The Sugar Beat

The Mexican government has formally notified America's ag and trade officials that the U.S. government is substantially underestimating the amount of Mexican sugar that will be sent to the United States this year.

In a Jan. 28 letter to the U.S. Trade Representative and U.S. Secretary of Agriculture, Gerardo Ruiz Mateos, Mexico's Secretary of the Economy, warned, "[E]xports to the US market are expected to reach around 750,000 to 800,000 tons this year, much higher than [USDA] projections (571,000 tons)."

"I respectfully ask you to consider the new figures provided before allocating any import quotas to third countries," he concluded.

This news is a big blow to large food manufacturers, which have launched an aggressive lobbying campaign to pressure USDA officials to open the U.S. market to additional imports from other countries.

In addition to greater Mexican imports, the USDA recently predicted that America's crop will be larger than once expected, further complicating the food manufacturers' request.

In its recent market outlook, the USDA increased the country's surplus sugar ratio to nearly 10%, up from 4.6% in Sept.  And this increased surplus projection does not even take into account the additional sugar imports cited by Mexican officials.

American sugar officials believe that candy companies are pushing for additional imports, not because there is any shortage of available sugar, but because they are looking to further depress sugar prices.

"We are not aware of a single buyer who cannot find enough sugar," explained Jack Roney, an economist with the American sugar Alliance.  "In fact, the sugar companies in America have plenty of sugar to sell and are actively looking for buyers."

Roney noted that with surpluses growing the biggest challenge has been the sugar price that farmers are receiving.

"Raw sugar prices have plunged 13% since September and are now below break-even levels," he said.

Refined sugar prices have also started to decline, which Roney says is a clear indication of supply outstripping demand.

"The most prudent thing the USDA can do right now is to hold tight," he concluded.  "If they cave to food manufacturers' demands and put more unneeded imports on the market, they will depress sugar prices further and harm family farmers."