Sugar Sector Challenges

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31st Annual
International Sweetener Symposium
Stowe, Vermont
August 4, 2014
Sugar Sector Challenges
Jack Roney
Director of Economics and Policy Analysis,
American Sugar Alliance
Washington, D.C.
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
1. Threats to U.S. sugar production
• 30 years of mostly flat prices and sharply rising input costs has
shrunk the industry; more closures possible = less supply certainty
• Market uncertainty, wide price fluctuations, low prices and
governments costs for sugar policy
• Defending efficient U.S. producers in the face of predatory foreign
subsidies
2. Threats to U.S. sugar consumption
• Misguided guidelines, labeling laws
• Consumer confusion regarding sugar safety, nutrition
3. Areas of common cause
• Defending consumption, USDA reporting, ISO, free trade
2
Wholesale Refined Sugar Prices and Sugar Company Closures:
Flat prices for three decades = 55 closures from 1985 to 2009
-Annual Average Prices, Cents per Pound60
Beet and Cane Mill or Refinery Closures
50
1985-89
1990-94
1995-99
2000-04
2005-09
5 Beet
8 Cane
2 Beet
4 Cane
5 Beet
9 Cane
5 Beet
7 Cane
3 Beet
7 Cane
40
30
20
Source: USDA, Table 5. Calendar-year average prices; January-June 2014.
31-W
3
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
0
1985
10
Wholesale Refined Sugar Prices and Sugar Company Closures:
Flat prices for three decades = 55 closures from 1985 to 2009
-Annual Average Prices, Cents per Pound-
User Focus:
2 Years of +50¢ Pricing
60
Beet and Cane Mill or Refinery Closures
50
1985-89
1990-94
1995-99
2000-04
2005-09
5 Beet
8 Cane
2 Beet
4 Cane
5 Beet
9 Cane
5 Beet
7 Cane
3 Beet
7 Cane
40
30
20
Source: USDA, Table 5. Calendar-year average prices; January-June 2014.
31-W
4
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
0
1985
10
Wholesale Refined Sugar Prices and Sugar Company Closures:
Flat prices for three decades = 55 closures from 1985 to 2009
-Annual Average Prices, Cents per Pound-
User Focus:
2 Years of +50¢ Pricing
60
Beet and Cane Mill or Refinery Closures
50
1985-89
1990-94
1995-99
2000-04
2005-09
5 Beet
8 Cane
2 Beet
4 Cane
5 Beet
9 Cane
5 Beet
7 Cane
3 Beet
7 Cane
40
30
20
10
Source: USDA, Table 5. Calendar-year average prices; January-June 2014.
31-W
5
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0
Producer Focus:
30 years of Flat Pricing
Since 1980's:
Producer Price for Sugar Has Fallen 8%
While Farmers' Costs Have Soared
+318%
325%
+268%
275%
225%
175%
+138%
+123%
125%
+99%
+106%
75%
25%
Sugar Price
-25%
-8%
Mixed Fertilizers
Agricultural
Machinery and
Equipment
General Inflation
(CPI)
Wage Rate
Gasoline
1980's average compared with 2013 average.
Sugar price data source: USDA , Table 4; Raw cane sugar prices, #16 contract. Input cost data source: U.S. Labor of Statistics.
Diesel Fuel
6
6b-J
Since 1980's:
Producer Price for Sugar Has Fallen 8%
While Farmers' Costs Have Soared
+318%
325%
+268%
275%
Retail sweetened-product price
categories up, on average,
about 130% since 1980's -more than general inflation rate
225%
175%
+138%
+123%
125%
+99%
+106%
75%
25%
Sugar Price
-25%
-8%
Mixed Fertilizers
Agricultural
Machinery and
Equipment
General Inflation
(CPI)
Wage Rate
Gasoline
1980's average compared with 2013 average.
Sugar price data source: USDA , Table 4; Raw cane sugar prices, #16 contract. Input cost data source: U.S. Labor of Statistics.
Diesel Fuel
7
6b-J
With Flat Sugar Prices Since 1985:
More Than Half of U.S. Sugar-Producing Operations Have Shut Down
1985 Total = 102
54 closures since 1985
42
Beet Factories
2014 Total = 48
42
Cane Mills
22
18
18
Source: American Sugar Alliance, 2014
1985
Cane Refineries
8
2009
54o
8
Since Peak in 2000: U.S. Sugar Area Down 20%
2.7
2.6
2.521
2.5
2.4
Million Acres
2.3
2.396
2.380
2.352
2.384
2.402
2.342
U.S. Beet and Cane Area
2.375
2.358
2.245
2.201
2.271
2.2
2.212
2.126
2.086
2.165
2.1
2.022 2.034
2.107
2.065
2.013
2.0
1.9
Since NAFTA began in 1993/94:
U.S. sugar acreage down 15%
Mexican sugar acreage up 66%
1.873
1.8
1.7
Source: USDA. Harvested area of sugarbeets and sugarcane for sugar and seed.
