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LA QUINTA, Cal., Feb 15 (Reuters) - Falling prices make it ``highly
likely'' that U.S. producers will forfeit sugar to the government this
year rather than repay some federal loans, a top U.S. sugar industry
official said on Tuesday.
``Those forfeitures seem -- I hate to say it -- highly likely at this
point,'' Jack Roney, chief economist of the American Sugar Alliance (ASA),
said at the International Sweetener Colloquium, a meeting of sweetener
users and traders.
Heavy loan forfeitures would make the sugar programme more vulnerable
to attack from its opponents in Congress, of which there are many. But
at current market prices, producers can get two cents more per pound for
their sugar by forfeiting it to the government rather than selling it,
Roney said.
Fear of the political fallout is unlikely to stop producers from
forfeiting their product.
``I think political academic discussions are on the wayside when
you're fighting to stay afloat,'' Roney said. ``These become business
decisions. These become survival decisions.''
Roney did not estimate how much sugar could be forfeited. But he told
Reuters he would not argue with figures presented by a co-panellist at
the sweetener meeting.
Frank Jenkins, president of Jenkins Sugar Group, a brokerage firm,
laid out a hypothetical series of events that could occur in the U.S.
sugar market over the next several years because of continuing low
prices.
OVERSEAS DONATIONS
Those included forfeitures of 265,000 short tons at the end of fiscal
2000 on September 30 and forfeitures of more than 500,000 tons one year
later.
Jenkins also envisioned the U.S. Agriculture Department buying
250,000 tons of sugar later this year to donate overseas. Some sugar
producer groups have called for that action to reduce price-depressing
U.S. supplies.
Such a move would prompt a broad coalition of U.S. trading partners,
led by Australia, to complain that the U.S. is subsidising exports,
Jenkins said.
While ASA is not pushing for the donation and purchase programme,
Roney said he thought such a move would be defensible in light of the
highly subsidised nature of the world market.
``I think it would underscore that a lot of that goes on,'' Roney
said. A donation of 250,000 tons would be ``only a fraction of what the
EU does.''
For years, U.S. import restrictions have kept domestic sugar prices
at 22 cents per pound. But several factors have driven prices below 17
cents per pound in the past year.
MEXICO IMPORTS
Chief among those are a 60-percent drop in world prices since 1995
which has increased the threat of imports from Mexico. Those would be in
addition to Mexico's duty-free access to U.S. market, which increases
tenfold to 250,000 metric tons on October 1 under the North American
Free Trade Agreement.
The U.S. industry still hopes to reach a negotiated settlement with
Mexico that would provide protection against low prices for producers on
both sides of the border, Roney said.
There should be an incentive for Mexico to make a deal because its
cost of production is near 17-19 cents per pound, Jenkins said. ``It
doesn't make a bit of sense for Mexico to produce five million tons and
ship it to the United States at a loss,'' he said.
A Michigan firm that has found a loophole in the U.S. tariff system
to import sugar syrup from Canada at low duty rates is also putting
pressure on prices.
The U.S. sugar industry hopes to close that hole through judicial or
legislative action, but has been stymied in court recently, Roney said.
Looking into the future, the stresses on the U.S. sugar programme are
likely to grow, said Pat Heneberry, an executive vice president of Louis
Dreyfus Corp.
The possibility of the United States normalising trade with Cuba
could add one more country looking for a share of the U.S. import quota,
he said.
``The status quo is going to be very hard to maintain,'' Heneberry
said. ``It's not going to be a simple fix.'' |