SUGAR AND SWEETENERS                                        December 22, 1995
               Approved by the World Agricultural Outlook Board
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Sugar and Sweetener Situation and Outlook Yearbook.  Commercial Agriculture
Division, Economic Research Service, U.S. Department of Agriculture,
SSSV20N4.
 
Contents
 
Page
Summary
World Sugar
U.S. Sweeteners
U.S. Sugar
World and U.S. Corn Sweeteners
U.S. Honey and Maple Syrup
World and U.S. High Intensity Sweeteners
Special Article:
Ukraine Sugar Industry:  Recent Developments and Future Prospects
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 Napper
 
Word Processing
Betty Barrett
 
Approved by the World Agricultural Outlook Board.  Summary released December
19, 1995.  The next Sugar and Sweetener Situation and Outlook report is
scheduled for release on March 19, 1996.  Text and summaries may be accessed
electronically.  For details on electronic access, call ERS Customer Service
(202) 219-0515.
 
Summary
 
World  sugar production and consumption for 1995/96 are forecast at record
levels of 117.9 and 116.6 million metric tons, respectively.  The implied
surplus of 1.3 million tons for 1995/96, together with a somewhat smaller
surplus estimated for 1994/95, allows a modest rebuilding of global stocks
and puts downward pressure on world prices.  The surplus in 1994/95 followed
2 years of sugar deficits.
 
Since the September Sugar and Sweetener Situation and Outlook report, world
sugar production and consumption were revised downward by 380,000 and 450,000
tons, respectively.  The modest downward adjustment in global production
reflects reduced production prospects for the United States, India, Pakistan,
and the Philippines that more than offset the improved outlook in Brazil,
France, China, and Thailand.  Also, downward revisions in key consuming
countries such as Brazil, Russia, and Indonesia, more than offset increased
consumption prospects by other leading sugar users, mainly Mexico and
Thailand.
 
With world stocks and the stocks-to-consumption ratio expected to rise, world
prices could face  downward pressure.  The spot price in late 1995 is more
than 2 cents a pound below a year ago.  Prices averaged 11.94 cents a pound
(Contract No. 11, spot basis) in October, 11.96 cents in November, and 12.39
cents for the first 11 market days of December (through December 15).
 
Brazil's sugar production for 1995/96 is estimated at a record 13.0 million
tons, up 5 percent from last season because more cane is being used for sugar
and less for fuel alcohol.  The increase in sugar production, driven by the
demand for exports, occurred in the Center-South region.  Sugar production in
the Northeast is forecast unchanged from last season.  Many processing
facilities that had produced only alcohol have been converted to regular
sugar mills with annexed distilleries for fuel alcohol production.  Brazil
now has 370 processing facilities to produce sugar and/or fuel alcohol from
sugarcane.  About 25 produce only sugar, about 145 produce only fuel alcohol,
and 200 produce both sugar and alcohol.  Brazil's sugar consumption is
forecast at 8.1 million tons, the highest in Latin America and the fifth
highest in the world behind only India, the European Union (EU), the United
States and China.  Brazil's raw and refined sugar exports are forecast at a
record 4.8 million tons, the world's largest.
 
U.S. sugar production for fiscal 1995/96 (October-September) is forecast at
7.49 million short tons, raw value, down 5.5 percent from the record outturn
achieved in 1994/95.  U.S. sugarbeet production is expected to total 28.9
million tons, a decrease of 10 percent from 1994.  Area for harvest, at 1.42
million acres, is 1.2 percent below last year.  The average yield, forecast
at 20.3 tons per acre, is 1.9 tons below last year.  A cool, wet spring got
the 1995 sugarbeet crop off to a poor start and lowered expectations. 
Yield-reducing disease problems in Michigan and late season harvest problems
in parts of the Great Plains and in southern Minnesota, have caused USDA to
reduce the beet sugar forecast from the September estimate by 300,000 tons to
4.1 million tons, raw value, 393,000 tons less than the record 1994/95 crop.
 