21-1g
9
100%
U.S. Sugar Production: Declining % of Consumption1
95%
91%
90%
89%
89%
88%
85% = OAQ2
85%
85%
85%
83%
81%
80%
79%
75%
78%
78%
76%
75%
73%
73%
72%
72%
70%
70%
70%
65%
60%
Source: USDA.
1Deliveries for domestic food use.
2Overall Allotment Quantity: U.S. producers' maximum access to their own market. Producers must store production in excess of the OAQ at their own expense
32013/14 Forecast, 2014/15 Projected.
3
302-11
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
1. Threats to U.S. sugar production
• Market uncertainty, wide price fluctuations, low prices
and governments costs for sugar policy
o The overwhelming cause of U.S. sugar market
uncertainty: MEXICO
11
2,500
U.S. Sugar Imports from Mexico, 1994/95-2014/15:
Large, Unpredictable Volumes
2,124
- Thousand short tons, raw value -
1,996
2,000
1,877
U.S.-Mexico free trade
in sweeteners began
January 1, 2008
1,705
1,500
1,378
1,072
Mexico's largest sugar producer/exporter:
Mexican Government -- owns and operates
one-fifth of Mexican sugar mills
1,000
827
794
693
500
182
24
52
46
84
138
39
185
171
55
134
26
0
Source: USDA, Global Agriculture Trade System(GATS) (http://apps.fas.usda.gov/gats/default.aspx), 1-17-14.
USDA, ERS: Table 24b- 2012/13 actual, 2013/14 forecast; 2014/15 projected data.
12
303
Mexican Sugar Exports to U.S. Far Exceed U.S. Needs in 2012/13 and 2013/14
--Short tons, raw value-U.S. Imports from Mexico
in 2012/13
U.S. Imports from Mexico
in 2013/14
2,500,000
2,250,000
2,124,000
2,000,000
1,750,000
1,500,000
Mexican exports
exceeded U.S. needs
by 1.4 million tons
in 2012/13;
by 0.7 million tons
expected in 2013/14
1,966,000
1,327,500
1,250,000
1,000,000
727,000
750,000
500,000
250,000
0
U.S.
Needs*
Actual
Imports
U.S.
Needs*
Forecast
Imports
Data Source: USDA, July 2014 WASDE.
* Sum of U.S. consumption and USDA target ending stocks (14.5% s/u) minus sum of U.S. beginning stocks, production, and TRQ-import commitments.
U.S. industry view: Lower stock/use ratio than 14.5% is needed to balance the market.
13
302
Mexico's Share of U.S. Sugar Consumption
20%
-- 1996/97-2014/15 -18.5%
18%
17.1%
16%
16.0%
U.S.-Mexican
free trade
in sugar
began 1/1/08
14%
15.2%
13.2%
12%
10%
9.6%
8%
7.8%
7.6%
6.6%
6%
4%
2%
0%
1.9%
1.8%
0.5%
0.9%
0.4%
1.4%
1.7%
0.6%
1.3%
0.3%
Source:
USDA WASDE Table 24b, 2012/13 acutal and 2013/14 and 2014/15 forecast. Imports for domestic use divided by deliveries for domestic food
USDA, Global Agriculture Trade System (GATS) 1-17-14.
303
Mexican Sugar Exports to U.S. and Rest of World
1996/97 - 2014/15
2,499
2,500
Thousand Metric Tons, Raw Value
2,091
2,000
1,713
Mexico Sugar Exports to the U.S.
1,500
1,558
1,378
Mexico Sugar Exports to the Rest of the World
1,076
1,000
985
966
866
677
751
524
500
413
318
128
155
38
160
14
0
Data Source: USDA; 2013/14 forecast; 2014/15 projection. June 2014 WASDE.
302-16
15
Mexican Sugar Exports to U.S. and Rest of World
1996/97 - 2014/15
2,499
Thousand Metric Tons, Raw Value
2,500
Mexican Exports to World Market, 2013/14:
GOM promise: 1.17 mmt, rv
USDA estimate: 0.69 mmt, rv
2,000
2,091
1,713
Mexico Sugar Exports to the U.S.
1,500
1,558
1,378
Mexico Sugar Exports to the Rest of the World
1,076
1,000
985
966
866
677
751
524
500
413
318
128
155
38
160
14
0
Data Source: USDA; 2013/14 forecast; 2014/15 projection. June 2014 WASDE.
