SUGAR AND SWEETENERS                                            June 30, 1995
               Approved by the World Agricultural Outlook Board
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Sugar and Sweetener Situation and Outlook Report.  Commercial Agriculture
Division, Economic Research Service, U.S. Department of Agriculture, SSSV20N2.
 
Contents
 
Page
Summary
World Sugar
Overview
Production
Consumption
Trade
Stocks and Prices
U.S. Sugar
Production
Consumption
Trade
Stocks and Prices
Programs
U.S. Corn Sweeteners
Production
Consumption
Trade
Prices and Costs
Special Article:  Mexico:  Sugar and Corn Sweeteners, An Update
List of Tables
 
Report Coordinator
  Peter Buzzanell
  (202) 219-0886  FAX (202) 219-0042
 
Principal Contributors
  Peter Buzzanell
  Ron Lord
  Nydia Suarez
 
Database Coordinator/Graphics & Table Design
  Fannye Lockley-Jolly
 
Layout & Text Design
  Wynnice Pointer-Napper
 
Word Processing
  Betty Barrett
 
Approved by the World Agricultural Outlook Board.  Summary released June 19,
1995.  The next Sugar and Sweetener Situation and Outlook report is scheduled
for release on September 19, 1995.  Report text may be accessed electronically
through the USDA CID system.  For details, call (202) 720-9045.
 
Summary
 
World sugar production will be in surplus in 1994/95.  A mid-June revision to
India's production estimate moved the USDA forecast from a production-
consumption balance to a production surplus.  Since March, production forecasts
were revised upward for several key producing countries, such as India,
Thailand, Cuba, and Brazil.  Lower-than-originally expected consumption in
Russia and Mexico helped move sugar supplies from the previous expected deficit
to a surplus.  This surplus follows 2 years during which world stocks were
drawn down sharply.  These stock drawdowns resulted in strong world sugar
prices, particularly during the last quarter of 1994 and the first quarter of
1995.  However, world sugar prices are expected to face downward pressure due
to a forecast larger world sugar crop and increased export availabilities in
1995/96.  World sugar production in 1995/96 is forecast to increase 1.8 percent
to a record 117.7 million metric tons, and is expected to exceed world
consumption.
 
Particularly noteworthy are developments in India, where production was revised
upward 11 percent from the March forecast (1.1 million tons above USDA's May
forecast) to a record 16.0 million tons for 1994/95 and a projected 15.1
million for 1995/96.  Good weather conditions and increased planted area, which
resulted from firm market prices at planting and a hike in the minimum cane
support price, resulted in a record 1994/95 sugarcane crop of 255 million tons.

In addition, firm prices during 1993/94 enabled mills to pay outstanding
arrears to farmers, which has stimulated cane deliveries in 1994/95.  The
government provided early and late season crushing incentives, which increased
early season crush, and may raise late season crush volumes.  In addition, new
sugar mills, which were licensed during the late 1980's and early 1990's, are
coming on line with improved efficiency and greater capacity.
 
For the first-half of June, world raw sugar spot prices (f.o.b. Caribbean
ports, contract No. 11, New York) averaged 13.79 cents a pound.  In April and
May, world raw sugar spot prices averaged 13.63 and 13.49 cents, respectively. 
Prices averaged 14.63 cents for the January-March quarter, the highest since
the first quarter of 1990.  World refined sugar prices (c.i.f. contract No. 5,
London) showed a similar pattern, with prices averaging 16.31 and 17.05 cents a
pound in April and May, and 18.12 cents in January-March 1995.  Improved crop
prospects for many key cane sugar producing and exporting countries and beet
sugar producers across Europe are placing downward pressure on prices.  The
direction of prices over the next several months will be largely influenced by
weather.  If good harvest conditions continue in the Southern Hemisphere and if
sugarbeet crops across Europe receive normal rains this summer, prices are
likely to continue to weaken.  If adverse conditions develop in a number of key
countries, prices could rebound, especially since global stocks will still be
relatively tight.  Apart from weather, the level of Russian and Chinese buying
and shipments of new crop sugar from South-Central Brazil will shape the
movement of prices of both world raw and refined sugar this summer.  Again
India will be a pivotal country to watch.  Despite the record production,
imports of 400,000 tons are expected this summer, and may be used to establish
buffer stocks.  India's sugar industry is pressing the government to lift the
ban on sugar exports.  A decision has yet to be made, however, India is
expected to become a net sugar exporter during 1995/96.
 
U.S. sugar production in fiscal 1995/96 (October 1995-September 30, 1996) is
projected at 7.68 million short tons, raw value, down 3.8 percent from the
revised 1994/95 estimate.  Lower output forecasts result from a likely return
to normal yields for sugarbeets and for Louisiana sugarcane, plus the closure
of two mills in Hawaii.  Beet sugar production is forecast at 4.35 million
tons, down 200,000 tons from the revised estimate for this year.  Cane sugar
production for fiscal 1995/96 is forecast at 3.33 million tons, down 103,000
tons from the current year.  Florida, the leading producing State, is expected
to produce 1.80 million tons, up 4 percent from the weather-delayed 1994/95
harvest.  Louisiana's sugar production is forecast at 900,000 tons, down 12
percent from the record outturn this year as yields are expected to return to
more normal levels.  Hawaii's sugar industry continues its contraction as two
more sugar factories will close by mid-1996 and production drops 8 percent to
460,000 tons.  Production in Texas and Puerto Rico are expected to remain
relatively unchanged at 130,000 and 40,000 tons, respectively.
 
U.S. sugar consumption for fiscal 1995/96 is forecast at 9.53 million tons, up
1.6 percent or 150,000 tons from the revised estimate for the current year. 
The year-to-year anticipated growth rate is comparable to recent years, but
down from the 2.4-percent annual growth experienced during the second half of
the 1980's.
 
U.S. sugar import forecasts for fiscal 1995/96 are not available as the level
of the tariff rate quota (TRQ) imports has not been set.  The United States has
a commitment, under the Uruguay Round Agreement, to the World Trade
Organization (WTO) to import at least 1.256 million short tons, raw value of
sugar per year at the low tariff level of the TRQ.  Imports under USDA's
reexport programs are forecast at 825,000 tons in 1995/96.  U.S. sugar exports
for the forecast year are projected at 450,000 tons, largely consisting of
refined sugar reexports.  
 
For fiscal 1994/95, total imports are estimated at 1.68 million tons,
consisting of 1.39 million tons of TRQ sugar, 225,000 tons of sugar for the
reexports programs, 49,000 tons from Canada, 1,000 tons high tariff, and 15,000
tons for polyhydric alcohol. The estimate for imports of quota-exempt sugar for
reexport have been reduced 175,000 tons from the March estimate as refiners are
delaying imports because of substantially lower futures market prices in 1996. 
Sugar exports for 1994/95 were lowered 8 percent to 470,000 tons due to the
relatively slow pace of exports during the first-half of the year.
 
On June 13, the Secretary of Agriculture announced that a TRQ shortfall of
101,883 short tons (92,427 metric tons) is expected for the import quota period
that ends September 30, 1995.  The countries for which a shortfall is
officially declared are Barbados, Congo, Gabon, Papua New Guinea, and St. Kitts
and Nevis.  In response, the U.S. Trade Representative announced that the quota
allocations for the five countries have been suspended for the current quota
period, and are being reallocated among the remaining quota holders, except for
the 10 minimum quota-holding countries.  The Secretary of Agriculture also
reconfirmed that the August 8, 1994 announcement setting the TRQ at 1,458,333
short tons (1,322,978 metric tons) remains unchanged, and that the TRQ entry
period ends September 30, 1995.  Current U.S. supply-demand forecasts for sugar
have not been revised to reflect the reallocation of the TRQ shortfall.  
U.S. raw sugar prices (nearby futures, c.i.f., duty-paid, contract No. 14, New
York) averaged 22.93 cents a pound in the first half of June (September
contract) compared with 23.10 cents in May; 22.76 cents in April; and 22.22
cents for the first half of fiscal 1995.  Comparable prices for the first 8-1/2
months of fiscal 1994 (October through mid-June) averaged 22.02 cents.  The
upturn in prices has reflected contraction in the fiscal 1995 supply situation
in terms of domestic production, imports of nonquota sugar for reexport, and
stocks.
 
U.S. corn sweetener production in fiscal 1996 (October/September) is forecast
to total 12.2 million tons, dry basis, up 4.3 percent from the current year. 
This projection reflects expanded industry capacity and is based on recent
growth trends equal to 1990-94 averages, excluding the high and low years. 
HFCS production for fiscal 1996 is forecast at 8.15 million short tons, dry
basis, up 350,000 tons, or 4.5 percent from the current year.  HFCS-55 will
likely account for 60 percent of the total and HFCS-42 the remainder.  Combined
glucose and dextrose production are projected to reach 4.05 million tons, up
150,000 tons from the fiscal 1995 forecast.  The United States remains the
world's leading producer of corn sweeteners, accounting for about three-
quarters of global production.  For 1995/96, about 715 million bushels or 9.1
percent of the U.S. corn crop forecast at 7.9 billion bushels are expected to
be used to produce corn sweeteners by the corn wet milling industry.
 
In the U.S., HFCS-55 and HFCS-42 consistently sell at a discount to wholesale
refined sugar.  The average discount over the last 5 fiscal years has been 4.2
cents a pound for HFCS-55, and 6.4 cents for HFCS-42.  For the first 8 months
of fiscal 1995, the discount has been 6.4 and 8.5 cents, respectively.  For
May, HFCS-55 and 42 list prices averaged 18.5 and 16.2 cents a pound,
respectively.
 
World Sugar
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1/ In this report, world sugar estimates are given in metric tons equal to
2,204.6 pounds or 1,000 kilograms. U.S. estimates are presented in short tons
equal to 2,000 pounds or 907,185 kilograms. All estimates are expressed in raw
value, unless otherwise specified. It takes 1.07 tons of cane sugar, raw value,
to produce 1.0 ton of refined sugar. For beet sugar the factor is 1.07 tons raw
value sugar to 1.0 ton of refined sugar in the United States, and 1.087 tons in
other countries.
 
