WASHINGTON, July 27, 2006 - The U. S. Department of Agriculture today announced sugar program provisions for the remainder of this fiscal year (FY) and for FY 2007 concerning administration of the tariff rate quotas (TRQ's) and the domestic allotment program.
Today's action includes:
· An increase in the FY 2006 refined sugar TRQ of 100,000 short tons raw value (STRV).
· An increase in the FY 2006 specialty sugar TRQ of 9,921 STRV.
· Establishing the FY 2007 raw sugar TRQ at 1,481,497 STRV, which is 250,000 STRV above the World Trade Organization (WTO) Agreement required minimum of 1,231,497 STRV.
· Establishing the FY 2007 refined and specialty sugar TRQ at 62,832 STRV, 38,581 STRV above the WTO Agreement required minimum of 24,251 STRV.
· In accordance with the North American Free Trade Agreement (NAFTA), permitting duty-free entry of 275,578 STRV (250,000 metric tons) raw or refined Mexican sugar during FY 2007, and at least 192,904 STRV (175,000 metric tons) from October 1, 2007 through December 31, 2007.
· The FY 2006 Overall Allotment Quantity (OAQ) remains at 9,350,000 STRV and the FY 2007 OAQ is set at 8,750,000 STRV.
2006 Refined Sugar TRQ
USDA announces that the FY 2006 TRQ for refined sugar is increased 100,000 STRV.
Due to the unprecedented disruptions to the U.S. sugar market, the supply of refined sugar in the United States is below optimum levels. This adjustment in the refined sugar TRQ should provide adequate supplies to sugar users until full production of the 2006 sugar crop is well underway.
The additional refined sugar TRQ will be allocated by the United States Trade Representative (USTR). For that portion of the refined sugar TRQ increase that is unallocated, entries must be in containers of 120 metric tons or less. This limit will apply only to the FY 2006 refined sugar TRQ increase. The opening date for the TRQ will be the second business day after the day on which USTR announces its allocation. The intent of this action is to make available to the market high quality refined sugar from all available sources that are ready for immediate use.
2006 Specialty Sugar TRQ
USDA also announces that the specialty sugar TRQ is increased 9,921 STRV to 41,508 STRV. The specialty sugar TRQ will be opened on a first-come, first-served basis in two tranches of 4,960 STRV each, on August 17, 2006 and August 31, 2006. This specialty sugar must have a sucrose content, by weight in the dry state, corresponding to a polarimeter reading of 99.5 degrees or more.
These TRQ tranches (the fifth and sixth of FY 2006) of 4,960 STRV are reserved for organic sugar and other specialty sugars not currently commercially produced in the United States or reasonably available from domestic sources. Only specialty sugar certificates which specify the FY 2006 fifth and/or sixth tranches will be accepted; previously issued FY 2006 certificates will not be valid. This action is intended to address directly the market requirements for organic sugar as an ingredient in manufactured products for the rapidly growing organic foods market.
The total FY 2006 refined sugar TRQ is composed of the minimum amount of 24,251 STRV, which includes 1,825 STRV of specialty sugar, that the United States must make available in accordance with its WTO commitments; 29,762 STRV announced on August 12, 2005 for specialty sugar; 75,000 STRV announced on September 9, 2005; 150,000 STRV announced on December 2, 2005; 250,000 STRV announced February 2, 2006; and today's 109,921 STRV.
The authority for modification of TRQs is the Harmonized Tariff Schedule of the United States, Chapter 17, Additional U.S. Note 5. As a result of these two actions, the total FY 2006 refined sugar TRQ is increased from 529,013 STRV to 638,934 STRV.
2007-2008 Sugar Outlook
The July World Agriculture Supply and Demand Estimates (WASDE) Report clearly indicates that total sugar production from 2006 crop sugar beets and sugarcane along with carry-in stocks will not be sufficient to meet domestic use requirements and provide for rebuilding ending stocks to reasonable levels. Additional imported sugar thus will be required, over and above the minimum WTO TRQ import quantities.
2007 Raw Sugar TRQ
USDA today sets the FY 2007 raw sugar TRQ at 1,481,497 STRV, which is 250,000 STRV above the WTO Agreement minimum. Considering the current market situation, increased sugar use and refiners' needs for additional flexibility in acquiring and processing raw sugar, the FY 2007 raw sugar TRQ will be allowed early entry beginning August 7, 2006 and no shipping patterns will be established. Country allocations will be announced subsequently by USTR.
2007 Refined and Specialty Sugar TRQ
The FY 2007 refined sugar TRQ is established at 62,832 STRV for which the sucrose content, by weight in the dry state, must have a polarimeter reading of 99.5 degrees or more. This amount includes 24,251 STRV, the minimum level to which the United States is committed under the WTO Agreement, and an additional 38,581 STRV for specialty sugars. This additional amount combined with a specialty sugar allocation of 1,825 STRV included in the WTO Agreement minimum, brings the total specialty sugar allocation to 40,406 STRV. USTR will subsequently allocate the refined sugar TRQ.