302-16
16
Mexican Sugar Exports to U.S. and Rest of World
1996/97 - 2014/15
2,499
Thousand Metric Tons, Raw Value
2,500
Mexican Exports to World Market, 2013/14:
GOM promise: 1.17 mmt, rv
USDA estimate: 0.69 mmt, rv
2,000
2,091
1,713
Mexico Sugar Exports to the U.S.
1,500
1,558
1,378
Mexico Sugar Exports to the Rest of the World
1,076
1,000
966
985
USDA projects Mexico
will direct only 0.5% of
its exports to world
market in 2014/15
524
500
866
677
751
413
318
128
155
38
160
14
0
Data Source: USDA; 2013/14 forecast; 2014/15 projection. June 2014 WASDE.
302-16
Mexico Sugar: Total Imports
1,000
1996/97 - 2014/15
900
861
Since 2007/08,
Mexico has imported
more than 1.1 million
tons of sugar
for domestic use;
predicted to do
more in 2014/15
Thousand Metric Tons, Raw Value
800
Imports for domestic use = substitution:
Backfilling exports to U.S. with
third-country, dump-market sugar
700
600
505
477
474
500
400
327
300
200
307
268
240
230
226
240
191
159
100
31
41
37
43
52
63
0
Sugar Imports for Domestic Use
IMMEX Sugar Imports mostly from U.S. for Re-export
Data Sources: USDA; Economia; ASA estimates. 2013/14 and 2014/15 forecast
302-14
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
1. Threats to U.S. sugar production
• Market uncertainty, wide price fluctuations, low prices
and governments costs for sugar policy
o The overwhelming cause of U.S. sugar market
uncertainty: MEXICO
 Uncertain, excessive exports of dumped, subsidized sugar
 20% of Mexican industry owned, operated by Mexican
government
 Soaring share of U.S. sugar consumption
 Not exporting to world market as promised
 Importing from world dump market to backfill exports to
U.S. market
19
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
1. Threats to U.S. sugar production
• Market uncertainty, wide price fluctuations, low prices and
governments costs for sugar policy
o The overwhelming cause of U.S. sugar market
uncertainty: MEXICO
o U.S. filing of anti-dumping and countervailing duty
cases: Should restore fair trade and, therefore, stability,
predictability to U.S.-Mexican sugar market; avoid any
further U.S. government sugar policy costs
 ITC preliminary determination: Voted 5-0 that dumped and
subsidized imports from Mexico are causing material injury to
U.S. growers and processors, rejecting Mexican government
and industry and U.S. Sweetener User arguments (Sugar from
Mexico, USITC Publication 4467, May 2014).”
20
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
1. Threats to U.S. sugar production
• Defending efficient U.S. producers in the face of
predatory foreign subsidies
o World market remains distorted
21
40
World Average Cost of Producing Sugar
35
-- Cents per pound, raw value --
30
25
26
World average cost of producing sugar
has doubled in past decade
20
World Average Cost of Production
15
13
10
5
Have world sugar prices
reflected the cost of
producing sugar?
0
Sources: Price - USDA, New York Board of Trade/ICE, Contract #11, raw cane sugar, stowed Caribbean port; Monthly avg prices through June 2014.
Cost of Production - "Sugar Production Costs, Global Benchmarking Report," LMC International, Oxford, England, July 2014.
31J
22
40
35
World Sugar Dump Market Price:
Historically Does Not Reflect Actual Cost of Producing Sugar
-- Cents per pound, raw value --
30
25
Over past 25 years:
World average cost of producing sugar (18 cents)
has averaged 50% more than world price (12 cents)
26
20
World Average Cost of Production
17
15
10
5
World Price
(Only 20-25% of sugar
sold at this price)
0
Sources: Price - USDA, New York Board of Trade/ICE, Contract #11, raw cane sugar, stowed Caribbean port; Monthly avg prices through June 2014.
Cost of Production - "Sugar Production Costs, Global Benchmarking Report," LMC International, Oxford, England, July 2014.
31J
23
$1.20
Developed-Country Average Retail Sugar Price: 24% Higher than U.S.;
Global Average: 14% Higher than U.S.
1.17 1.16
$1.00
0.91 0.91
U.S. Dollars per pound
$0.80
0.78 0.78
0.76
0.73
American sugar consumers benefit from U.S. sugar policy:
Lower retail prices than most of rest of world,
including "free-trade" Australia and Canada
0.71
0.67 0.66 0.66
0.65 0.65 0.65 0.65 0.65
$0.60
0.59 0.58
0.57
0.55 0.54
0.48 0.47
$0.40
0.31
0.28
$0.20
$0.00
Source: SIS International Research, "Global Retail Sugar Prices," May 2012, from Euromonitor, International Monetary Fund; 2011 prices.