The decline in the beet sugar forecast is partially offset by an increase in
the forecast for cane sugar  production to 3.39 million tons, up 140,000 tons
from earlier forecasts due to the improved outlook for sugarcane yields in
Louisiana and Texas.  Despite these upward revisions, the overall outlook for
cane sugar is expected to be down slightly from 1994/95, reflecting a further
contraction in the Hawaiian sugar industry.
 
The U.S. sugar consumption forecast remains unchanged at 9.4 million short
tons, raw value, up 90,000 tons or about 1.0 percent from 1994/95.  Demand
growth appears to be running only slightly ahead of population growth,
compared with the 1.6 percent growth rate of recent years.  Reduced demand
growth is attributed to encroachment of high fructose corn syrup (HFCS) into
traditional sugar markets and weaker demand for confectionery and bakery
products--major industrial users of sugar.  Sugar use expanded an average of
164,000 tons per year over the last decade (fiscal 1985/86-1994/95),
following the major contraction in sugar use in the early 1980's due to the
substitution of HFCS for sugar in soft drinks.
 
Reacting to a tight supply situation and firm prices, the Secretary of
Agriculture, on November 9, increased the fiscal 1995/96 tariff-rate-quota
(TRQ) for raw cane sugar by 330,693 short tons (300,000 metric tons).  This
action raised the TRQ to 1.56 million short tons, and total supply (carryin
stocks, production, and imports) to 11.0 million tons, comparable with the
11.1 million forecast in September. 
 
U.S. raw cane sugar prices averaged 23.21 cents a pound in September and
22.67 cents in October (Contract No. 14, nearby futures), more than 1 cent
above the level for the same months in 1994.  Since the quota increase,
prices have remained firm, averaging 22.60 cents a pound for November and
22.64 cents for the first 11 market days of December.  As indicated in USDA's
press release of November  9 announcing the quota change, USDA will continue
monitoring import requirements and will adjust the TRQ accordingly.
 
Total U.S. corn sweetener use is expected to reach 11.2 million tons in
fiscal year 1995/96 of which U.S. production is expected to supply 98
percent.  The United States supplements domestically produced corn sweetener
supplies with imports, mainly from Canada.  USDA forecasts HFCS consumption
at 8.0 million tons, up 3.9 percent from 1994/95.  The consumption forecast
for HFCS is based on projections of deliveries from domestic production and
imports.  Using a U.S. population of 269.2 million (including Puerto Rico),
domestic HFCS use is forecast at 59.3 pounds in fiscal 1995/96, up from 57.7
pounds for last year, and 45.2 pounds a decade ago.  Per capita sugar
consumption is forecast somewhat higher at 64.6 pounds, refined basis.
 
HFCS-55 and HFCS-42 list prices averaged 18.96 and 16.92 cents a pound, dry
weight basis, respectively, for the period October 1994 through May 1995. 
For the June through September period, prices for HFCS-55 averaged 18.51
cents a pound, and HFCS-42 prices averaged 16.62 cents. In the past, prices
moved up sharply during the summer due to the high demand for HFCS from the
beverage sector which pushed processing capacity to the limit.  However, this
past summer, while demand was strong due to unusually hot summer temperatures
in many parts of the country, prices did not move up.  This reflects added
corn sweetener processing capacity--as much as 25 percent according to some
estimates--that has come on line in the last year.  With the very sharp
downturn in this season's corn crop, higher HFCS prices have increased. 
HFCS-55 prices averaged 19.68 cents a pound in October, and 20.84 cents in
November and for the first 2 weeks of December.  For fiscal 1994/95,
wholesale HFCS-55 averaged 18.81 cents a pound compared with 25.26 cents for
refined beet sugar.  The 6.45 cent price spread between HFCS and refined beet
sugar for 1994/95 contrasts to the 2.73 cents the year before.  For fiscal
1995/96, it is likely that the price spread between HFCS-55 and sugar will
narrow somewhat. 
 