2/ The USDA world sugar supply and demand balance for 1994/95, released by the
Foreign Agricultural Service on June 1, indicates a balance between production
and consumption. However, a revised production estimate for India (USDA, FAS
World Agricultural Production, June 13, 1995) changes the balance to a surplus.
The United States and Mexico's supply and use also has been revised. Data for
all other countries remain unchanged from the June 1 release.
_________________________________________________________________________ 
 
 
Overview
 
Upward revisions to USDA's 1994/95 sugar estimates for world production and
consumption indicate there will be a surplus (production greater than
consumption) of about 640,000 tons in 1994/95.
--
A mid-June revision to India's production estimate moved the USDA forecast from
a production-consumption balance to a production surplus.  This contrasts with
forecasts of a world sugar deficit of 500,000 tons estimated in March and 1.2
million tons projected in December.  Increased production prospects in India,
Brazil, and Thailand are largely responsible for the higher 1994/95 ending
stocks forecast.  In addition, consumption in Russia and Mexico has been lower
than previously expected.
 
The surplus in 1994/95 follows 2 years of large sugar deficits.  The large
drawdown of world sugar stocks that result explain the strong world prices that
were at a 5-year high during the first quarter of 1995.  World sugar prices now
are facing downward pressure because of a larger world sugar production
resulting in more exportable supplies forecast for 1995/96.
 
Production
 
Higher Production Forecast
For 1995/96
 
USDA's preliminary forecast for world sugar production in 1995/96 is a record
117.7 million metric tons, raw value, up 1.8 percent from the revised 1994/95
production of 115.7 million tons, and 1 percent above the previous record of
116.5 million tons in 1991/92 (table 1).  Sugar produced from sugarcane is
forecast at a record 80.4 million tons, accounting for 68 percent of the global
sugar production forecast.  While sugarcane yields are expected to be somewhat
lower, sugarcane area harvested is forecast up nearly 3 percent to a record
12.7-million hectares.  Sugar processed from sugarbeets is forecast at 37.3
million tons, up 7 percent from 1994/95.  Global sugarbeet area harvested is
expected to be relatively unchanged at 7.8 million hectares, but yields are
forecast to be over 6 percent higher than last year's yields, largely
reflecting the improved prospects for Europe's sugarbeet agriculture.
 
Among the world's major cane sugar producing countries, large crops are
foreseen in Cuba, Brazil, India, Pakistan, and China.  Foreign investment in
Cuba's sugarcane production, mainly the purchase of production inputs, is
expected to boost sugar output by 14 percent to 4.0 million tons.  For Brazil,
production is forecast at a record 12.5-million tons, largely reflecting
continued diversion of cane from fuel-alcohol to sugar and improvements in
recovery rates.  In India, an increase in sugarcane area, combined with
relatively low cane diversion to the production of gur will likely result in
centrifugal sugar output of 15.1 million tons, only 6 percent below this
season's record output.  Pakistan's production is forecast at a record 3.6
million tons, up 3 percent from 1994/95 due to both higher expected area
harvested and yields.  China's cane sugar crop is expected to be up 5 percent
to 5.4 million tons, due to increased area harvested and some improvement in
recovery rates.  Like the United States, China is a major producer of both cane
and beet sugar, with cane sugar normally accounting for more than 80 percent of
annual production.
 
For Thailand, Australia, and the United States, also world leaders in cane
sugar production, the 1995/96 outturns are expected to be lower at 5.0, 4.9 and
3.0 million metric tons, respectively.  Yields are expected to decline in both
Thailand and Australia after record production in 1994/95.  In the United
States, area harvested is forecast to be down largely due to the closing of two
cane mills in the State of Hawaii.  For details on Mexico, which ranks as the
world's seventh largest cane sugar producer, see the special article  Mexico: 
Sugar and Corn Sweeteners, An Update on page 28.
 
The expected upturn in global beet sugar production largely reflects improved
forecasts across Europe.  The European Union's (EU-15) beet sugar production
forecast for 1995/96 is 17.4 million tons, up 6 percent from 1994/95 and
accounting for 47 percent of projected world beet sugar production (table 2). 
The EU-15 is expected to have a 3-percent increase in harvested sugarbeet area
and a potential for higher yields.  The anticipation of more favorable weather
conditions and increased planted area in France and Germany, the EU's two major
producers--with production forecasts of 4.5 and 4.2 million tons,
respectively,--will account for most of the production increase.
 
Turkey and Poland are also forecast to have improved beet sugar crops.  Normal
weather is expected to boost beet sugar output in Ukraine, up 11 percent to 4.0
million tons and Russia, up 19 percent to 2.0 million tons.  However, area in
sugarbeets in both countries is forecast to be largely unchanged, remaining
significantly below levels of the recent past.  For China and Japan, the only
significant beet sugar producers in Asia, production is expected to be improved
somewhat to 1.1 million and 650,000 tons, respectively, reflecting better
yields in China and improved recovery rates in Japan.
 
Production
Revised Upward for 1994/95
 
Since publication of the Sugar and Sweetener Situation and Outlook in March,
USDA has increased the 1994/95 world sugar production estimate by 2.1 million
tons to 115.7 million tons.  The upturn is largely attributed to better-than-
anticipated record outturns in India and Thailand and revised estimates for
Brazil and Cuba.
 
India's sugar production surged to a record 14.7 million tons through mid-May. 
With 4 months remaining in the crushing season, total sugar production is
expected to reach 16.0 million tons, including 740,000 tons of khandsari, up 37
percent from 1993/94.  Good weather conditions and increased planted area,
which resulted from firm market prices at planting and a hike in the minimum
cane support price, resulted in a record sugarcane crop of 255 million tons. 
In addition, firm prices during 1993/94 enabled mills to pay outstanding
arrears to farmers, which has stimulated cane deliveries in 1994/95.  The
Government provided early and late season crushing incentives which increased
early season crush, and may raise late season crush volumes.  New sugar mills,
which were licensed during the late 1980's and early 1990's, are coming on line
with improved efficiency and greater capacity.  Despite the record production,
imports of 400,000 tons are expected this summer, and may be used to establish
a buffer stocks.  India's sugar industry is pressing the Government to lift the
ban on sugar exports.  A decision has yet to be made, however, India is
expected to become a net sugar exporter during 1995/96.
 
Brazil's 1994/95 sugar production estimate was revised several times during the
year with the latest estimate a record 12.4 million tons, 25 percent higher
than the year before.  Both of Brazil's producing areas--the Central South
(harvest May-October) and the North/Northeast (harvest September-March)--have
experienced excellent harvest and milling seasons.  Moreover, the strong upturn
in world prices has encouraged a significant volume of cane to shift from
ethanol to sugar production.  This trend has been facilitated by investment of
many ethanol plant owners in equipment to produce sugar.
 
Consumption
Sugar Use Continues To Expand
 
World sugar consumption in 1994/95 has been revised up to 115.0 million tons,
about 900,000 tons above the March forecast.  Higher-than-expected growth in
sugar demand in China and India account for most of the higher consumption
forecast, and more than offset lower estimates for Russia and Mexico.  China is
recovering from the apparent decline in sugar consumption in 1993/94.  India
has experienced record production resulting in a substantial increase in sugar
availability for the country's 950 million people, second only to China in
population.
 
Although the USDA has not yet made a world consumption estimate for 1995/96,
continued strong sugar demand is anticipated.  Major consuming countries such
as the United States, Mexico, Brazil, India, Pakistan, and Indonesia will
likely use an additional 1.2 million tons in 1995/96.  Additionally, increased
sugar consumption is expected in countries in Central and South America,
Africa, and Asia.  The surge is due to a mix of factors, including increased
sugar production, higher consumer incomes, population growth, and rising demand
for sugar containing products such as drinks and processed foods.  However,
sugar consumption in 1995/96 in the EU, Russia, and Eastern European countries
is expected to remain at the 1994/95 level.
 
For Russia, USDA revised downward both the 1993/94 and 1994/95 consumption
estimates to 5.4 and 4.9 million tons, respectively.  The drop-off of sugar
consumption, down more than 20 percent between 1990/91 and 1994/95, has been
the result of tight family incomes and the contracting economy.  Consumption of
domestically produced sugar has also been negatively affected by increased
sugar prices and declining production.  Also, increased availability of
imported confectionery has reduced the demand for sugar from domestic
confectionery suppliers.  For 1995/96, Russia's sugar consumption is expected
to remain at 1994/95 levels.
 
Since 1980/81, global sugar consumption has expanded, reflecting population
growth and sugar's role as a staple in most of the world.  The lack of
substantial growth in recent years is due to a drop in sugar use in the
countries of the former Soviet Union and Central Europe, as well as generally
slow consumption growth in the rest of the world, apart from Asia.  Also, there
has been a significant volume of high fructose corn syrup (HFCS) substituting
for sugar in liquid sucrose markets in North America and some Asian countries.
 
Despite rapid growth in sugar consumption, Asia continues to have the lowest
per capita sugar consumption of any region.  For the world's two most populous
nations, India and China, sugar consumption in 1995/96 is projected at 15.0 and
8.0 million tons, up 3.4 and 1.9 percent from this year's record levels.  With
a combined population in 1994/95 estimated at 2.2 billion, India and China are
expected to account for nearly 60 percent of Asia's total sugar use and nearly
20 percent of the world total.  A decade earlier, India's sugar use was
estimated at 9.1 million and China's at 2.2 million tons--together only 11.5
percent of the world total.  Per capita sugar use for India is now around 14
kilograms and for China only 6 kilograms, strikingly different from the 30 to
40 kilogram range in Europe and much of Latin America.
 
Trade
 
Trade Expansion Expected in 1995/96
 
World sugar trade is forecast to increase 2.4 percent in 1995/96 to 31.0
million tons.  It is expected that improved sugar export availabilities in
1995/96 in Cuba, EU, Ukraine, and Guatemala will likely account for most of the
increase in world sugar exports next season.  USDA forecasts India's exports at
500,000 tons, more than double last year's level.  The EU-15, the world's
largest exporter, is expected to export 5.4 million tons, up marginally from
1994/95 and accounting for 18 percent of the world total (table 2).  Exports
from these countries should more than offset lower sugar shipments forecast for
Australia, Thailand, and Brazil (table 3).  Anticipated lower sugar production
in the first two countries could reduce their export availabilities, while
increased domestic demand in Brazil will lower its international sugar
shipments.
 
A recovery in the level of imports in Russia, supplied in part from a larger
Cuban crop, will be a major factor in the anticipated increase in world trade. 
USDA forecasts Russia's imports, the largest of any single country, at 3.1
million tons, up 15 percent from 1993/94.  Russia and Cuba have signed a new
barter deal for 1995/96 under which Cuba will supply Russia with 1 million tons
of sugar in exchange for 3 million tons (22 million barrels) of petroleum, and
petroleum products.  China will also import at high levels, 2.50 million tons. 
EU-15 imports, mostly ACP (African, Caribbean and Pacific) sugar under the Lome
Convention, are expected to approach 2.0 million tons.  India, a sizeable
importer the last 2 years, is not expected to import sugar in 1995/96 as
improved production should meet its domestic requirements as well as generate
an exportable surplus.  Import forecasts for the United States will not be
available until the U.S. Government sets the tariff rate import quota for
1995/96.
 