Surveyed countries represent 60% of global sugar consumption. Developed countries include OECD member countries and Hong Kong.
319
24
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
1. Threats to U.S. sugar production
• Defending efficient U.S. producers in the face of
predatory foreign subsidies
o World market remains distorted
o Dismantling U.S. sugar policy while foreign subsidies
rampant = unilateral disarmament
 Loss of American jobs to foreign subsidizers
 Threat of less safe, lower quality, less dependable foreign
sugar, probably at higher prices
o Seek support zero-for-zero approach: U.S. will
eliminate its sugar policy when major
producers/consumers eliminate theirs
25
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
2. Threats to U.S. sugar consumption
• Misguided guidelines, labeling laws
• Consumer confusion regarding sugar safety, nutrition
o Absurd notion that rising sugar consumption is a
major cause of rising U.S. obesity rates
26
Since 1974: U.S. Child Obesity Has Tripled, Adult Obesity Has More than Doubled;
U.S. Per Capita Sugar Consumption has Fallen by Nearly a Third
(1974=100%)
350%
300%
Child Obesity
(% of population)
250%
200%
Adult Obesity
(% of population)
150%
100%
Sugar Consumption (lbs/person)
50%
Source: Caloric Sweetener (Sugar + High Fructose Corn Syrup) Data -- Economic Research Service/USDA: ttp://www.ers.usda.gov/Briefing/sugar/data.htm
Obesity Data -- Centers for Disease Control and Prevention/HHS.
Note: Official obesity data available only for years shown.
27
206C
U.S. Per Capita Daily Calorie Consumption Rises 21% from
1970 to 2010, but Sugar & Sweeteners' Share Drops, by 9%
1970
Sugar & Sweeteners,
333, 15%
Meat, Eggs and Nuts,
528, 25%
Fats and Oils, 411,
19%
Fruit, 64, 3%
Dairy, 262, 12%
Grains, 432, 20%
Vegtables, 125, 6%
1970: Total calories: 2,155
28
2010
Total calories up 449,
but sweeteners up
only 33 --just 7.6% of rise
Sugar & Sweeteners,
367, 14%
Meat, Eggs and Nuts,
544, 21%
Fruit, 81, 3%
Fats and Oils, 616,
24%
Vegtables, 121, 4%
Dairy, 255, 10%
Grains, 620, 24%
2010: Total calories: 2,604
Source: USDA/ERS; http://www.ers.usda.gov/data-products/food-availability-%28per-capita%29-data-system.aspx
206
29
18%
16%
Sugar and Sweeteners' Share of U.S. Caloric Consumption
Drops 9% from 1970 to 2010
15.5%
14.1%
14%
12%
Sugar cannot be
blamed for rising
U.S. obesity
10%
8%
6%
4%
2%
0%
1970
2010
Source: USDA/ERS; http://www.ers.usda.gov/data-products/food-availability-%28per-capita%29-data-system.aspx
206-1
30
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
2. Threats to U.S. sugar consumption
• Misguided guidelines, labeling laws
• Consumer confusion regarding sugar safety, nutrition
o Absurd notion that rising sugar consumption is a
major cause of rising U.S. obesity rates
 In fact, U.S. per capita sugar consumption is down 34%
since its peak in 1972
 In fact, sugar and sweeteners’ share of U.S. calorie
consumption is down 9% since 1970
31
Sugar Sector Challenges
Common Concerns of Sugar Producers and Users:
3. Areas of common cause
• Defending sugar and sweetened-product consumption
 Addressing consumer misperceptions
• Defending, improving USDA sugar outlook data for U.S. and
Mexico
 Maintaining USDA sugar expertise and reporting levels; encouraging
most productive interaction among expert analysts
• U.S. rejoining the International Sugar Organization
 As instructed by Congress in 2008 and 2014 Farm Bill and as favored
by both ASA and Sweetener Users: Valuable data sharing
• Striving for genuine global free trade in sugar
 Seeking Users’ support for zero-for-zero approach
32
Sugar Sector Challenges
Summary
1. Threats to U.S. sugar production
• Producing industry severely threatened by low prices, market
uncertainty: Further decline = harm to Users, consumers as well
• 2014 Farm Bill and AD/CVD cases major steps toward restoring
some order, certainty, opportunity to cover rising production costs
2. Threats to U.S. sugar consumption
• Work throughout sugar sector to address consumer misperceptions
regarding sugar consumption, safety, nutrition
3. Areas of common cause
• Cooperate on nutrition issues, USDA reporting on sugar, ISO
membership, possibly global sugar free trade
33
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