USDA Announces TRQ Increase

Sugar industry says action is premature.

The USDA has announced an increase in the fiscal year 2008 refined sugar tariff-rate quota of 300,000 short tons raw value. Undersecretary of Agriculture Mark Keenum made the announcement during a teleconference addressing the 25th Annual International Sweeteners Symposium being held in Hawaii. Keenum cited several factors for the increase including the February explosion of a plant in Savannah, Ga. that cut capacity.

Sugar producers at the symposium called the action premature and prompted the American Sugar Alliance to issue a statement on the issue.

"We are unaware of any sugar buyer in this country who is having trouble finding sugar," the statement said. "And, while sugar prices have rebounded in the past couple of months, they are still far below price increases for other commodities. The USDA's actions today cast a cloud over a sugar industry that has been dealing with depressed prices and soaring input costs for some time."

The ASA says the move is a reaction to the forecast of what the sugar market will look like in 14 months, and with the often wildly swinging month to month forecasts from USDA, they feel the announcement is a major market moving action based on unknowns.

"It is understood that there are still uncertainties about U.S. domestic production, U.S. domestic consumption, hurricanes and other risks as well as uncertainties about the actions of Mexico," Keenum acknowledges. "But these actions should compensate for the lost refining capacity and give the market some insurance in case of any unanticipated interruptions."

USDA took similar action in 2006, but their predictions were wrong resulting in a sugar price freefall that according to ASA has taken two years to reverse.

"This action is exactly why Congress wrote the new Farm Bill in a way that would remove speculation from the equation and add certainty to future TRQ announcements by instructing the USDA to wait until we know the size of the U.S. and Mexican crops before increasing imports above traditional levels," ASA said in their statement. "We feel that having taken one premature action, the Department should take a deep breath and wait until unknowns take shape before acting further, as Congress intended."

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