Sugar Scoop: A Review

July 22nd, 2014

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Category: Sugar

(IngredientNews Staff) – Bill Holtgrieve, Senior Sugar Trader at International Food Products, recently revealed the latest sugar scoop at International Food Products’ recent webinar on the sugar markets view here.

Here’s what he had to say:

A look back

Sugar isn’t a commodity ingredient that goes up and down every day or even every quarter – it trends. Sugar will be up for three years and then down for three years. This is an important factor to recognize when buying sugar.

Last year, the USDA brought in 400,000 tons of raw sugar in at the wrong time. This was way more than what we needed. And on top of that, we had a record beet crop, a record domestic crop and a record Mexican cane crop. The end result caused domestic beet and cane growers to forfeit sugar. It has taken us a long time for the surplus to get out of the market.

Today

Recently, the sugar market has run up in prices between $10-13 CWT. The growers became disciplined sellers, and what was expected to be a large Mexican crop turned out to be a big disappointment.

The largest beet seller has sold about 80% of its crop for 2015. Out West, two sugar refiners sold out of sugar for 2014. They were aggressive early and hadn’t achieved the sugar content from the beets they were processing.

On the WASDE, cane sugar projection estimates have dropped from June to July. Mexico imports have also dropped in that timeframe. We expect the Mexican crop for 2014/2015 to be a lot less next year than it was this year.

Anti-Dumping Suit against Mexico

The American Sugar Coalition, a combination of domestic beet and cane growers, filed a lawsuit against Mexico claiming that sugar was dumped and subsidized in the US. The suit was turned over to the International Trade Committee (ITC). The ITC ruled there was sufficient evidence and will announce its preliminary findings in hearings scheduled for August 25th.

There are two possible outcomes from the hearing: (1) The suit is dismissed. (2) Mexico is found at fault (which we think will happen). Here’s a timeline for what could potentially happen:

  • Countervailing duties for sugar subsidizes will be announced on August 25th.  Bonds will need to be posted for exporters to bring Mexican sugar into the country at this point.
  • On September 4th, antidumping duties will be announced and bonds will need to be put in place again.
  • Once this happens, Mexico will probably announce duties on HFCS, potatoes and other items.
  • Next, the USDA/Congress/Congressional Committee will work to sort this out, trying to get a resolution to satisfy grower’s, Mexico, and keep NAFTA from being damaged.
  • If not resolved, there will be duties in place for five years.

This case prevents the USDA from announcing next year’s TRQ, which would normally happen about now. Without Mexican sugar deliveries, the April 1st TRQ adjustment could possibly turn out to to be 2 million tons more than the World Trade Organization’s minimum.

What happens from here?

If the case is dismissed, we could see some nearby softness in pricing. However, we think a negotiated settlement will happen – which favors the growers and firms prices.

The fact remains that beet and cane refiners have a nice layer of business on for 2015, which reduces downward momentum on prices.

Datagro and Kingman, sugar researchers, are both projecting world raw sugar deficits for 2014/2015. We could see a run up in cane prices sometime in 2015, which will support and influence domestic prices.

If the outcome is a settlement on sugar exported from Mexico, we could see sugar prices strongly entrenched at 35 bulk basis.

Longer term, if the world market is in a deficit position, we could see 40 BB. That would put the raw #16 market at 32 cents per lb.

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