US imports of sugar are a sticky business Commodities are complicated and sugar is complicated. Americans may enjoy their sweet treats, but the transport of the substance and trade policies surrounding the commodity, are involved and political. The United States is among the world’s largest sugar producers, with crops grown largely in Texas, Louisiana, Florida and Hawaii. And unlike most other producing countries, the U.S. has both large and well-developed sugarcane and sugar beet industries. The growth of sugarcane yields has been particularly impressive in Florida and Louisiana because of varietal improvements, investments in improved harvesting technologies, and other technological changes. Despite U.S. sugar production the country does not produce enough sugar to meet domestic consumption. As a result, almost one-fifth consumed in the U.S. must be imported. India is the largest producer of sugar in the world, followed by Brazil, the world’s largest exporter of sugar. While most countries are experiencing falling prices for the commodity, the United States – on the other hand – is seeing prices jump higher. Much of that has to do with U.S. policies surrounding sugar and this country’s importation of sugar from Mexico. Last year, Mexico provided 18% of the sugar consumed in the U.S. last year, according to the USDA.
Transport Issues The transport of sugar is fairly straight forward, although it requires expert handling. White sugar is predominantly a break bulk commodity packaged and transported in 50-pound bags of woven natural materials, such as jute, or woven plastic bags. These bags contain a plastic inner bag that is impermeable to water vapor and provides protection from contamination. The shipments are transported in both bulk containers and standard containers, subject to compliance with lower limits for water content of goods, packaging and container flooring. When the sugar shipments reach their destination, they are then loaded on trucks and taken to plants for further processing and refining, and repackaging. The decision as to transport sugar as containerized freight or as break bulk has much to do with markets, routes, and pricing and vessel availability. Today about 70% of the white-sugar trade is in containers, up 30% from a decade ago. Transport as a bulk cargo occurs only rarely. Just 19 of the world’s countries account for 95% of all buyers of white sugar in break-bulk, according to data from international trading company RCMA. The handling of the product is imperative since the most important quality feature of sugar is its purity. Sugar is highly sensitive to contamination. Moist, dirty, damaged and poorly sewn bags must not be loaded. Other constraints: Sugar must not contain sugar dust as this will attract microorganisms. Yet sugar can be stored for years as long as it is maintained at 20°C and a relative humidity <70%, sugar has a storage life measured in years. Politics, Agreements On the political side, the sugar trade has been controversial, particularly that between the United States and Mexico. US producers have been arguing that Mexico’s growth in exports to the U.S. is the result of substantial subsidies and by dumping margins of 45% or more. They also have said that Mexico is directly responsible for sinking U.S. sugar prices. These have fallen 50% since late 2011 and are back to the lows of the 1980s. Phillip Hayes, spokesperson for Washington, D.C.-based American Sugar Alliance, predicts that Mexico’s actions will cost domestic producers nearly $1 billion this crop year, and that the low-price environment has already forced U.S. farmers to plant less. The US Agriculture Department (USAD) forecasts total imports of sugar for 2015 to be 3.504 million short tons, raw value (STRV). Tariff-rate quota (TRQ) imports are projected to be 1.492 million STRV. Imports from Mexico are projected to be 1.602 million STRV. Projected deliveries for domestic use remain at 11.994 million STRV. Deliveries for food and beverage use from domestic refineries are up year-over-year through the first quarter of FY2015, while sugar imports from non-reporting entities for direct consumption are down considerably over the same period. Ending stocks for the current year are projected to be 1.666 million STRV, which would result in a supply-to-use ratio of 13.6%. In December, however, agreements were signed by the US Department of Commerce and the Government of Mexico to suspend antidumping and countervailing duty investigations on imports of sugar that had been initiated by Commerce in April 2014. The US sugar industry had filed petitions alleging that it was injured by unfair pricing and government subsidies on Mexican sugar. The agreements immediately suspend both the antidumping and countervailing duty investigations. This means Mexican sugar can enter the U.S. market free of antidumping or countervailing duties. The countervailing duty agreement also contains provisions to ensure there is not an oversupply of Mexican sugar that could cause price declines that threaten the U.S. industry and farmers. The agreements also prevent imports from being concentrated during certain times of the year, limit the amount of refined sugar that may enter the U.S. market, and establish minimum price mechanisms to guard against undercutting or suppression of U.S. prices. “We believe these agreements, which work in concert with the U.S. sugar program, effectively address the market-distorting effects of any unfairly traded sugar,” comments Assistant Secretary of Commerce for Enforcement and Compliance Paul Piquado. Meanwhile, on February 12, three U.S senators, in continuing efforts to reform the U.S. sugar program, introduced the bipartisan Sugar Reform Act of 2015. Those senators are Senators Jeanne Shaheen (D-NH), Mark Kirk (R-IL) and Pat Toomey (R-PA). The bill is similar to one introduced in 2014. Fourteen other senators joined to cosponsor the legislation. “This legislation calls for modest reforms that will give the secretary of agriculture the flexibility to adjust marketing allotments and import quotas as needed to stabilize the U.S. sugar market – ensuring the program works for all stakeholders, not just one,” says John Downs, chairman of the Coalition for Sugar Reform and president of the National Confectioners Association. Trade groups contend that the sugar program incurred some $259 million in direct costs in 2013 due to loan forfeitures that occurred only once in the past decade. Recently, the US Department of Agriculture forecast that there would be zero cost through 2024-25 under a proposed export agreement between the United States and Mexico. But supporters of reform maintain consumers bear the cost of the program through higher domestic sugar prices compared global prices. Trade groups, including the National Foreign Trade Council, urge the Senate to pass the reform bill. Opponents of reform say world sugar prices are kept artificially low by subsidies in most producing countries, and are below cost of production in those countries. They maintain that if the reform bill is passed and finalized early next year as expected, a new US-Mexico sugar deal would amount to managed trade in this commodity and “a partial rollback of a market-opening agreement both sides had negotiated in good faith” under the North America Free Trade Agreement (NAFTA).