Domestic Sugar Harvest Expected to Increase

Assembled by USDA economists and market analysts, the latest WASDE report – World Agriculture Supply and Demand Estimate – estimates that domestic sugar supply for the 2008/9 crop year ending September 30th will be 250,000 tons larger than previously estimated. WASDE also reports demand will be 100,000 tons larger than previous estimates, meaning that the net availability of sugar for the current year is estimated to be 150,000 tons larger than last month’s assessment.

The report, issued August 12, is good news for domestic food manufacturers, who are concerned about a possible shortage for the balance of this crop year. A coalition of companies, including General Mills Inc., Kraft Foods Inc. and ConAgra Foods Inc., has requested that USDA policymakers increase sugar import quotas to offset any possible shortfall.

The Sugar Policy Alliance, a national coalition of sugarcane and sugar beet farmers, processors, refiners and suppliers, contends that such fears are unfounded. They point out that a successful domestic harvest, along with continued healthy imports from Mexico (estimated up 150,000 tons this month to 1.450 million tons total for the 08/09 crop year) will help mitigate any possible inventory concerns.

The report also made new estimates for the sugar supply-demand balance for the 2009/10 crop year beginning October 1st. USDA estimates the beet crop will total 4.85 million tons, up 200,000 tons from last month. Cane supplies from domestic producers are also estimated to be up 50,000 tons. The estimate of imports was reduced by 50,000 tons due to expected competition for supplies from other nations, inspired by higher world sugar prices.

Imperial Sugar’s Chief of Commodities Management Pat Henneberry expresses confidence, albeit guarded, in the supply side of the equation. “It’s my job to worry about these things. Between October and April, the size of the domestic sugar crop will be known with greater certainty and the ability of Mexican sellers to supply sugar to the U.S. will become clearer. The estimate of demand will also become more certain. The USDA, armed with better information, will undoubtedly authorize a level of access to our market that will balance supply and demand. We may have to pay slightly higher prices for these sugars in international markets, but we believe sugar will be made available.”