Export Estimate Raised for 1994/95
 
USDA has revised its sugar trade estimate upward for 1994/95 by 1.2 million
tons to 30.3 million.  The revision is based primarily on larger-than-expected
exportable supplies in Brazil, Cuba, China, and Thailand (table 3).  This
situation, and the fact that world prices continued strong throughout most of
the current season, helped foster the upturn in trade.
 
The growth in Brazil's exports have been particularly impressive, with export
estimates for 1994/95 put at 4.1 million tons versus 2.6 million the year
before.  According to Brazilian trade statistics, between June 1994 and January
1995, Brazil exported 2.0 million tons of crystal sugar (plantation white), 0.8
million tons of raw sugar, and 0.6 million tons of refined sugar.  This
diversity of types of exportable supplies enables Brazil to market its sugar to
a wide-range of international customers.  For example, Brazil in 1994/95
exported for the first time, an impressive 1.23 million tons of crystal sugar
to India.
 
Effective June 1, 1995, Brazil increased the export tax on sugar from 2 to 40
percent.  Some in the sugar industry fear that what has been called a temporary
measure may assume a more definite character.  The tax was imposed as a stopgap
measure with the expiration of the sugar export quota authority on May 31,
1995.  The government was expected to announce the Sugar Program before the end
of May for the 1995/96 season which for the South-Central Brazil sugarcane crop
milling has already started.  The major concern of the government is adequate
supplies of both sugar and ethanol for the domestic market.  In past Sugar
Programs, domestic sugar supplies were assured by establishing export quotas to
limit excessive exports of sugar, as well as domestic targets for ethanol
production to assure adequate supplies of fuel ethanol made from sugarcane.
 
Stocks and Prices
 
Global Stock Estimate Increased
 
World ending stocks for 1994/95 are estimated at 19.2 million tons, up from
17.6 million in March.  The new stocks-to-use ratio is 16.7 percent, compared
with 16.5 percent the year before.  Significant upward adjustments in stocks
were registered for India and Thailand due to improved production and for
Russia because of a downturn in consumption.  USDA will not forecast 1995/96
world ending stocks until after the U.S. tariff rate quota for sugar imports is
announced. 
 
World Prices Weaken
 
For the first-half of June, world raw sugar spot prices (f.o.b. Caribbean
ports, contract No. 11, New York) averaged 13.79 cents a pound.  In April and
May, world raw sugar spot prices averaged 13.63 and 13.49 cents, respectively. 
Prices averaged 14.63 cents for the January-March quarter, the highest since
the first quarter of 1990.  World refined sugar prices (c.i.f. contract No. 5,
London) showed a similar pattern, with prices averaging 16.31 and 17.05 cents a
pound in April and in May, and 18.12 cents in January-March 1995.  Improved
crop prospects for many key cane sugar producing and exporting countries and
beet sugar producers across Europe are placing downward pressure on prices.
 
However, the direction of prices over the next several months will be largely
influenced by weather.  If good harvest conditions continue in the Southern
Hemisphere and if sugarbeet crops across Europe receive normal rains this
summer, prices are likely to continue to weaken.  If adverse conditions develop
in a number of key countries, prices could rebound, especially since global
stocks will still be relatively tight.  Apart from weather, the level of
Russian and Chinese buying and shipments of new crop sugar from South-Central
Brazil will shape the movement of prices of both world raw and refined sugar
this summer.  Russia's recent decision to increase the import tariff on refined
sugar from 20 to 25 percent effective July 1 could effect the mix of raw and
refined imports and result in a weakening of world refined sugar prices.
 
U.S. Sugar
 
Production
 
Production Downturn Expected in Fiscal 1995/1996
 
U.S. sugar production in fiscal 1995/96 (October 1995-September 30, 1996) is
projected at 7.68 million short tons, raw value, down 3.8 percent from the
revised 1994/95 estimate.  Lower output results from a likely return to normal
yields for sugarbeets and for Louisiana sugarcane, plus the closure of two
mills in Hawaii.
 
Beet sugar production is forecast at 4.35 million tons, down 200,000 tons from
the revised estimate for this year.  The beet sugar forecast is underpinned by
intended plantings reported in USDA's Prospective Plantings, released March 31.

Sugarbeet growers indicated intentions to plant 1.45 million acres in 1995,
down 2 percent from last year.  USDA's forecasts of the percent of area
harvested and beet yield equal the 1990-94 averages, excluding the high and low
years.  Sugar recovery from beets (14.3 percent) excluding net additional sugar
from desugarization of molasses is the projected linear trend of 1982-94
recoveries.  Total sugar from molasses is forecast at 310,000 tons.  Net
additional sugar from molasses is forecast at 285,000 tons.
 
Of the 14 states where sugarbeets were planted this spring, the top five--
Minnesota, North Dakota, Idaho, Michigan and California--account for nearly 80
percent of the total.  All have experienced expansion in acreage in recent
years except California (table 4).
 
Rain in early March slowed sugarbeet planting in California.  Heavy rains in
mid-March flooded low-lying sugarbeet fields and caused plant loss, especially
in the Sacramento Valley.  These delays pushed planting past optimal crop
production dates.  According to industry sources, growers in California tend to
cut back acreage if weather is expected to reduce the crop's yield potential
and when prices at planting time are flat or declining.  Reflecting these
factors, USDA's National Agricultural Statistics Service (NASS) reported
prospective sugarbeet plantings in California for 1995/96 at 125,000 acres,
down 13 percent from the previous season.  In the previous several years,
sugarbeet acreage has been declining in California due to weather problems such
as the recent persistent drought which limited irrigation water supplies in
some areas and the availability to growers of more remunerative alternative
crops.
 
As of June 1, industry reports from other sugarbeet growing areas indicate that
the upcoming crop is generally progressing well, although the crop got off to a
late start in many parts of the United States due to a cool, wet spring.  These
conditions pushed back planting in growing areas in Southern Minnesota, the Red
River Valley of Minnesota and North Dakota, and western Nebraska.  In contrast,
the sugarbeet crop in Michigan was planted in the normal period and overall is
reported to be in good-to-excellent condition.
 
Cane sugar production for fiscal 1995/96 is forecast at 3.33 million tons, down
103,000 tons from the current year.  Florida, the leading producing State, is
expected to produce 1.80 million tons, up 4 percent from the weather-delayed
1994/95 harvest.  Louisiana's sugar production is forecast at 900,000 tons,
down 12 percent from the record outturn this year as yields are expected to
return to more normal levels.  Hawaii's sugar industry continues its
contraction as two more sugar factories will close by mid-1996 and production
drops 8 percent to 460,000 tons.  Production in Texas and Puerto Rico are
expected to remain relatively unchanged at 130,000 and 40,000 tons,
respectively.  USDA's cane sugar production forecast is based on estimates of
sugarcane area harvested for sugar in each State, which reflects information
from producers, processors, and other knowledgeable sources; and forecast
sugarcane yields and sugar recovery from cane equal to 1990-94 averages
excluding the high and low year for each State (table 5).
 
USDA does not issue its first survey-based sugarcane acreage report until June
30.  However, as of June 1, industry reports indicate that the upcoming
sugarcane crop is progressing well in Florida, Louisiana, Texas, and Hawaii. 
No significant freezes were reported this past winter that could have pushed
back plant growth in the mainland States.  Also, the heavy rains experienced in
southern Louisiana in May did not damage the upcoming sugarcane crop.  In
contrast, the Texas growing area has been experiencing dry conditions that
could diminish yield potential.
 
Fiscal 1994/1995 Estimate Revised Downward
 
Since the March Sugar and Sweetener Situation and Outlook, USDA has revised
downward the fiscal 1994/95 sugar production estimate by 3.1 percent or 257,000
tons to 7.98 million tons.  Despite the downturn, the revised estimate is up
4.0 percent from fiscal 1994 and represents a record high for U.S. sugar
production.
 
Beet sugar production was revised downward by 100,000 tons to 4.55 million
tons.  The decline was caused by a number of factors, including lower-than-
anticipated sugar recovery because of deterioration of stored beets late in the
processing season, some abandonment of stored beets at the end of the season,
and rains in California that disrupted processing and caused losses.
 
For 1994/95, total cane sugar production is now put at 3.48 million tons
representing 43 percent of total U.S. sugar production.  Cane sugar production
was revised downward, 157,000 tons, reflecting a 110,000-ton downward
adjustment to the Florida estimate, and a 40,000-ton contraction in Hawaii's
estimated production.  Florida, the largest cane sugar producing State,
experienced extremely wet conditions in November and December with significant
flooding in some areas.  These conditions, coupled with milling delays reduced
the overall potential of the crop.  For Hawaii, weak monthly production levels,
especially the last several months, forced a lower estimate for the year.  At
500,000 tons, Hawaii's cane sugar production has fallen to only one-half of the
1 million tons regularly produced a decade ago.
 
According to information from USDA's Consolidated Farm Service Agency (CFSA)
published in Sweetener Market Data, beet sugar production for the first 6
months of fiscal 1994/95 (October-March) totaled 3.32 million tons, accounting
for 73.0 percent of the revised estimate for the year.  This compares with 3.13
million or 75.5 percent of the estimate for the corresponding period in
1993/94.  Cane sugar production for the first 6 months of 1994/95 totaled 3.04
million tons or 87.5 percent of the forecast for the year.  This compares with
3.04 million or 84.7 percent for the same 6-month period in 1993/94.
 
Consumption
 
Expansion in Sugar Use Expected To Continue
in Fiscal 1995/96
 
U.S. sugar consumption for fiscal 1995/96 is forecast at 9.53 million tons, up
1.6 percent or 150,000 tons from the revised estimate for the current year. 
The year-to-year anticipated growth rate is comparable to recent years, but
down from the 2.4 percent annual growth experienced during the second half of
the 1980's.
 
The anticipated growth reflects population growth and increased incomes. 
Population growth is projected up nearly 1 percent to 269.2 million people
(including Puerto Rico), including an increasing number of immigrants, many of
whose traditional diets are high in sugar.  These developments, along with
increasing away-from-home food consumption, and expanded use of processed
foods, are reflected in heightened demand for sugar in commercially prepared
foods and packaged sugar for the grocery trade and institutional users.  Per
capita sugar use is forecast at 65.0 pounds for fiscal 1995/96, up 3.4 pounds
since fiscal 1986/87 when sugar use began to rebound after the soft drink
industry completed its switch to HFCS.
 
