Analyst: Increasing U.S. sugar production makes sense, what would Mexico say? | TheFencePost.com

Analyst: Increasing U.S. sugar production makes sense, what would Mexico say?

-The Hagstrom Report

From left, Frank Jenkins of JSG Commodities and Craig Ruffolo of McKeany-Flavell Company talk about the sugar market outlook. At right is the panel moderator, Ron Sterk of Sosland Publishing.

AVENTURA, Fla. — Under the U.S.-Mexican agreements to limit Mexican sugar exports to the United States, it would make sense for U.S. sugar growers to increase production, but that could lead to a crisis between the two countries, a leading sugar commodity analyst said here Tuesday at the International Sweetener Colloquium.

Under the agreements, which suspend cases against Mexico for subsidizing sugar and then dumping it in the United States, the U.S government determines each year how much sugar Mexico can ship to the United States.

This year the U.S. government has decided Mexico can send 896,000 tons. But in another year, if the Agriculture Department determines that U.S. sugar production and imports under other obligations are higher, the government could reduce Mexico's allotment.

Frank Jenkins, the president of JSG Commodities, a Connecticut firm, noted that Louisiana had expanded acreage in 2018 and produced a record crop despite heavy rains.

This year and other years, Louisiana and other sugar producing areas could have increases in production that would lead the government to reduce the Mexican imports.

"Common sense tells you they should continue to increase their production," Jenkins said.

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At present the United States produces a beet crop of about 5 million tons and a cane crop of about 4 million tons. If U.S. production rises to 5.3 million tons of beets and more than 4 million tons of cane and the government reduces the amount of sugar that Mexico can send to the United States to between 500,000 and 700,000 tons "that could be the next crisis between the United States and Mexico, Jenkins said.

The big issue, Jenkins noted, would be Mexico's attitude about its imports of high-fructose corn syrup.

Since Mexico began exporting sugar to the United States under the North American Free Trade Agreement, beverage companies have begun importing U.S.-made high-fructose corn syrup.

Despite the image of Mexican Coca-Cola as sweetened with sugar, the sweetener content of Mexican soda is now 50 percent high-fructose corn syrup, noted Craig Ruffolo, the vice president and commodity specialist at McKeany-Flavell, an Oakland, Calif., firm.

Mexican bottlers like HFCS because it is cheaper and companies have done market research to find that Mexican consumers will accept sodas with 50 percent HFCS. In the United States, the sweetener in most sodas is 100 percent HFCS.

"If Mexicans are no longer invested in the relationship (with the United States) it could be really jarring," Jenkins said.