ASA Provides USDA a Market Update

In a July 10 letter to Secretary of Agriculture Tom Vilsack, the American Sugar Alliance urged the USDA to proceed with caution before allowing additional imports of sugar this year. Over the past two months, the letter states, no evidence has emerged that the market is undersupplied.

“U.S. cane refiners continue to have more than adequate supplies of raw sugar,” the letter explains. “Most are operating at less than full capacity because the demand for refined sugar is not great.”

The same holds true for beet processors, who still have an abundance of refined sugar available. That means despite recent pressure from food manufacturers to allow additional imports from foreign sugar producers, there’s plenty of sugar already in the U.S. market to meet their needs.

The letter also notes that Mexican sugar shipments continue to be a big unknown and could easily eclipse USDA estimates next year, thus increasing supplies.

“USDA’s projection of possible tight supplies in 2009/10 assumes imports from Mexico of a mere 165,000 tons,” the sugar producers wrote. “Higher imports from Mexico next year would further ease any supply concerns.”

Mexico is expected to send the United States 1.3 million tons of sugar by the end of this year, and many market experts doubt the steep decline of Mexican imports predicted by USDA for next year.

“With chronic oversupply during the first half of the year, any tightness next year would not emerge until the summer,” the ASA further noted. “USDA would have adequate time to prevent any possible tightness through an import-quota increase, if necessary, on or after April 1.”

Food manufacturers made a similar plea for additional imports at the same time last year, but the USDA denied their requests and routinely revised government estimates to reflect growing sugar supplies. If the food manufacturers’ request had not been denied, sugar loan forfeitures would have occurred, costing taxpayers millions.

Sugar producers say this should serve as a cautionary tale and urge Vilsack to remain vigilant in regard to market fluctuations,

“The USDA is right to be cautious, because to bring in more unneeded sugar now would only harm U.S. sugar producers and incur taxpayer cost,” explained ASA economist Jack Roney.