This forecast is below the average annual growth rates of recent years.  The
reduced growth rate, in part, is explained by increases in imports of sugar-
containing products, which displace some U.S. sugar deliveries.  Other factors
could be a resurgence in inroads into sugar markets by corn sweeteners,
including crystalline fructose, and expanded substitution of high intensity
sweeteners (aspartame and saccharin) for sugar.
 
Fiscal 1994/1995 Estimate Lowered
 
USDA has lowered the estimate for U.S. sugar consumption in fiscal 1994/95
published in the March report.  The sugar use estimate was revised downward by
50,000 tons to 9.38 million tons.  This represents only a 0.5 percent growth
rate over the previous year.  The slowing of the sugar use growth rate this
year is attributed to high sugar deliveries in the last quarter of 1993/94 in
anticipation of marketing allotments, reduced demand for sugar-containing
reexports, and increased use of alternative sweeteners, particularly
crystalline fructose.  For the first 6 months of fiscal 1994/95, sugar
deliveries totaled 4.42 million tons or 47.1 percent of the estimate for the
year.  Comparable data for 1993/94 was 4.45 million tons or 47.7 percent of
9.33 million tons.  During the second half of 1994/95, the pace of sugar
consumption is expected to increase and total 4.96 million or 52.9 percent of
the estimate for the year.
 
The breakdown of deliveries between beet and cane sugar shows beet sugar at
1.91 tons for the first 6 months of fiscal 1994/95, 43.2 percent of the total,
and cane sugar, 2.40 million, 54.4 percent, up from 53.0 percent the previous
year.  The remaining 2.5 percent of total deliveries for the first half of
fiscal 1995 includes importers' direct consumption, sugar reexported in
products, and sugar for polyhydric alcohol and livestock feed use.  Table 27
has delivery details by month and quarter.
 
During the first half of fiscal 1994/95, industrial use of sugar totaled 2.33
million tons, refined, compared with 2.35 million a year earlier (table 6). 
Bakery/cereal and confectionery sectors continue to underpin industrial use,
accounting for 39 and 27 percent, respectively, of total deliveries to
industrial users.  Delivery levels for these industrial users have been
relatively stable for the first half of the year.  Stronger deliveries to these
sectors, as well as an expected seasonal upsurge in demand from the ice cream
and dairy products category are expected during the last half of 1994/95.
 
USDA also tracks deliveries to non-industrial users (table 7).  This group
registered 1.75 million tons, refined, for the first half of fiscal 1995.  In
this group, wholesale grocers, jobbers, and sugar dealers accounted for 58
percent or 1.01 million tons of the total, and retail grocers and chain stores,
34 percent or 600,000 tons.
 
Table 8 provides a summary of all delivery data by region.  The North-Central
and South each accounted for 32 percent of the 4.08 million tons, refined for
the first-half of fiscal 1995.  Traditionally, the North-Central region has
been the leading use region reflecting the large number of food processing
plants concentrated in the region as well as the food stores that service the
19 percent of the U.S. population that live in the 10 state region.
------------------------------------------------------------------------
3/ USDA places the following States in the North Central region: Illinois,
Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota,
and Wisconsin.
-------------------------------------------------------------------------
 
Deliveries to the South increased 14 percent between 1990 and 1994 due to the
growth in food processing facilities in the region as well as food stores
serving the region's growing population.
 
Trade
 
Import Quota Shortfall Reallocated
 
The United States remains a large net sugar importer.  U.S. sugar import
forecasts for fiscal 1995/96 are not available as the level of tariff rate
quota (TRQ) imports has not been set.  U.S. sugar exports for the forecast year
are projected at 450,000 tons, largely consisting of refined sugar reexports. 
The United States has a commitment, under the Uruguay Round Agreement, to the
World Trade Organization (WTO) to import at least 1.256 million short tons, raw
value of sugar per year at the low tariff level of the TRQ.  Imports under
USDA's reexport programs are forecast at 825,000 tons in 1995/96.
 
For fiscal 1994/95, total imports are estimated at 1.68 million tons,
consisting of 1.39 million tons of TRQ sugar, 225,000 tons of sugar for the
reexports programs, 49,000 tons from Canada, 1,000 high tariff, and 15,000 tons
for polyhydric alcohol.  The estimate for imports of quota-exempt sugar for
reexport have been reduced 175,000 tons from the March estimate as refiners are
delaying imports because of substantially lower futures market prices in 1996. 
Sugar exports for 1994/95 were lowered 8 percent to 470,000 tons due to the
relatively slow pace of exports during the first-half of the year.
 
On June 13, the Secretary of Agriculture announced that a sugar tariff-rate
quota (TRQ) shortfall of 101,883 short tons (92,427 metric tons) is expected
for the import quota period that ends September 30, 1995.  The countries for
which a shortfall is officially declared are Barbados, Congo, Gabon, Papua New
Guinea, and St Kitts and Nevis.  In response, the U.S. Trade Representative
announced that the quota allocations for the five countries have been suspended
for the current quota period, and are being reallocated among the remaining
quota holders, except for the 10 minimum quota-holding countries.  The
Secretary of Agriculture also reconfirmed that the August 8, 1994 announcement
setting the TRQ at 1,458,333 short tons (1,322,978 metric tons) remains
unchanged, and that the TRQ entry period ends September 30, 1995.  Current U.S.
supply-demand forecasts for sugar have not been revised to reflect the
reallocation of the TRQ shortfall.
 
According to USDA's Foreign Agricultural Service, as of June 14, 1995
approximately 595,000 tons of TRQ allocations remain available for entry into
the United States by September 30, 1995 (table 9).
 
Stocks and Prices
 
Fiscal 1994/1995 Stocks Lower
 
Beginning stocks in fiscal 1995/96 are forecast at 1.15 million tons, down
187,000 from the beginning stocks for fiscal 1994/95, and 553,000 tons below
fiscal 1993/94.  Since the fiscal 1995/96 TRQ has yet to be set, no ending
stock figure can be calculated for September 30, 1996.
 
For fiscal 1994/95, ending stocks on September 30, 1995, are estimated at 1.15
million tons, down 342,000 tons from the March estimate and largely reflecting
downward adjustments in production and quota exempt imports that more than
offset adjustments to consumption and exports.  The new stock-to use ratio is
11.69 percent versus 15.02 in March.  According to USDA's stocks and price
model, for every 1 percent change in the stock level there is a corresponding
0.3-cent a pound change in price.  For this 3.33 percent negative change since
March, the model predicts about a 1.0-cent higher raw sugar price.  The revised
stock estimate includes 151,000 tons of beet sugar in excess of marketing
allotments.  The stocks-to-use ratio, without the "blocked stocks," would be
10.15 percent.
 
According to USDA's Sweetener Market Data, compiled and published by the CFSA,
sugar stocks on April 1, 1995, the midpoint in the fiscal year, totaled 3.90
million tons, compared with 4.02 million a year earlier.  Beet processors held
1.79 million tons, 46 percent of the total, only slightly below a year earlier.

The remaining stocks were held by cane mills 1.40 million (36 percent) and cane
sugar refiners 713,645 tons (18 percent).  No stocks were held by USDA's
Commodity Credit Corporation (CCC).  Normally at their highest point around
April 1, U.S. sugar stocks are then drawn down to meet domestic demand.  Stocks
are usually the lowest at the end of the fiscal year.
 
Raw Sugar Prices Strengthen
 
U.S. raw sugar prices (nearby futures, c.i.f., duty-paid, contract No. 14, New
York) averaged 22.93 cents a pound in the first half of June (September
Contract) compared with 23.10 cents in May; 22.76 cents in April; and 22.22
cents for the first half of fiscal 1995.  Comparable prices for the first 8-1/2
months of fiscal 1994 (October-mid-June) averaged 22.02 cents.  The upturn in
prices reflects contraction in the fiscal 1995 supply situation in terms of
domestic production, imports of nonquota sugar for reexport, and stocks.
 
Wholesale refined beet sugar prices (f.o.b. plant, Midwest markets) averaged
25.60 cents a pound for fiscal 1994, and 25.40 cents for the first half of
fiscal 1995, according to price data compiled by the Milling and Baking News. 
Wholesale refined beet sugar prices have remained stable during April, May, and
mid-June, averaging 25.50 cents.  The stability of refined beet prices reflects
the size of the 1994/95 beet crop, up 460,000 tons over the previous season,
the overhang on the market from blocked stocks, and slow growth in market
demand.
 
Programs
 
Sugar Marketing Allotments Continued
 
On April 11, USDA announced the third quarter (April-June) revision of sugar
marketing allotments and allocations for fiscal year 1994/95.  After re-
estimation of U.S. sugar consumption, stocks, production, and imports, USDA
determined that sugar marketing allotments, implemented October 1, 1994, should
continue.  Based on the supply-demand-price situation at the end of the
January-March quarter, reasonable ending stocks were estimated at 1.222 million
tons, up 50,000 tons from the December estimate.  This resulted in the overall
allotment quantity (OAQ) continuing unchanged at 7.889 million tons.  Based on
the revised estimates, the beet sugar percentage share of the OAQ is 55.25
percent, up 8 hundredths of a percent from the December level.  This resulted
in the beet sugar allotment totalling 4.359 million tons, compared with the
4.352 million tons previously announced.  The raw cane sugar percentage share
and allotment levels decreased a like amount, and now total 44.75 percent and
3.530 million tons, respectively.  The marginal change in beet-cane sugar
shares resulted from slight changes in the 1994/95 crop beet and cane sugar
production forecasts (March estimates were used for these calculations), and
slightly lower cane processing capacity as a result of revised cane sugar data
in crop years 1989-93.  In setting allotment levels, USDA utilizes a weighted
3-factor criteria:  past marketings (25 percent); processing capacity (25
percent); and ability to market (50 percent).
 
USDA also announced a reassignment of 50,000 tons of Hawaiian and 5,000 tons of
Puerto Rican allotments to processors in Florida, Louisiana, and Texas.  The
reassignment is a portion of the Hawaii and Puerto Rico allotments that is not
expected to be filled because of a deficit in each State's sugar supply
relative to allotment.  The reassignment in Florida, Louisiana, and Texas were
limited to only those processors whose expected production exceeded their
previous allocation.
 
In addition to sugar, marketing allotments cover crystalline fructose according
to the Farm Act of 1990.  The allotment for crystalline fructose is also
unchanged at 159,757 short tons.  The next re-estimation of the need for
marketing allotments, and if needed, allotment levels, will be made by the
beginning of the July-September quarter.
 