USDA will administer the FY 2007 specialty sugar TRQ in four tranches to allow for orderly marketing throughout the year. The first, totaling 1,825 STRV, will open October 24, 2006. All specialty sugars are eligible for entry under this first tranche. The next three tranches each will be equal to 12,860 STRV. The second tranche will open on November 7, 2006; the third on February 5, 2007; and the fourth on July 24, 2007. The second, third and fourth tranches will be reserved for organic sugar and other specialty sugars not currently commercially produced in the United States or reasonably available from domestic sources.
2007-2008 NAFTA Sugar
The United States has consulted with Mexico and the two parties have determined jointly, in accordance with Annex 703.2 of NAFTA, that Mexico is projected to be a net surplus producer of sugar for the next marketing year (FY 2007). In accordance with this determination, USDA is announcing that Mexico will be permitted to enter up to 275,578 STRV (250,000 metric tons) raw or refined sugar duty free in FY 2007.
USDA notes that the United States and Mexico have concluded an agreement under which:
· As noted above, the United States will provide duty-free access to 250,000 metric tons of Mexican sugar during the next marketing year (FY 2007).
· Mexico will provide duty-free access to the Mexican market for an equivalent amount of U.S. high fructose corn syrup (HFCS) during the same period (October 1, 2006 through September 30, 2007).
· Effective January 1, 2008, Mexico will not impose duties on U.S. HFCS.
· Mexico will establish a duty-free quota for U.S. sugar of not less than 7,258 metric tons (raw value) for each of marketing years 2006, 2007 and 2008. The over-quota tariff on U.S. sugar will be eliminated effective January 1, 2008 as provided for in NAFTA.
· The United States will provide duty-free access of a minimum of 175,000 metric tons and, based on market conditions, up to 250,000 metric tons of Mexican sugar and Mexico will provide duty-free access to an equivalent amount of U.S. HFCS from October 1, 2007 through December 31, 2007.
· Mexico and the United States confirm that on July 3, 2006 they submitted a joint letter to the WTO Dispute Settlement Body regarding the elimination of Mexico's soft drink and distribution taxes.
FY 2006 OAQ
The effects of earlier disruptions, most notably last year's hurricanes, continue to affect sugar supplies as the current marketing year draws to a close. The most recent forecasts of beet and cane sugar production, in combination with the current OAQ of 9,350,000 STRV, results in a total domestic supply shortfall of 246,000 STRV. This shortfall, in accordance with statute, is reassigned as follows: 100,000 STRV to the FY 2006 refined sugar TRQ increase, 9,921 STRV to the FY 2006 specialty sugar TRQ increase, 75,000 STRV to estimated early entries of the FY 2007 raw sugar TRQ, and 61,079 STRV to FY 2006 non-program imports. These imports do not count against the import trigger of 1,532,000 STRV contained in the 2002 Farm Bill.
FY 2007 OAQ
USDA today affirms that domestic sugar marketing allotments will continue in effect for FY 2007. USDA seeks to meet the statutory objective of an orderly market operation of the program at no cost to the taxpayer to the maximum extent practicable. The calculation of the OAQ is based on the estimate of domestic sugar food use minus the amount of sugar that is expected to be supplied from alternative (non-OAQ) sources.
USDA is establishing the FY 2007 OAQ at 8,750,000 STRV. The OAQ is allocated to the beet and cane sectors as follows:
Beet Sugar: 4,755,625
Cane Sugar: 3,994,375
This allocation is estimated to result in a supply shortfall of 375,000 STRV for the cane sector, all of which is reassigned to imports. This reassignment is being made now to facilitate shipping arrangements that will help ensure availability of the sugar to the market.
Preliminary market indicators incorporating the latest available information from the July 12, WASDE report plus changes reflecting today's announcement indicate a preliminary FY 2007 situation as shown below:
Due to considerable uncertainties involving the underlying estimates, USDA will closely monitor stocks, consumption, imports, and all other program variables on an ongoing basis. During the year, appropriate adjustments will be made to the OAQ as required to ensure an adequate supply for the domestic market, avoid forfeitures, and prevent market disruptions.
Separately, the Farm Service Agency will, on an individual processor basis, adjust FY 2006 allocations and announce initial FY 2007 cane State allotments and sugarcane and sugar beet processor allocations.
For further information regarding the foreign program changes, contact Ron Lord, Foreign Agricultural Service at 202-720-2916, and for domestic program changes, contact Dan Colacicco, Farm Service Agency at 202-690-3451
Release No. 0267.06
FAS PR 0091-06
Ed Loyd (202) 720-4623