Frank Jenkins: USDA’s May WASDE Report
isc | May 12, 2010
Sugar industry analyst Frank Jenkins of the Jenkins Sugar Group comments on the USDA May WASDE report:
The USDA has released the monthly update of its supply and demand report for the US sugar market. The report showed an 11.6 % stocks/use ratio for 2009-10 – unchanged from the April estimate despite the 200,000 short ton quota increase announced on April 23rd. This begs a question: if an 11.6 % estimated stocks to use ratio in the April WASDE justified a 200,000 ton quota increase, does an 11.6 % stocks/use ratio in May call for another 200,000 increase? Not likely, but there is a certain logic to the question.
Looking at 2009-10, estimated cane production was reduced by 60,000 tons – the Louisiana estimate was reduced by 35,000 tons to 1.465 million tons, Texas by 24,000 tons and Hawaii by 1,000 tons. Imports under the TRQ were increased by 167,000 tons, indicating that 33,000 tons of the newly announced quota increase will not be shipped. This brings the total shortfall estimate for 2009-10 to 103,000 tons despite the USDA’s best efforts at reallocating the shortfall to capable shippers. The estimate of high-tier imports was increased by 65,000 tons to 75,000 tons. Total supply was thus increased by 172,000 tons to 11.865 million tons.
Mexican exports to the US are still estimated at 540,000 tons. As exports in the Oct-March period totaled only 225,398 tons, Mexico’s import program has underperformed and is on hiatus. Storage and financing pressures will only ease as the crop winds down, we see no reason to think exports will total more than 400,000 tons.
The estimate of domestic food use was increased by 160,000 tons to 10.300 million tons. Taking the 160,000 ton increase in food use into account, today’s report still shows a 1.65 % drop in domestic food use. Should the half-year trend in the SMD hold for the full year, the difference would be 487,190 ton increase in food use and a 487,190 reduction in ending stocks.
Frank Jenkins
Today’s release provides the first estimate of 2010-11 S&D. The estimate of beet production is 4.630 million tonnes. With the remarkable planting campaign experienced in Michigan, Minnesota and North Dakota and the full saturation of GM seed, this seems conservative. Cane production is estimated at 3.535 million tons, with Florida up 155,000 tons at 1.785 million tons and Texas up 34,000 tons at 150,000 tons. TRQ imports are pegged at the default WTO minimum and imports of Mexican sugar are estimated at 550,000 tons. Total supply is estimated at 11.479 million tons.
The demand side of the 2010-11 ledger is unchanged from 2009-10 – neither logical nor surprising. Ending stocks are estimated at 844,000 tons and the ending stocks/use ratio is 7.9 %. Overlaying our assumptions for 2009-10, beginning stocks would be 487,190 tons lower and use would be 243,595 tons higher. Ending stocks would thus be estimated at 113,215 tons, or 1.1 % of use. To get the ending stocks for 2010-11 back to 11.6 % using the USDA numbers would take a quota increase of 389,000 tons. Using our estimates, it would take an increase of 1.150 million tons to get back to an 11.6 % ending stocks/use ratio.