U.S. Corn Sweeteners
 
Production
 
U.S. Corn Crop Forecast Lower
 
The 1995/96 (September/August) U.S. corn crop is forecast at 7.90 billion
bushels, down 22 percent from the record 1994 crop, due to reduced acres and
lower expected yields.  Prolonged wet conditions in the Midwest are expected to
prevent some plantings and have delayed others.  Planted acres are forecast
down 7 percent to 73.3 million.  Harvested acres are projected to be down by a
slightly greater margin, 9 percent to 66.0 million.  The average corn yield is
projected at 119.7 bushels per acre in 1995/96.  This compares with the record
138.6 bushels per acre yield in 1994/95.  Although farmers can make very rapid
planting progress if conditions allow, late plantings could increase the risk
that more of the crop will enter the pollination stage during the typical hot
weather of July.
 
Domestic corn use for 1995/96 is forecast at 6.83 billion bushels, with feed
and residual use taking 74 percent or 5.05 billion bushels, and food, seed, and
industrial (FSI) use the remainder.  Within the FSI use sector, the corn grind
for corn sweeteners is forecast at a record 715 million bushels, or 20.0
million short tons, up 2.9 percent from the current season.
----------------------------------------------------------------------------
4/ It is assumed one 56-pound bushel of number 2, yellow dent corn, the type
used by U.S. wet millers, will yield approximately 33.33 pounds of corn
sweetener, dry basis. This means, on the average, 60 56-pound bushels of corn
are needed to produce 1 short ton of corn sweetener, dry basis, whether
fructose syrup, glucose syrup, or dextrose.
-------------------------------------------------------------------------------
Corn sweeteners represent nearly 10 percent of the projected domestic use of
the 1995/96 crop, and 40 percent of FSI use.  For 1994/95, corn used for high
fructose corn syrup (HFCS) is expected to total 465 million bushels, up 5.2
percent from the previous year.  Corn used for glucose syrup and dextrose is
expected to total 230 million bushels, up 3.1 percent from 1993/94 (table 11).
 
HFCS Output Continues To Expand, U.S.
Remains World Leader
 
U.S. corn sweetener production in fiscal 1995/96 (October/September) is
forecast to total 12.2 million tons, dry basis, up 4.3 percent from the current
year.
----------------------------------------------------------------------------
5/ In this report, U.S. corn sweetener estimates are given in short tons, dry
basis, unless otherwise specified. It is assumed HFCS-42 contains 71 percent
solids; HFCS-55, 77 percent solids; glucose corn syrup, 80.3 percent solids;
and dextrose--assumed to be monohydrate, 92 percent solids. 
-----------------------------------------------------------------------------
This projection reflects expanded industry capacity and is based on recent
growth trends equal to 1990-94 averages, excluding the high and low years. 
HFCS production for fiscal 1995/96 is forecast at 8.15 million short tons, dry
basis, up 350,000 tons, or 4.5 percent from the current year.  HFCS-55 will
likely account for 60 percent of the total and HFCS-42 the remainder.  Combined
glucose and dextrose production are projected to reach 4.05 million tons, up
150,000 tons from the fiscal 1994/95 forecast.
 
About 75 percent of HFCS output is targeted to the beverage industry which is
experiencing strong growth spurred by expansion in fast-food soft drink use,
and "new age" beverages including the fastest growing beverage category, ready-
to-drink teas.  Growth in HFCS exports to Mexico during fiscal 1995/96 is also
a factor explaining projected higher U.S. corn sweetener production (see
following article Mexico Sugar and Corn Sweetener Industries, An Update.
 
In fiscal 1994/95, U.S. production of corn sweeteners (HFCS, glucose syrup, and
dextrose) is estimated at 11.7 million tons, up 4.3 percent from the previous
year.  This forecast has been raised from the 11.6 million published in March,
reflecting higher-than-anticipated production in January-March 1995.  Total
HFCS production in fiscal 1994/95 is expected to reach 7.8 million tons, up 4.5
percent from the preceding year (figure 4).  HFCS-55 (55-percent fructose, dry
basis) continues to be the dominant corn sweetener in the United States, with
output estimated over 4.7 million tons, 5.9 percent higher than 1994.  For the
first half of fiscal 1994/95, HFCS-55 production totaled 2.1 million tons, up
8.2 percent from the year before and accounting for 45 percent of the estimate
for the year.  HFCS-42 (42-percent fructose, dry basis) production in fiscal
1994/95 is estimated at 3.1 million tons, up 2.5 percent from 1993/94.  For
October 1994 to March 1995, HFCS-42 production totaled nearly 1.4 million tons,
up 3.1 percent from a year earlier and accounting for over 44 percent of the
estimate for the year (table 12).
 
The United States remains the world's leading producer of HFCS, accounting for
75 percent of global production.  According to a leading international
sweetener analyst, world HFCS production for 1994/95 is estimated at 9.51
million tons, dry basis, up 37 percent from 1986/87.
----------------------------------------------------------------
6/ F. O. Licht, "World Corn Syrup Growth Outpaces Sugar," Reuters, March 30,
1995.
--------------------------------------------------------------- 
 
Global sugar production in the same period grew only 9.5 percent.  In addition
to the United States, other major HFCS producers in 1994/95 are Japan (870,000
tons), South Korea (330,000 tons), the EU (303,000 tons) and Canada (240,000
tons).  As in the United States, HFCS is used around the world primarily as a
liquid sweetener for the soft drink industry.
 
Combined U.S. glucose syrup and dextrose production is estimated at 3.9 million
tons for fiscal 1994/95, one-third of total U.S. corn sweetener output. 
Glucose syrup production is estimated at nearly 3.2 million tons, of which 1.5
million tons was produced October-March, up 3.9 percent from the corresponding
period the year before.  Dextrose production is estimated at 728,000 tons for
the year, of which 48 percent of the estimate was produced during the first-
half of the year.
 
Consumption
 
U.S. Corn Sweetener Domestic Use
Also Continues To Expand
 
Total U.S. corn sweetener use is expected to reach 11.6 million tons of which
U.S. production is expected to supply 98 percent of domestic demand.  USDA
forecasts fiscal 1995/96 HFCS consumption at 8.2 million tons, up 4.7 percent
from the current year.  The consumption forecast for HFCS is based on
projections of deliveries from domestic production and imports.  On a per
capita basis and using a U.S.  population of 269.2 million (including Puerto
Rico), domestic HFCS use is forecast at 61.4 pounds in fiscal 1996, up from
58.7 pounds the current year, and 49.8 pounds in fiscal 1990/91.  Glucose syrup
and dextrose deliveries are forecast at 3.4 million tons, up 4.1 percent from
the current year.
 
For fiscal 1994/95, U.S. corn sweetener use is expected to total 10.95 million
tons, up 3.9 percent from the previous year.
-------------------------------------------------------------------
7/  Domestic deliveries of corn sweeteners in "consumption" are limited to
those for domestic food and beverage use only, and do not include nonfood use.
-------------------------------------------------------------------
The composition of estimated corn sweetener use by the domestic food and
beverage industry is HFCS-55, 4.6 million tons; HFCS-42, 3.1 million; glucose
syrup, 2.7 million tons; and dextrose, 0.5 million tons.  Nonalcoholic
beverages account for more than 70 percent for total HFCS domestic food and
beverage use and nearly 90 percent for HFCS-55 alone.
 
HFCS domestic deliveries for the first half of fiscal 1994/95 totaled over 3.4
million tons, leaving nearly 4.3 million or 55 percent for the remainder of the
year, assuming USDA's current forecast (table 13).  Over the past 5 years,
deliveries during the last 2 quarters averaged 28 and 27 percent, respectively.

The major reason for recent growth of HFCS deliveries has been rising use in
nonalcoholic beverages, largely carbonated soft drinks as well as the
increasingly popular noncarbonated sports and fruit drinks and ready-to-drink
teas.
 
Domestic glucose syrup deliveries for the first half of fiscal 1994/95 totaled
1.3 million tons, up 46,000 tons from a year earlier.  For the entire fiscal
year, glucose syrup deliveries are expected to be up 3.3 percent or 88,000 tons
for the year.  In recent years, glucose growth can be attributed to expanded
use by the bakery and cereal, confectionery, and processed foods industries.
 
Domestic dextrose deliveries for the first half of fiscal 1994/95 totaled
250,000 tons, up nearly 5.0 percent from the same period last year.  Domestic
use grew slightly over 2.0 percent annually over the last 5 years.  The higher
growth was led by use in the confectionery and multiple product areas.  A minor
but positive reason for expanded nonfood use of corn sweeteners, particularly
for glucose syrup and dextrose, is a growing market for their use in the
production of chemicals and pharmaceuticals.
 
Trade
 
The United States is a Net Exporter of HFCS
 
The United States is expected to be a small net exporter of HFCS in fiscal
1994/95 and 1995/96.  For this year, HFCS imports, mostly from Canada, are
forecast to total around 113,800 short tons, down from 158,143 tons in fiscal
1993/94.  For the first 6 months of fiscal 1994/95, HFCS imports totaled 45,100
tons, down  by one-half from a year earlier.  Relatively high world sugar
prices so far this fiscal year appears to have stimulated HFCS use in Canada
and reduced the incentive to export to the United States.  World raw sugar
prices averaged 14.02 cents a pound during October 1994 through June 15, 1995,
compared with 10.82 cents during the same period in fiscal 1993/94.
 
HFCS exports, including crystalline fructose, are expected to total 114,100
short tons in fiscal 1994/95, down from 134,820 tons in fiscal 1993/94.  Most
HFCS exports go to Canada, but over the last 2 years increasing quantities have
been going to Mexico.  For the first half of fiscal 1994/95, HFCS exports
totaled 52,891 tons versus 73,572 tons for the first half of fiscal 1993/94. 
With sugar prices up in Canada, HFCS use was expected to increase and draw in
more imports than a year ago, but that has yet to occur.  U.S. HFCS exports to
Mexico totaled 25,095 tons for the first half of fiscal 1994/95, down from
32,331 tons from the corresponding period in fiscal 1993/94.  The downturn is
largely due to Mexico's major peso devaluation announced in December 1994. 
This action has made HFCS exports from the United States 30 to 45 percent more
expensive in Mexico.
 
The United States is expected to continue to be a net exporter of glucose syrup
and dextrose.  For the first 6 months of fiscal 1994/95, glucose syrup exports
totaled 16,774 tons, down from 19,192 tons the year before, and likely to total
37,400 tons for the year.  U.S. imports of glucose syrup are forecast to total
around 13,800 tons in fiscal 1994/95, nearly 11 percent above the previous
year.
 