World Sugar
 
Overview
 
World sugar production and consumption for 1995/96 are forecast at 117.9 and
116.6 million metric tons, respectively. 1/, 2/ The implied surplus of 1.3
million tons for 1995/96, 
-------------------------------------------------
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/ These estimates include changes to the sugar supply and use published
December 12 in USDA's World Agricultural Supply and Demand Estimates (WASDE)
report. All other estimates for world sugar are unchanged from USDA reports
released in November.
------------------------------------------------
 
together with a somewhat smaller surplus estimated for 1994/95, allows a
modest rebuilding of global stocks.  The surplus in 1994/95 followed 2 years
of sugar deficits (figure 1).  With world stocks expected to be higher
coupled with a higher stocks-to-consumption ratio, world prices could face
downward pressure.  Current spot prices are 12.4 cents a pound, more than 2
cents below a year ago. 
 
Since the September Sugar and Sweetener Situation and Outlook report, world
sugar production and consumption were revised downward by 380,000 and 450,000
tons, respectively.  The modest downward adjustment in global production
reflects reduced production prospects for the United States, India, Pakistan,
and the Philippines that more than offset the improved outlook in Brazil,
France, China, and Thailand.  Also, downward revisions in key consuming
countries such as Brazil, Russia, and Indonesia, more than offset increased
consumption prospects by other leading sugar users, mainly Mexico and
Thailand.
 
Production
World Record Production Forecast 
 
The 1995/96 estimate of world sugar production is a record 117.9 million
tons, raw value, 2 percent above the revised 1994/95 outturn of 115.6
million, and 1 percent above the previous record of 116.4 million set in
1991/92.  This production forecast is less than many other analysts are
forecasting because USDA expects India's output to decline.  Sugar produced
from sugarcane is estimated at a record 81.5 million tons, up marginally from
a year ago.  Sugar processed from sugarbeets is estimated at 36.4 million
tons, up 5 percent from last season.
 
Over the past decade cane, sugar production has been trending up.  The
expansion from an average of 66.4 million tons annually during the second
half of the 1980's, to more than 80 million tons the last 2 years, is largely
attributed to growth in harvested area.  In contrast, yields and recovery
rates have been fairly steady at around 60 to 61 tons per hectare and 10
percent, respectively.  For 1995/96, USDA estimates that a record 12.8
million hectares of sugarcane for sugar will be harvested around the globe
compared with 10.9 million in the late 1980's (figure 2).  Among the major
producing countries contributing to the global expansion have been Australia,
Brazil, India, Pakistan, and Thailand.
 
Beet sugar area, in contrast, has generally declined to a decade low of 7.7
million hectares in 1995/96, compared with 8.6 million in the second half of
the 1980's.  The downturn was largely in the Russian Federation and Ukraine. 
Higher recovery rates reflecting improved seeds, heightened use of production
inputs, and greater factory efficiencies somewhat offset the area decline.
 
Production Prospects in Selected Countries:
 
Mexico--Sugar production during 1995/96 is forecast at 4.3 million tons, down
7 percent from last season's record output of 4.6 million.  The decrease
primarily reflects the return to a more normal cane yield of 72.5 tons per
hectare, following last season's unusually high yield of 78.4 tons per
hectare.
 
Brazil--Sugar production for 1995/96 is estimated at 13.0 million tons, up 5
percent from last season because more cane is being used for sugar and less
for fuel alcohol.  The increase in sugar production, driven by the demand for
exports, occurred in the Center-South region.  Sugar production in the
Northeast is forecast unchanged from last season.  Many processing facilities
that had produced only alcohol have been converted to regular sugar mills
with annexed distilleries for fuel alcohol production.  Brazil has 370
processing facilities to produce sugar and/or fuel alcohol from sugarcane. 
About 25 produce only sugar, about 145 produce only fuel alcohol, and 200
produce both sugar and alcohol.
 
