November 20, 2014

The sugar trade agreement between the U.S. and Mexico reached last month, which at first appeared as a big win for the U.S. sugar industry, is reducing imports of raw sugar from Mexico used by U.S. refiners, cutting critical feedstock. After months of disputes, the two countries reached an agreement that would set quotas and price limits on Mexican sugar imports after U.S. sugar processors accused Mexico in March of flooding the U.S. market with cheap, subsidized, refined sugar. Six out of the ten U.S. refiners are located at ports and rely on imports of raw sugar to meet their annual production capacity of 4 million to 4.4 million tons, and there are concerns that Mexican exporters will fulfill their entire U.S. quota by shipping direct consumption sugar. Refiners options for other sources of supply are limited by the tariff rate quota that only allows alternative imports if the government declares the market to be short, but because of differing definitions of ‘refined sugar’ between the two countries, market data could become skewed.

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