Dextrose exports in fiscal 1994/95 are likely to total around 39,100 tons, 40
percent higher than fiscal 1993/94, based on the trend for the first 6 months. 
Dextrose imports in fiscal 1994/95 will likely total 7,700 tons.  Dextrose
imports, in recent years, have been less than one-fifth as large as dextrose
exports.  But while dextrose imports are relatively small, they continue to
grow.
 
Prices and Costs
 
HFCS Prices Expected To Seasonally Strengthen
 
In the United States, HFCS-55 and 42 consistently sell at a discount to
wholesale refined beet sugar.  The average discount over the last 5 fiscal
years has been 4.2 cents a pound for HFCS-55, and 6.4 cents for HFCS-42.  For
the first 8 months of fiscal 1995, the discount has been 6.4 and 8.5 cents,
respectively.  HFCS prices have a well-defined seasonal pattern.  For example,
after reaching plateaus in April-June and July-September 1994 of 24.8 and 24.5
cents a pound, respectively, HFCS-55 fell to 19.7 cents in October-December and
18.5 cents for January-March.  In April and May of 1995, HFCS-55 prices held
steady at 18.5 cents a pound, down 25 percent from the corresponding months in
1994.  HFCS-42 has shown a similar pattern, averaging 22.2 cents during April-
September 1994 and 17.0 cents during October-March.  HFCS-42 prices in April
and May 1995 were 16.6 cents, down by one-quarter from the corresponding months
in 1994.
 
Glucose syrup prices showed less variability as prices averaged 15.6 cents
April-September 1994, 14.6 cents October-March, and 14.2 cents in April and May
1995.  There is less seasonality in glucose syrup use and this is reflected in
the price movements over the last year.  Dextrose list prices remained
unchanged at 24.5 cents per pound from October 1989 through December 1993--a
51-month period.  List prices were increased to 26.0 cents per pound in
February 1994, then dipped to 25.5 cents in 5 of the last 7 months (November-
May).  Dextrose continues its reputation as the most expensive major U.S. corn
sweetener and the one with the most stable list prices.
 
Net Corn Costs Higher Than a Year Ago
 
The Midwest price of Number 2 yellow dent corn (the grade used by wet millers)
averaged $2.16 per bushel during October 1994-March 1995, down from $2.70 in
fiscal 1994.  The lower corn prices this season reflect the record corn crop in
1994/95.  But corn prices in April and May 1995 rose to average $2.41 and $2.50
per bushel, respectively.
 
Prices for the three major byproducts (corn oil, corn gluten feed, and meal)
for October 1994-April 1995, were mixed.  For example, Midwest corn oil prices
averaged 26.3 cents a pound during October 1994-March 1995, comparable with the
first half of fiscal 1993/94.  Midwest corn gluten meal prices averaged $227.7
per short ton during the first 6 months of fiscal 1994/95, down from $302.3 for
fiscal 1993/94.  Corn gluten feed prices averaged $84.3 per short ton, down
from $87.6 in the previous year.
 
The net corn cost (corn price less byproduct credits) to Midwestern corn
refiners averaged 89 cents a bushel during October 1994-March 1995, down from
$1.40 a bushel in fiscal 1993/94.  This is equivalent to a net corn sweetener
cost averaging 2.66 cents a pound, dry weight of sweetener, during the first 6
months of fiscal 1994/95, down from 3.91 cents for fiscal 1993/94.  For October
1994-March 1995, corn prices declined around 20 percent and net corn costs
declined 32 percent from fiscal 1994.
 
Forecasts of 1995/96 corn production to be released over the next 5 months will
affect corn prices and net corn sweetener costs.  A corn crop falling much
below 8.0 billion bushels can be expected to firm Midwest corn prices, while a
crop much larger than 9.0 billion bushels could be expected to soften prices. 
USDA forecasts the farm price of corn to average $2.45 to $2.85 a bushel in
1995/96, up about 18 percent from the $2.20-$2.30 range for 1994/95. 
Reflecting prospects for a much smaller crop in 1995/96, corn prices rose from
$2.36 per bushel in March to $2.41 in April, $2.50 in May, and $2.62 for the
first half of June.
 
Mexico:  Sugar and Corn Sweeteners, An Update
by
Peter Buzzanell and Ron Lord
----------------------------------------------------------------
8/ The authors are agricultural economists in the Field and Specialty Crops
Branch, Commercial Agricultural Division, Economic Research Service, USDA. The
authors wish to thank Dulce Flores M., Agricultural Specialist, Office of
Agricultural Affairs, American Embassy, Mexico City for her assistance in the
preparation of this article as well as officials of the U.S. and Mexican
sweetener industry.
------------------------------------------------------------------------
 
 Abstract:  Mexico's sugar production is averaging just over 4 million tons a
year.  Sugar consumption is projected to decline to 4.1 million tons in
1994/95, in part due to the economic crisis following the December 1994
devaluation of the peso.  Even with lower consumption, Mexico is forecast to be
a net sugar importer this year, and require over 300,000 tons of imports next
year when consumption is projected to rebound.  The industry was privatized in
1990/91, but the government still plays a major role, controlling the domestic
price of sugarcane and sugar, and sweetener tariff levels at the border. 
Several sugar companies have closed and others are under financial stress, and
the government is involved with decisions about mill closures.  Sugar prices
have been raised twice in 1995.  Mexico's sugar price policy will be key to not
only sugar production prospects, but also prospects for the embryonic high
fructose corn syrup (HFCS) industry and thus, indirectly, sugar consumption. 
Sugar trade between Mexico and the United States is minimal, and likely to so
remain until the end of the 15-year phase-in of NAFTA sugar provisions in 2008.
 
Key Words:  Sugar, HFCS, production, consumption, trade.
 
Introduction
 
Mexico is one of the world's largest sugar producing and consuming nations. 
While achieving a high degree of self-sufficiency, Mexico since the late 1980's
has been a consistent net importer of sugar.  In recent years, the sugar
industry has been in a state of transition as the government has ended most
production subsidies, privatized the cane milling sector, and changed its trade
policies.  The implementation of the North American Free Trade Agreement
(NAFTA), the peso devaluation announced in December 1994, the subsequent
deterioration of the economic situation,  and new investments in the sugar and
corn wet-milling industries, are beginning to reshape the Mexican industry and
the outlook for sweeteners for 1995 and beyond.
 
Sugar Production
 
Mexico's 1994/95 sugar production is up 10 percent or more over last year,
largely reflecting good growing and harvesting conditions.  USDA's official
estimate for Mexico's 1994/95 (November-October) sugar production is 4.15
million metric tons, raw value, versus 3.78 million in 1993/94.  Production
data from the Mexican sugar industry in mid-June indicate that this season's
output will surpass the record of 4.33 million tons achieved in 1992/93 (table
A-1).  USDA's initial production forecast for 1995/96 is 4.10 million tons for
the crop to be harvested next December through June (figure A-1).  The
production projection assumes normal weather and yields, and a 2-percent growth
in area harvested to 520,000 hectares (figure A-2).  Sugarcane continues to be
one of Mexico's most widely grown crops, with commercial production in 15 of
the country's 32 States.  However, four states concentrated in central Mexico--
Veracruz, Jalisco, San Luis Potosi, and Oaxaca--account for about two-thirds of
annual production.  Of Mexico's six northern-most states that border the United
States, only Tamaulipas in the northeast produces cane sugar.
 
Mexico's sugarcane growers, more than 130,000 mainly small growers, are
attempting to improve yields, but progress has been slow.  Prices of production
inputs such as fertilizer, herbicides, and fungicides are up 30 percent or more
due to the peso devaluation in December and up nearly 90 percent from May 1994
through May 1995.  Moreover, most government production subsidies have ended. 
Interest rates have risen dramatically; production loans for the 1994/95 season
carried an interest rate of 21 percent before the peso devaluation in December,
then as high as 80 to 100 percent before falling recently to the 50-percent
range.  Electricity costs also have increased due to the economic situation. 
About one-third of Mexico's sugarcane area is irrigated and growers have
cutback on the frequency of irrigation.  While good rains this season helped
compensate for the cutback in irrigation, if the cutback continues it could
adversely affect productivity.  Nevertheless, despite the recent financial
problems and longer term technology transfer problems associated with a
production sector dominated by small holders, Mexico's sugarcane quality has
been generally good by world standards.  According to USDA indicators, Mexico
has the world's seventh largest cane sugar industry, which ranks sixth in
overall productivity (table A-2).
 
Mexico's Secretary of Agriculture, Livestock, and Rural Development published
sugarcane producer price regulations in the Diario Official on July 27, 1993. 
These regulations set the standards for planting, harvesting, and delivering
sugarcane in Mexico.  In addition, cane prices are to be calculated as a
percentage of the monthly wholesale price for one kilogram of standard sugar,
fob mill.  For 1994/95, the cane price is calculated at 55 percent of the
wholesale price for standard sugar, up from 54 percent in 1993/94.  This
percentage will be gradually increased to 57 percent over the next 3 years.
 
Sugar Mills
 
Much of Mexico's cane sugar milling sector has been struggling financially
since the Government privatization initiative began in 1990/91.  Several
privatized sugar mills have had serious financial problems and have filed for
bankruptcy.  Three mills have closed, but the remaining 61 mills all operated
during the 1994/95 milling season.  Of these, four operated under Government
supervision because they had declared bankruptcy in 1993.  Several others have
been working under severe financial stress.
 
There are no stand-alone sugar refineries in Mexico.  All refined sugar
production takes place in integrated milling and refining facilities. 
Currently, Mexico has 18 integrated cane milling-refinery facilities, 14 of
them are owned by subsidiaries of either Pepsi Cola or Coca-Cola.  With its
acquisition and upgrading of cane sugar mills and linked refineries, Pepsi Cola
currently produces about two-thirds of Mexico's refined sugar.
 
With the peso devaluation, cane mill and integrated mill-refinery owners face
higher costs.  Moreover, the Government's sugar credit agency, Financiera
Azucarera S.A., is providing fewer credits than in recent years.  Also,
commercial bank credit is difficult to obtain given the current economic
situation.
 