Cuba--The 1995/96 estimate pegs sugar output at 4.0 million tons, up 21
percent from last season's 50 year low of 3.3 million.  The turnaround is due
to the increased availability of inputs, such as fuel, fertilizers,
chemicals, and replacement parts for machinery.  The inputs were financed by
foreign loans, secured by the anticipated increase in sugar output.
 
European Union (EU)--Sugar production during the 1995/96 season is estimated
up 3 percent from last year, to 17.0 million tons, because of a 2-percent
increase in harvested area and improved yields.   In France, sugar production
for 1995/96 is estimated up 5 percent, to 4.6 million tons, accounting for 27
percent of the EU total.  The increase is due to a 5-percent increase in
harvested area.  For the second consecutive year, France suffered through a
hot, dry summer which hit the sugarbeet growing areas particularly hard. 
This limited beet growth and resulted in a smaller-than-average beet weight. 
However, because planting conditions were nearly ideal, a record number of
beets were sown per hectare.  In Germany, the EU's second largest producer,
sugar production during 1995/96 is estimated at 4.2 million tons, 5 percent
above last year.  The upturn reflects a 3-percent increase in harvested area
and a 5-percent increase in the average beet yield.  Although the hot summer
weather throughout the EU did not cause major damage to the bulk of the beet
crop, beets grown in the sandy-soil regions of northern and eastern Germany
were adversely affected by the heat.  Rains during the latter part of August
helped to offset part of the moisture deficit.
 
Russia--Sugar production for 1995/96 is estimated at 1.9 million tons, 15
percent above 1994/95.  Sugarbeet production for 1995/96 is forecast at 19.0
million tons, up 36 percent from a year ago.  The increase in sugarbeet
production is due to a 38-percent increase in beet yield per hectare compared
with 1994/95, which returns Russia's average beet yield to a more normal
level.
 
Ukraine--Sugar production for 1995/96 increased from last season's
drought-reduced crop, but remains well below pre-independence levels because
of a shortage of farm equipment, low availability and high price for farm
chemicals, and poor maintainence of sugarbeet factories.
 
China--Sugar production for 1995/96 is estimated up 8 percent, to 6.5 million
tons, because of a significant expansion in sugarbeet and sugarcane area.  In
Guangxi, the province in China that produces the largest volume of sugarcane,
the area planted to sugarcane increased 53,400 hectares; in Yunnan, another
major producing province, planted area is up 15,400 hectares.  In total, the
area harvested for sugarcane is estimated up 8 percent from last season, and
sugar from cane is estimated up 6 percent to 5.3 million tons.  China's
1995/96 sugar production from beets is estimated up 20 percent from last year
to 1.2 million tons.  Harvested beet area is forecast up 16 percent over last
year, to 672,000 hectares.  The increase in sugarbeet area is taking place
primarily in Inner Mongolia and Xinjiang Provinces.  With a per hectare yield
4 times higher than that of Heilongjiang Province, Xinjiang is expected to
replace Heilongjiang as the largest producer of sugarbeets this year.
 
India--Sugar output is forecast to decrease in 1995/96 to 15.2 million tons,
down 7 percent from the record 1994/95 sugar crop of 16.3 million tons.  A
month delay in the onset of the 1995 monsoon season in many areas, combined
with variable rainfall in key growing states will likely lower cane yields. 
Also, in 1995/96, the Indian government is expected to lift gur (crude brown
non-centrifugal sugar) stock holding limits, which will likely decrease the
volume of cane diverted to centrifugal sugar production.  Moreover, cane
diversion to the production of khandsari (a low recovery centrifugal sugar)
is expected to decrease again in 1995/96, due to reduced demand for this
product from the alcohol industry.  Overall, undefined market and policy
factors, such as those that determine the diversion of sugarcane between gur
and centrifugal sugar, including khandsari, will play a significant role in
determining the final mill sugar production level in 1995/96.  Despite the
expected downturn, India is forecast to be the world's largest sugar producer
(excluding the EU).
 
