USDA Outlook Forum February 24, 2012

Transcription

1 USDA Outlook Forum February 24, 2012 Integration of Two National Sugar Markets Competing Interests of Surplus and Deficit Producers Two Countries One Market David Berg American Crystal Sugar Company

2 Topics Trade integration Product flows & prices Policy integration 1/1/08 thru present Future scenarios

3 Thousand Metric Tons, Raw Value 4,000 3,500 3,000 2,500 2,517 U.S. Sugar: Total Imports 1996/ /12 3,381 3,124 3,012 2,796 2,585 2,377 2,000 1,500 1,962 1,654 1,484 1,443 1,393 1,570 1,588 1,905 1,887 1, Data Source: USDA; 2011/12 forecast TRQ: WTO & CAFTA Imports for Re-Export Above-Quota (except Mexico) and Circumvention Imports from Mexico

4 1,800 1,600 1,400 Mexico: High Fructose Corn Syrup Consumption 1995/ /12 -- Thousand Metric Tons, Dry Weight-- 1,418 1,610 1,635 1,200 1, Data Source: USDA; 2011/12 forecast

5 Trade Flows

6 Trade Flows

7 U.S. and Mexican Wholesale Refined Sugar Prices Monthly Averages, cents per pound, Correlation: 83% Mexican Wholesale Refined Sugar U.S.-Mexican free trade in sweeteners began January 1, U.S. Wholesale Refined Sugar Data Source: USDA/ERS. Mexican sugar -- Mexico City, SNIIM-ECONOMICA; U.S. sugar -- Midwest markets. Prices through January A

8 U.S. & Mexican Sugar Prices: Raw and Estandar Monthly averages, cents per pound, Correlation: 88% U.S.-Mexican free trade in sweeteners began January 1, Mexican Estandar U.S. Raw Cane Sugar 16 Source: USDA,ERS. Mexican Prices: Estandar, bulk, Mexico City, SNIM-ECONOMICA. U.S. Prices: Raw -- #16 contract, New York. January A2

9 Crop size - Mexico Sugar demand - Mexico Mexican Export Mix (Estandar/Refined) IMMEX Substitution Third Country Sugar Price Integration Mexican HFCS demand World Market Trends U.S. Refining Capacity Utilization Trade Agreements - Mexico Mexican Import Decisions Trade Agreements - U.S. U.S. Re-Export Sugar demand U.S. Grower Payments - Mexico Domestic Political Pressure Legislative Mandates Dollar/Peso Exchange Rate Crop size U.S. Cane Crop size U.S. Beet

10 Import Policy Formulation U.S. U.S.: Avoid the forfeiture of sugar under price support loans, and therefore avoid a cost to the federal treasury Legislative mandates: No cost; Reasonable prices Trade agreements: WTO; CAFTA-DR; NAFTA; Peru / Colombia / Panama Political pressures: Producers; Users; Refiners; Traders; Internal processes: USDA consultation with State, USTR, Commerce, Treasury, OMB, CBP Time constraints: Minimum TRQ before 10/1; No revisions before 4/1 without determination of an emergency Outputs: Raw & specialty sugar TRQs; CQEs

11 Import Policy Formulation - Mexico Mexico: Avoid prices low enough to destabilize market for sugar cane, or high enough to contribute to inflation of basic commodity Legislative mandates: Minimum price for sugar cane Trade agreements: WTO, NAFTA, Guatemala/Honduras, Nicaragua Political pressures: Cane growers, Users, Mills, Traders Internal processes: National Sugar Committee; Department of Economy; Department of Agriculture Time constraints: None Outputs: Economia establishes TRQ

12 Import Decisions 2008 to Present (Table Courtesy LMC International) 23 Import Adjustments Totaling 4,612,002 Tons

13 Complements & Conflicts Complements (What s working): WASDE includes both U.S. & Mexican components Moving towards reliable data on Mexican production and consumption Improved consultation between governments Conflicts (What might work better): Each country s objectives may be different Clarification & harmonization TRQs in Mexico unpredictable; May ignore the US segment of the integrated market Should be based on objective criteria and reliable data about conditions in both the US and Mexican markets.

14 Future Scenarios How things might go wrong: Lack of consultation Unreliable crop & demand data Historical & projected Lack of coordination Failure to communicate objectives Failure to communicate intentions Failure to identify options for action e.g. TRQ vs. Export Restrictions

15 Future Scenarios How things can go right: Improve & share data Direct, ongoing consultation Crop & market analysis Policy formulation Policy implementation

16 Summary & Conclusions Market integration has occurred Competition for end user volume Price Logistics are in place Administration of import policy is complicated & sensitive Both governments need to be engaged real time

17 Coeur d Alene Idaho August 3-8,