Sugarcane area servicing the country's mills is likely to remain relatively
stable for the foreseeable future.  While in recent years there has been a
limited shift of land from sugarcane to other products such as citrus,
vegetables, and tropical fruits, it is unlikely that any large shifts will
occur, given the social benefits that are attached to the growing of sugarcane
such as medical care costs provided by mill companies to growers.  In addition,
mills are required by law and their union contracts to pay a large share of
social service costs for mill workers, including medical care, retirement, and
housing.  Thus sugar mills provide important employment and social service
functions in the communities and farming areas across rural Mexico.  However,
some mills have not been able to keep up with paying production and social
service costs due to the depressed financial situation and market price of
sugar.  Moreover, as long as mills experience financial difficulties, growers
will find it difficult to obtain credit to increase area and improve yields.
 
However, new investments could improve the situation for some segments of the
sugar industry.  For example, Tate & Lyle has purchased a 49-percent interest
in Mexico's fifth largest sugar group, Grupo Industrial Azucarero de Occidente
SA de CV.  The investment, which includes three cane mills linked to refineries
and distilleries, was reported to be US$56 million.  The mills and adjoining
refineries are located in the States of Tamaulipas bordering Texas and the Gulf
of Mexico and Jalisco where Guadalajara, Mexico's second largest city, is
located.  The remaining 51 percent of Grupo Industrial Azucarero, also known as
the Saenz Group, will be retained by the Saenz family.  The joint venture plan
is to expand production from 250,000 tons to 350,000 tons by 1998.  Tate & Lyle
is also reported to be supplying technological assistance to the Escorpion
Group's San Cristobal mill and refinery, located in the State of Veracruz.  San
Cristobal is the largest sugar mill in Mexico, processing an estimated 20,000
tons of sugarcane per day and producing around 200,000 tons of sugar annually. 
Also, Savannah Foods and Industries, Inc. has formed a joint venture with Grupo
Azucarero Mexico to improve the packaging and retail distribution of sugar. 
Savannah will reportedly invest $50 million in the joint venture.  Prior to the
privatization, the Government handled all the marketing of sugar within Mexico.
 
Trade sources report that owners of 6 to 8 mills are upgrading their facilities
to produce refined sugar.  For example, two mills--Alvaro Oregon in the State
of Quintana Roo and A.Lopez Mateos in the State of Oaxaca--are currently being
upgraded to produce refined sugar.  In addition, subsidiaries of Pepsi Cola Co.
have multi-million dollar investment programs underway to upgrade their mills. 
All in all, it appears that the larger, better financed mills located in good
producing areas will remain viable in the future, while the smaller,
financially weak mills will either merge with stronger mills or eventually
close.
 
Sugar Consumption
 
Mexico's sugar consumption for 1994/95 is estimated at 4.10 million tons, the
5th highest in the world for a country that ranks 10th in world population
(table A-3).  This estimate represents a 3.8-percent or 160,000-ton decrease
from 1993/94, and the 2nd year in a row of falling consumption.  For 1993/94,
Mexican sugar use fell for the first time since the early 1980's, despite a 3.1
percent growth in gross domestic product (GDP) registered for 1994 (figure A-
5).  The downturn was largely attributed to an increase in imports of food
products that contained sugar, such as chocolates and hard candies whose prices
were reduced due to lower tariffs under NAFTA.
 
For 1995 fewer sugar-containing products are expected to be imported because of
the peso devaluation that makes these products much more expensive.  In
December 1994, the peso was devalued 30 percent against the dollar and by mid-
1995 the exchange rate has been fluctuating from about 5.90 to 6.30 pesos to
the dollar versus 3.46 before the December devaluation.  Over the last year
(May 1994-May 1995) the devaluation of the Mexican peso has been close to 90
percent.  As a result, some imported chocolates have doubled in price because
of the devaluation.  Mexican consumers would be expected to switch back to
cheaper domestic products and thereby increase the demand for sugar by the
Mexican confectionery industry, however, the general deterioration of the
Mexican economy is expected to more than offset these changes as the purchasing
power of consumers has been sharply reduced.  U.S. forecasters are now
estimating a 2.1-percent contraction in GDP in 1995.  Mexico's Centro de
Estudios Economicos de Sector Privado (CEESP) is forecasting an even sharper
contraction, -4.1 percent.  If the Mexican economy contracts that much, USDA's
sugar consumption estimate for 1994/95 may be too high.
 
Looking ahead to 1995/96, USDA projects Mexico's sugar consumption at 4.34
million tons, up nearly 6 percent, reflecting Mexico's 2.2 percent annual
population growth and an expected rebound in the economy.  Mexico's GDP is
projected by U.S. forecasters to grow 2.5 percent in 1996 and then jump to a
4.7-percent growth rate in 1997.
 
Sugar demand in Mexico is split between industrial users, which are expected to
account for about 55 percent of the 1995/96 consumption forecast, and direct
household use for the remaining 45 percent.  Within the industrial sector, soft
drink manufacturers are expected to account for about 57 percent, bakeries 15
percent, confectionery 13 percent, and others the remaining 15 percent.  Soft
drink producers are expected to use 1.3 million tons of sugar, refined weight
(1.4 million tons, raw value), in calendar 1995 (figure A-6).  Soft drink
producers caught in the economic downturn, expect consumption to increase only
about 1.8 percent or less in 1995, compared with 5 percent in 1994.  In 1994,
Mexico's soft drink industry produced about 13.25 billion liters (3.5 billion
gallons) of soft drinks or about 148 liters (39 gallons) per capita for a
population of nearly 90 million, of which more than one-half are under 21 years
old.  Mexico is firmly in second place after the United States in global per
capita soft drink consumption.  The United States has the world's highest per
capita soft drink consumption of about 189 liters (50 gallons).
 
The long-run outlook for the Mexican soft drink market is for continued growth,
and soft drink bottlers will continue to fight for expanded market shares.  The
industry is composed of the world's two major international bottlers, Coca-Cola
and Pepsi Cola, four major national brands, and a number of smaller brands. 
Reflecting the size and potential growth rate of the market, Coca-Cola recently
announced it will invest US$1.5 billion in several new plants.  The Pepsi Cola
company announced $750 million in investments in three new plants.
 
Normally soft drink bottlers require refined sugar to meet their bottling
specifications.  However, due to periodic shortages of refined sugar, Pepsi,
Coca-Cola, and many national brands have used standard or plantation white
sugar which has color, turbidity and ash differences compared with refined
sugar.  The large soft drink bottlers and other mill owners are working on
technologies to improve the quality of standard sugar as well as increase the
capacity to produce refined sugar.  The new technologies to upgrade standard
sugar include filtration systems and ion-exchange systems.
 
Efforts to increase Mexico's refined sugar capability are seen in the growth of
refined sugar production.  According to the Mexican milling industry, a record
1.72 million tons of refined sugar has been produced during the 1994/95 season
through the end of May, up 13 percent from the previous record achieved in
1992/93.  This season refined sugar will account for about 43 percent of total
production, compared to 33 percent in the late 1980's (table-4).
 
The current wholesale price difference between standard and refined is about 11
percent or 258 pesos per metric ton.  At the retail level the difference is 9
percent or .25 pesos per kilogram.  The gap between standard and refined sugar
has narrowed leading to increased use of refined sugar by the household sector.

As recently as the late 1980's about 90 percent of household use was standard
sugar.  A recent study indicated that Mexican demand for refined sugar will
rise by about 3 percent per year over the next several years, largely for the
soft drink industry as well as growing household demand.
 
The Government of Mexico still controls the wholesale and retail prices of
sugar.  These prices are calculated and published by the Secretariat of
Commerce and Industrial Development (SECOFI).  Due to the economic situation,
sugar prices were increased 10 to 11 percent in February, and again in May
1995.  As of May 19, Mexico's wholesale sugar prices, fob mill, are 2,127 pesos
per metric ton for standard sugar, and 2,385 pesos for refined sugar.  Retail
prices were increased to 2.70 pesos per kilogram for standard, and 2.95 pesos
for refined.  At an exchange rate of 6.1 pesos per 1 U.S. dollar, the 2.95
pesos per kilogram for refined sugar translates into 21.9 U.S. cents a pound. 
The Mexican Government's recent increases in sugar prices are in line with
other increases in agricultural products due to the peso devaluation.  For the
sugar mills, the recent price increases have helped the industry pay growers
for the current sugar crop.
 
Sugar Trade
 
For 1994/95, Mexico is expected to be a net importing country, importing an
estimated 130,000 tons and exporting 100,000 tons (table A-3).  Some exports
are likely to be those under the U.S. tariff rate quota.  Due to the peso
devaluation, Mexican sugar is now cheaper than in the United States so there is
an incentive to fill the U.S. quota.  Over the past 2 years, the U.S. import
quota for Mexico went unfilled since sugar prices in Mexico were higher than
those in the United States.  However, the larger share of exports are expected
to go out under a special Temporary Export Program announced officially on
April 29, 1995.  The regulation establishes a US$260 per ton export tax, and
says exporters may be exempted from the tax if they obtain a "certificate of
exemption" issued by SECOFI (table A-5).  According to SECOFI, exporters will
receive the exemption if they pledge to re-import an equivalent amount of sugar
within 6 months.  The re-import requirement can be waived if the Government of
Mexico determines that the sugar will not be needed.  This season's expected
record production, the fall-off in domestic demand, the high cost of storing
sugar, and the liquidity provided to millers from cash export sales, are
factors which led the Government of Mexico to implement the program.
 
Of total imports in 1994/95, 120,000 tons are expected to be raw sugar with the
balance refined sugar.  When Mexico imports raw sugar, Guatemala, Costa Rica,
and Colombia are likely to be key sources of supply.  Recent trade agreements
between the Government of Mexico and these countries now provide for limited
duty free access for their sugar in the Mexican market.  While refined sugar
imports are expected to be small, this situation could change.  Some Mexican
soft drink bottling companies now using standard sugar in their formulations
could switch to imported refined sugar if the flavor of their products is
affected adversely.
 
Looking ahead to 1995/96, Mexico's sugar imports are expected to rise to
330,000 tons, the highest since 1990/91 as stocks fall and consumption expands.

Sugar-containing product imports are expected to remain depressed largely due
to higher prices resulting from the peso devaluation.
 
Mexico's specific sugar import tariffs were published by SECOFI on November 30,
1994 (table A-4).  Under NAFTA, the tariff for exporters from the United States
who do not participate in USDA's sugar reexport program is 92 percent of the
general Mexican sugar import tariff.  Sugar entering into Mexico under the
USDA's refined sugar reexport program pays the full Most Favored Nation (MFN)
duty.
 
Also under NAFTA, Mexico's tariffs for sugar-containing products such as
chocolates and candies from the United States fall to zero over a 10-year
period.  But if U.S. exporters use USDA's reexport program for products--taking
advantage of lower-priced world sugar--these products must pay the standing MFN
duty.  Confectionery tariffs are currently 18 percent and will decrease 2
percent per year to zero in 2003.  Prior to NAFTA, starting in 1989 they were
20 percent and before that 45 percent.
 