Thailand--Sugar production for the 1995/96 season is estimated at a record
5.7 million tons, up 5 percent from 1994/95 because beneficial rainfall is
likely to result in a record-breaking sugarcane crop of 54.0 million tons. 
Additionally, crop quality is improving in Thailand as growers increasingly
switch to new varieties that have higher sucrose content.  The number of
factories  in Thailand remains stable at 46 because the Government banned
construction of additional mills.  However, the Government has given
permission to expand crushing capacities and to relocate mills.  As a result
of this policy, Thailand's milling capacity has greatly expanded.  In
addition, a number of mills have been relocated from cane-deficit zones in
the Central and Eastern regions to cane-surplus zones in the Northern and
Northeastern regions.
 
Australia--Sugar output for 1995/96 is estimated at 4.9 million tons, down 3
percent from last season's record of 5.1 million.  The area harvested in
1995/96 is pegged at 373,000 hectares, up 9,000 hectares from last season. 
However, dry weather in some growing areas reduced the volume of sugarcane
produced.  And, unseasonal rains, which closed more than half of Australia's
mills for nearly 3 weeks midway through the processing season, reduced the
sugar content of the harvested cane.  Nevertheless, the decline in sugar
production in the drought-affected southern growing regions during 1995/96
will be more than offset by increased production in the expanding Burdekin
and northern growing areas (figure 3).
 
Consumption
Global Consumption Forecast Lowered
 
World sugar consumption in 1995/96 has been revised down to 116.6 million
tons, about 450,000 tons below the September forecast.  Slower than expected
growth in domestic sugar demand in Brazil, Russia, and Indonesia account for
most of the revisions.  Nevertheless, the revised record 1995/96 world sugar
consumption forecast is 2.1 million tons or 1.8 percent above the 1994/95
estimate.  Increased sugar consumption is expected in countries in Central
and South America, Africa, the Middle East, and Asia.  The rise is due to a
mix of factors, including lower prices, higher consumer incomes, population
growth, and rising demand for sugar containing products such as soft drinks
and processed foods.  In Asia, which today accounts for over 30 percent of
world sugar use, sugar consumption has increased more than 20 percent over
the last decade, from 27.8 million tons in 1985/86 to a forecast of 40.0
million in 1995/96 (figure 4).
 
Over the last decade, global sugar consumption growth has been about 1.2
percent per year, down from 2 percent from the previous decade.  In contrast
to the overall growth in global sugar consumption, year-to-year growth has
been weak or non-existent in many of the world's industrialized economies in
North America, Europe, and Japan where population growth is slow, sugar
markets are mature, and alternative caloric sweeteners and high intensity
sweeteners are popular.  For 1995/96, sugar consumption growth in the United
States is forecast at only 1 percent, while Canada's use is expected to
decline due to increased use of lower priced corn sweeteners and a fall-off
in exports of sugar containing products.  The EU's sugar use is relatively
stagnant at 14.0 million tons, as is Japan's at 2.4 million.
 
In Central Europe and the countries of the former Soviet Union, sugar
consumption forecasts are relatively unchanged between 1994/95 and 1995/96,
but are sharply lower compared with the late 1980's or early 1990's.  Many of
these formerly centrally planned economies continue to undergo painful
economic transitions, increased retail sugar prices, and high unemployment.
 
Trade
Trade Forecast Raised
 
The 1995/96 world sugar trade forecast was revised up 2 percent to 31.3
million tons.  Increased export prospects in Brazil, Ukraine, Thailand, and
Cuba account for most of the higher 1995/96 sugar trade forecast, which is
almost 1 million tons more than the revised 1994/95 trade estimates.  World
sugar trade in 1994/95 was revised due to higher export availabilities in the
EU and India.
 
Larger sugar export supplies in 1995/96 in Brazil, Thailand, Cuba, