April 19, 2012 / 12:47 PM / 5 years ago

US to need more sugar despite USDA import increase

* U.S. sugar supplies still seen tight

* May need 400,000-500,000 short tons of added imports

* USDA to evaluate domestic sweetener market in June

By Rene Pastor

NEW YORK, April 19 (Reuters) - The United States will need to import more sugar on top of what the government was allowing because supplies remain tight in the domestic market, industry sources said Thursday.

The U.S. Agriculture Department on Wednesday approved an increase in raw sugar imports of 450,000 short tons (408,233 tonnes) because of a supply crunch in the United States, one of the world’s biggest markets.

An informal survey of sugar brokers in the U.S. projected that imports of another 400,000 to 500,000 short tons (362,873-453,592 tonnes) would be needed to feed food, confectionary and industrial companies.

“I do not think it’s enough. But the USDA has to balance what the industry needs and help growers on the price front,” one broker said.

USDA said the import allowance was enough for now, but it would take another look at the market come June.

“Significant uncertainties about 2012 Mexican imports, domestic refined and raw sugar demand, the early (U.S.) sugar beet crop, and other market factors make it prudent for USDA to not increase imported supplies further at this time,” the government agency said.

USDA said it “will re-evaluate market conditions in June, as required by statute, and, as determined appropriate, increase the TRQ to bring the expected FY 2012 ending-stocks-use to within the traditional range that USDA considers adequate, 13.5 to 15.5 percent.”

The stocks-to-use ratio, which is used as an indicator of supply tightness or adequacy, had fallen to a critically low 6.8 percent in USDA’s April monthly supply report.

The TRQ, short for the tariff rate quota, is the government-administered program that allows sugar to be imported from such countries as top producer Brazil, major exporter Thailand, the Dominican Republic and the Philippines, among others.

Industry group Sweetener Users Association applauded USDA’s decision.

“SUA is particularly appreciative that USDA stated its stocks target clearly and also announced its intention to increase the TRQ further in June, in a quantity that will allow the stocks target to be reached. These steps toward greater clarity and transparency in sugar policy are extremely welcome,” it said.

Sugar traders said the impact of the USDA import order could be felt in deliveries to the May raw sugar contract which is due to expire at the close of trade on April 30.

“We were thinking that some Centrals (American) would be delivered, but they could be diverted to the U.S.,” a broker said.

The No. 16 sugar contract <0#SFS:> on the ICE Futures U.S. exchange enjoys a premium running from 8 to 10 cents over the No. 11 world sugar contract on the exchange. Imports to the U.S. are priced against the No. 16 contract.

The traders said the U.S. decision should support sugar prices because U.S. imports could eventually total almost 1.0 million short tons (907,184 tonnes).

Normally, the lion’s share of sugar imports would come from Mexico because it can export sugar to the U.S. without any restrictions under the North American Free Trade Agreement.

USDA’s monthly supply report forecast Mexico’s 2011/12 sugar output at 4.9 million tonnes. An official at one of the biggest sugar processors in the U.S. pegged it at 4.8 million tonnes.

“The hazard is that the crop has been damaged by bad weather and getting to a 4.8-million-tonne result will require that the remaining part of the crop from now on will have to be much better than the results seen to date,” the official said. “A 4.5-million-tonne output is not out of the question.”

“The Government of Mexico may have to allow more imports to satisfy both the export contracts and keep the local market supplied,” an industry source added.

Editing by John Picinich

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