NAFTA provisions govern the quantity of sugar which may be traded duty-free
between each country.  Since 1982, Mexico has been included within a basket
category of the U.S. import quota program known as the "other specified
countries and areas" and has been allocated a minimum quota amount, currently
set at an annual rate of 7,258 metric tons, raw value.  The NAFTA duty free
import level is the greater of this access or Mexico's net surplus production,
but no greater than 25,000 metric tons during the first 6 years or 250,000 tons
during the remaining 8 years of the NAFTA implementation period.  During each
of the first 14 years of the NAFTA, Mexico and the United States will jointly
determine whether either has been or is projected to be a net surplus producer.

For the purposes of the NAFTA formulas, high fructose corn syrup (HFCS) is
included in determining the consumption of sugar.  For 1994/95
(October/September) the joint determinations were that neither country was a
net surplus producer.
 
The Future of HFCS in Mexico
 
Currently, there is no large scale use of alternative sweeteners in the Mexican
market.  The primary caloric sweetener remains sugar, with domestically
produced honey a distant second.  Mexico's domestic consumption of honey is
estimated at between 12,000 and 13,000 tons annually for a per capita use of
about 1.3 kilograms.  This compares with per capita sugar use of 45 kilograms. 
The low-calorie or high intensity sweeteners, saccharin and aspartame, are used
but in small amounts.  Aspartame is used in diet soft drinks, but diet products
represent less than 5 percent of Mexico's total soft drink market.
 
The key potential substitute sweetener is the corn sweetener, high fructose
corn syrup (HFCS).  While still relatively small in scale, Mexico's imports of
HFCS, all from the United States, have been growing (figure A-7).  For
marketing year 1993/94 (November-October), Mexico's imports of HFCS-42 were
21,164 metric tons, dry weight basis, up from 16,585 in 1992/93, and 9,119 tons
in 1991/92.  HFCS-42 imports have gone largely to those baking and
confectionery industries located in Mexico's states and large cities that
border the United States.  For 1994/95, U.S. trade data for November 1994
through March 1995 total 3,727 short tons, compared with 10,507 tons for the
comparable period a year earlier.  The downturn since December apparently
reflects the impact of the December peso devaluation which raised HFCS-42
prices by about 30 percent.  HFCS-55 imports have been higher, but show a
similar recent pattern.  For 1993/94, HFCS-55 imports--traditionally used in
the soft drink bottling industry as a liquid sweetener substitute for sugar--
totaled 23,444 metric tons, dry basis, compared with 17,012 tons and 12,757
tons, respectively for the 2 previous years.  HFCS-55 imports have gone largely
to soft drink bottlers in the border areas.
 
Helping to foster these imports have been a declining tariff on HFCS.  Under
NAFTA, the tariff on HFCS drops 1-1/2-percent a year from 15 percent to zero by
2004.  For 1994, the tariff on HFCS was 13.5 percent, and this year it is 12.0
percent ad valorem.  However, for the first 5 months of 1994/95, HFCS-55
imports totaled only 10,915 tons, compared with 20,364 tons a year ago, a 46-
percent decline.  The fall in imports has been particularly noticeable since
the peso devaluation in December.
 
To facilitate the potential trade in HFCS into Mexico, Cargill Inc. within the
last year has opened corn sweetener storage terminals at Reynosa, on the U.S.-
Mexico border in the State of Tamaulipas and at Tula, about 30 miles north of
Mexico City in the State of Hidalgo.  The first terminal is situated to service
potential product distribution points in Mexico's northeastern States. 
Northwestern border areas are expected to be serviced by the existing terminal
located in Los Angeles.  The second terminal is situated to service the
potential market for HFCS in central Mexico.
 
The prospect for production of HFCS in Mexico has been a lingering question
since discussions about NAFTA and its sweetener provisions began in the early
1990's.  While Mexico has had a corn wet milling industry that produces
traditional products such as starch and corn oil, production of HFCS, either
from imported or domestically grown corn, has been negligible.  This has been
due, in part, to Mexican government corn policies that have maintained high
domestic support prices for corn, which have made production of HFCS
unprofitable.  In addition, the price of sugar was held very low prior to the
privatization of the Mexican sugar industry.  As a result, there has been
concern by corn-wet millers as to the long term risks posed to HFCS production
in Mexico by a resurgent Mexican sugar industry.
 
Historically, Mexican corn prices have been very high, more than twice the U.S.
price in the early 1990's.  Recently, Mexican corn was priced at about US$116
per ton or approximately $2.92 per bushel.  This compares with a pre-
devaluation level of $4.68 per bushel.  These changes are mostly linked to the
devaluation as well as to the Government of Mexico's PROCAMPO program.  Under
PROCAMPO, the Government announced plans to abolish price supports and in their
place provide direct income support to the Mexican farm sector with corn
producers a pivotal part of the program.  PROCAMPO is expected to have a
significant impact on Mexico's crop production mix over the medium and long
term.  USDA analysts believe that a sizeable share of Mexico's corn area will
find its way into other crops as prices decline, with only about one-quarter of
Mexico's corn land capable of competing with U.S. corn yields.  As Mexico's
corn production declines, imports are expected to increase beyond the initial
2.5 million tons duty free level under NAFTA (figure A-8).  In 1994, the
Mexican corn import quota was filled (table A-6).  The quota increases 3
percent annually under NAFTA, but the Government of Mexico can waive import
duties on shipments above quota.  Some of the yellow corn imported from the
United States goes to wet millers, while domestic corn, mainly white corn, will
probably continue to be preferred for food use.
-------------------------------------------------------------------
9/ According to corn wet mill industry officials, Mexican white corn
"technically" can be used to produce HFCS and other corn wet mill products.
---------------------------------------------------------------------
 
As Mexican corn prices fall in line with U.S. prices plus freight, corn wet
millers' starch costs will decline substantially.  This will come at a time
when corn wet milling co-product markets in Mexico for corn oil and gluten feed
and meal are expected to expand and the potential for a Mexican-based HFCS
market becomes economically feasible.  Indicative of these changing conditions
are recent announcements concerning HFCS capacity:
 
     o   ALMEX, a Staley Company and a subsidiary of Tate and Lyle, in a joint
venture with Archer Daniels Midland (ADM) has an HFCS production facility under
construction in Guadalajara located in the State of Jalisco.  The facility is
expected to go on line in August 1995.
     o   ARANCIA, Mexico's largest corn wet miller, has formed a joint venture
with CPC International.  They have a plant under construction in San Juan del
Rio in the State of Queretaro, about 100 miles northwest of Mexico City.  HFCS
production from the new plant is expected to come on line by mid-1996.
 
Over the long run, HFCS use in Mexico is likely to capture a sizeable share of
the soft drink market provided sugar prices are high enough.  Much of future
Mexican HFCS production will likely be based on imported U.S. corn.  Aside from
quality factors, a continued lower Mexican corn price would provide an
incentive for corn-wet millers to supplement U.S. corn with more corn produced
in Mexico.  HFCS imports from the United States are also likely to remain a key
source of supply, especially for industries along the U.S.-Mexico border.  In
fact, some of the new capacity now on line in the United States is earmarked to
develop that border market.
 
List of Tables
Page
 
 1.  World sugar supply and use and stocks-to-consumption ratio and world
     prices
 2.  European Union (EU-15) sugar production, supply, and distribution
 3.  World sugar trade, by leading sugar exporters and importers
 4.  U.S. sugarbeet area, yield, and production trends   5.  U.S. sugarbeet,
     beet sugar, sugarcane, cane sugar:  Area, yield, production, output,
     recovery rate, and sugar yield per acre
 6.  U.S. sugar deliveries for human consumption, by industrial user, calendar
     years and quarters
 7.  U.S. sugar deliveries for human consumption, by non-industrial users,
     calendar years and quarters
 8.  U.S. sugar deliveries by region, calendar years and quarters
 9.  U.S. sugar imports under quota and tariff-rate quota, by country
10.  U.S. cane sugar refiners:  Company, factory location, and capacity
11.  U.S. wet milled use of field corn, crop years
12.  U.S. high fructose corn syrup (HFCS) production, quarterly, fiscal, and
     calendar years
13.  U.S. sugar and HFCS consumption and per capita use, fiscal years
14.  World sugar production, supply, and distribution, by selected countries
15.  World raw sugar prices, monthly, quarterly, and by calendar and fiscal
     years
16.  World refined sugar prices, monthly, quarterly, and by calendar and fiscal
     years
17.  U.S. raw sugar prices, duty fee paid, New York, monthly, quarterly, and by
     calendar and fiscal years
18.  U.S. wholesale refined beet sugar prices, Midwest markets, monthly,
     quarterly, and by calendar and fiscal years
19.  U.S. retail refined sugar prices, monthly, quarterly, and by calendar and
     fiscal years
20.  U.S. wholesale list prices for HFCS-55, Midwest markets, monthly,
     quarterly, and by calendar and fiscal years
21.  U.S. wholesale list prices for HFCS-42, Midwest markets, monthly,
     quarterly, and by calendar and fiscal years
22.  U.S. wholesale list prices for glucose syrup, Midwest markets, monthly,
     quarterly, and by calendar and fiscal years
23.  U.S. wholesale list prices for dextrose, Midwest markets, monthly,
     quarterly, and by calendar and fiscal years
24.  Net cost of corn starch to U.S. wet millers, Midwest markets, quarterly
     and calendar years
25.  U.S. cane sugar production by state (including Puerto Rico), and beet
     sugar, monthly, quarterly, and by fiscal and calendar years
26.  U.S. high fructose corn syrup (HFCS) deliveries, quarterly, fiscal, and
     calendar years
27.  U.S. cane sugar (including Puerto Rico) and beet sugar deliveries,
     monthly, quarterly, and by fiscal and calendar and years
28.  U.S. sugar (including Puerto Rico) supply and use, fiscal years
29.  U.S. high fructose corn syrup (HFCS) supply and use, by calendar years
30.  U.S. total consumption of caloric sweeteners, calendar years
31.  U.S. per capita consumption of calorie sweeteners, calendar years
 
List of Figures
 
 1.  Sugarbeet yields per acre
 2.  U.S. beet sugar recovery, net of desugar, actual and trend
 3.  U.S. cane refiners:  Capacity and volume
 4.  U.S. production of sugar and HFCS
 5.  U.S. sugar and HFCS prices
 
                                    END-END-END