U.S. Sugar

1
U.S. Sugar

• Some Implications of Changes in U.S. Sugar Policy

2
Recent Policy Changes

• NAFTA
• Free Access to Supplies from Mexico At a Price
• 2008 Farm Bill
• Increasing Support Prices Moving to a slightly
  higher priced supply
• TRQ Administration Additional Restrictions to
  Regulatory Action
• Conversion to Ethanol

3
NAFTA Open Access to Supplies from Mexico

• NAFTA allows free movement from Mexico
• Sugar must be drawn to the U.S.
• Prices must rise in the U.S. to pay for the
  transportation and form conversion charges
• 5 and up per cwt.
• Bridging Two Markets
• Quality and Form
• Estandar and Refined
• Packaging 50 Kilo poly versus bulk and 50 lb
  bag
• Movement between geographies
• Transportation
• Availability of conversion facilities
• Governmental and External Influences
• Cane Grower Supports Reference Price for Cane
• Exchange rate (Peso/Dollar)
• Energy price

4
2008 Farm Bill - Changes in Pricing Structure

• Level of price support increases
• Year Raw Sugar Refined Sugar
• 08/09 18.00 22.90
• 09/10 18.25 23.45
• 10/11 18.50 23.77
• 11/12 18.75 24.09
• 12/13 18.75 24.09

5
2008 Farm Bill - New Regulatory Restrictions on
TRQ Administration

• TRQ must be set at the minimum at beginning of
  year
• Changes thereafter are restricted
• Prior to April 1
• War or natural disaster
• Domestic sources maximized
• New requirement that cane refiner capacity be
  maximized
• Refined imports thereafter
• Problems of definition have caused some of these
  to enter as raw sugar

6
Conversion to Ethanol

• Still not implemented
• Would prospectively remove forecast surpluses
• How to define
• Problems with variability of underlying
  parameters
• Devil will be in the details
• Important to have sugar taken from the US and not
  quota origins or the incidence will fall unfairly
  on importing cane refiners.
• Broad Flexibility in form of sugar
• Raw / Thick Juice
• Refined / Syrups