5 million tons set in the previous year. Current estimates put 2000/01 beet sugar output 10 percent below last year's production, as a result of a 7 percent decline in beet area and a 3.6 percent reduction in yields. The current sugar production estimate is up 600,000 tons from the previous forecast due to higher yields.

Former Soviet Union

Russia--The two principal features of the up-coming Russian sugar situation are very large stocks, almost three times the average carryover, and low prices. On December 16, 2000, Russia will implement tariff rate import quotas for 3.65 million tons of imported raw sugar. As a consequence, stocks are projected to decline and domestic prices for sugar are expected to rise. The Government hopes that stronger prices will spur production, but local sugar producers lack the necessary investment capital to significantly expand production and take advantage of the favorable market conditions created by the quota.

During marketing year 1999/2000, Russian sugar beet producers failed to expand area planted. However, despite early frost damage, they raised sugar beet production 4 percent above the 1998/1999 season due to replanting, favorable harvest conditions, and good yields. Nevertheless, Russian beet farmers work with older machinery and suffer unusually high losses during harvesting. The Government hopes that the introduction of quotas this year will encourage internal investment to support domestic production. During the 2000/2001 marketing year, local sugar beet production is unlikely to expand significantly.

Ukraine--Ukraine, one of the world's largest centrifugal sugar producers in the early 90's, will experience its lowest sugar beet harvest and sugar production since 1950. Current estimates place 2000/01 production at 1.65 million tons, down 250,000 tons from the previous forecast. Lower production is due to reduced area planted to beets as a result of continued unprofitability of growing that crop. Ukraine will continue to import raw cane sugar to satisfy increasing domestic demand and will remain a net sugar importer in MY 2000/2001. Imports for 2000/01 are now estimated at 400,000 tons up 100,000 tons from the previous forecast. Ukrainian sugar consumption in MY 2000/2001 will increase slightly, reflecting the growth in confectionery output. At the same time, Ukraine will continue to export small quantities of sugar mostly to the Russian Federation and Belarus.

Asia

China--Sugar prices rose to record levels in July in response to last winter's freeze, which severely damaged cane crops in the top three producing provinces of Guangxi, Young and Guangdong. Import restrictions remain effective, and imports for MY2000/01 are now estimated at 500,000 tons, only a slight increase over last year. In response to rising prices, the government has placed 400,000 tons of sugar from national reserves on auction, with additional sales planned through the rest of the year. The government's announcement stated the concern that high prices would undercut recent reforms to the sugar industry. These reforms have continued at an aggressive pace, with the government scheduled to close another 152 refineries this year. The government is also trying to limit production and the use of artificial sweeteners, but industry sources indicate that this effort has not been effective.

India--The estimate for total MY 2000/01 centrifugal production is raised from the May forecast by 500,000 tons to total 17.8 million tons (17.1 million of mill sugar and 683,000 of Khandsari) due to marginally improved cane supplies and reduced diversion of cane to alternative sweeteners. Cane yields for MY 2000/01 are expected to be lower than last year due to a higher share of `Raton,' crop (low yielding compared with the new plantings) and reduced use of fertilizer. The diversion of cane to guru is expected to be lower than previously anticipated, due to depressed `Guru' prices. Cane use by manufacturers of Khandsari (low recovery centrifugal sugar) is also expected to be lower because many Khandsari units closed last year due to heavy financial losses from continued increases in cane prices and depressed prices for molasses.

Although India has been a net sugar importer for the last few years, record production and a slowdown in consumption resulted in stocks ballooning to a record 10.7 million tons last year. India would like to export sugar in MY 2000/01 to liquidate its record ending stocks. However, higher domestic prices vis-a-vis international quotations and lack of infrastructure will likely limit exports to neighboring markets. Sugar exports for MY 2000/01 are forecast at 500,000 tons.

Australia--Sugar production for 2000/2001 is estimated at 4.6 million tons, 16 percent lower than the previous year's level. This would put sugar production at the lowest level since 1993/94, when production reached only 4.2 million tons. Agriculture Fisheries and Forestry Australia (AFFA) reports that the lower production level in 2000/2001 is primarily a result of cyclones and flooding. Rust, disease and rat plague also contributed to a smaller crop. In response to the significant production problems experienced by Australian cane farmers, together with a sustained period of low prices, the Government of Australia (GOA) recently announced an assistance package for cane growers. AFFA reports that this package included a range of measures which are aimed at reducing the commercial vulnerability of the industry.

This range of measures includes: income support for 10 months in the form of ex-gratia payments (equivalent to unemployment benefits); interest rate subsidies on "new" or "existing" loans (to a maximum of A$50,000 and A$100,000 respectively); and rural financial counseling assistance (in the form of a A$1000 voucher for growers who do not have access to counseling services). The total cost of the package is valued at A$83 million. In return for this assistance, the Australian sugar industry will prepare proposals for comprehensive structural reform aimed at improving longer term viability. The deadline for this proposal is June 2002.

November 22, 2000

Foreign Agricultural Service

USDA, Washington, D.C.

202-219-0515

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