Urgent Action Required
With the US cane sugar supply already under pressure, Hurricane Ida has pushed the situation from bad to worse and immediate action from the USDA is required to prevent disruption to the supply of cane sugar.
According to Reuters on Tuesday, Sept.1:
Two large sugar refineries in Louisiana, which were shut down before Hurricane Ida hit the state, were still not operational on Tuesday as the companies assessed damages and waited for power lines to be restored.
There were also reports of damage to sugarcane crops in the state, the second largest producer in the country after Florida, but it will take some days for agronomists and farmers to evaluate the situation, an expert said.
Perception is Not Reality
Prior to the hurricane, the USDA and DOC made a series of announcements that give the appearance that they are taking action to improve sugar supply and to prevent price increases. But look again.
• DOC increases Mexico's export limit by 17,527 tonnes - up to 99.5 pol.
• USDA increases FY'21 TRQ 90,100 tonnes - extends arrival window to 10/31/21
• USDA increases Specialty TRQ 40,000 tons
The DOC increase for Mexico only advances the shipment by a month at best, as this sugar would certainly have been shipped in October if there was no increase.
The USDA reallocation adds ZERO sugar to the supply. All of the increases would be arriving at the end of September / Early October regardless of the reallocation.
The USDA 40k increase in the specialty quota is a fraction of what would normally be allocated. It simply gives the importers a small break on paying the Tier 2 tax of 16 cents per lb.
Additionally with the expected larger Mexico quota (1.49 million ST as of the last WASDE), close to 300k will be held off the market until March 31 per the terms of the suspension agreements. This will keep the first half of the year very tight for raw sugar supply.
The current USDA policy is bad news to the food manufacturers already struggling with higher operational costs. And now with the added impact of Ida, prices could go higher. Much higher.
While we at CSC certainly agree that all segments of the supply chain must be compensated fairly, the current prices are egregious, and actions to ensure a fair price for sugar users should be our government’s policy. Actions to increase supply would also reduce inflationary pressures on the price consumers pay for their sweet treats.
We recommend that the USDA issue a substantial raw sugar TRQ increase and give it to the countries that actually have available sugar for prompt delivery. These countries include Brazil, Australia, South Africa and Swaziland, among others.
CSC Sugaright believes that ALL stakeholders matter.
And it is time for URGENT ACTION by the USDA and DOC to do Sugar Right!