Jenkins: August WASDE Fairly Remarkable

Sugar industry analyst Frank Jenkins of Jenkins Sugar Group provides perspective on the USDA August WASDE report for sugar released this week. The text portion of the report reads as follows, (with notes by Jenkins):

Projected 2009/10 U.S. sugar supply is increased 350,000 short tons, raw value, from last month. Sugar production is increased 200,000 tons and beginning stocks are increased 150,000 tons while imports are decreased 50,000 tons. The increase in sugar production is based on higher-than-expected forecast production of U.S. sugar beets (200,000 tons) and Florida sugarcane (150,000 tons), which more than offsets lower Louisiana sugarcane (-100,000). The reduction in 2009/10 imports is due to prospects for sharply higher world market prices increasing shortfall in filling the tariff rate quota (now 200,000 tons).

Estimated 2008/09 U.S. sugar supply is increased 250,000 tons, based on larger early harvest of 2009-crop sugar beets (up 100,000 tons to 4.250 million tons) and continued strong imports from Mexico (up 150,000 tons to 1.450 million tons). Sugar use is increased 100,000 tons to reflect the refined portion of the increase in imports from Mexico.

The report is fairly remarkable, reports Jenkins Sugar Group; the 300,000 ton increase in beet production from the new crop represents nearly a 6.5% increase in the crop over last month’s estimate. This, combined with the increase in the Florida production estimate of over 12% (while partially offset by the 100,000 ton reduction in Louisiana) is likely to squelch any lingering potential for an increase in imports for the balance of the current fiscal year.

Despite the assumption that 100,000 tons of additional Mexican imports will be consumed prior to the end of September, the ending stocks/use ratio for 2008-09 increased to 11.2%. Should this number hold, it would still represent the lowest stocks/use ratio at Sept. 30 in the history of the sugar program. Despite the reduction in the import estimate for 2009-10 and the hit to Louisiana production, the 2009-10 ending stocks/use increased from 3.4% to 6.7% – still in need of a million or so tons of top-off imports, but probably sufficient to put any talk of an increase before September 30 to rest.

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