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NEW YORK -- Revised figures calling for higher sugar output in
the U.S. for 2000-01 are seen bearish for the domestic market, just
as farmers appear ready to default on their outstanding loans with
the U.S. Department of Agriculture.
"The market doesn't need 60,000 more tons of sugar,"
said Ed Makin, senior vice president at U.K trade house C. Cazrnikow
in New York.
U.S. sugar production will total 9.083 million short tons in
2000-01, the USDA said Wednesday in its monthly World Agricultural
Supply & Demand Estimates report. That figure was up 60,000 tons
from the June forecast of 9.023 million and above the estimate of
9.075 million for 1999-00.
"The more sugar produced, the worse for the (U.S.)
market," said a broker with another large international trade
house in New York, concurring that the new estimate complicates the
situation for domestic producers, who are hurting from excess
supplies and low prices. The market reacted negatively to the news.
The September domestic contract at New York's Coffee, Sugar &
Cocoa Exchange closed 0.16 cent down Wednesday at 17.99 cents a
pound, with the back months also falling sharply.
Meanwhile, the CSCE's October world sugar contract gained 0.24
cent to end at 9.17 cents as that market continued rising on an
expected world supply deficit in 2000-01.
Fortfeitures Of Sugar Likely To Begin Soon
U.S. sugar beet farmers are likely to start defaulting en masse next
month on government loans, forfeiting sugar rather than cash, market
and government sources told Dow Jones Newswires recently.
Barring additional USDA sugar purchases from the farmers, the
latter are expected to default on government loans extended for
approximately 1.2 million short tons, or 2.3 billion pounds, so far
this year. To alleviate some of the pressure, the USDA bought
130,000 tons of sugar from producers last month.
According to Czarnikow's Makin, the low prices, below production
costs, are causing about $100 per ton of sugar in losses to U.S.
producers.
By the end of July, $18.6 million in loans to beet growers
mature, with an additional $53.7 million due in August and $219.4
million in September. In August, $30.8 million in loans to cane
sugar producers are scheduled to mature, and $175.5 million in
September.
Rising stocks in the U.S. could be augmented later this year,
when Mexico is expected to start shipping higher quantities of sugar
into the U.S., as allowed by the North American Free Trade
Agreement.
Starting Oct. 1, Mexico can raise its tariff-free sugar exports
to 250,000 metric tons a year from 25,000 currently. The U.S.
government and Mexican counterparts are now discussing how to
implement that policy, according to USDA and industry sources, but
details aren't available.
Amy Stillwell, a USDA spokeswoman, told Dow Jones that the two
nations have exchanged data that will be applied to the formula to
calculate the amount of tariff-free sugar Mexico can export to the
U.S.. But no agreement has been reached.
"Mexico and the U.S. have exchanged production estimates -
which will be the basis for calculating the quota - but they haven't
agreed on the access level," she said. She said no new date has
been set to resume the negotiations, following the latest meeting
between the parties held on June 29.
Mexico's 2000-01 sugar output is estimated at 4.7 million tons,
with local consumption pegged at 4.2 million. The country is said by
sources close to the negotiators to be pushing to export the entire
surplus of 500,000 tons to the U.S., which American producers charge
will depress prices further.
The talks are likely to move slowly as Mexico prepares for the
new administration of president-elect Vicente Fox, which will entail
the naming of a new negotiator over the sugar trade policy.
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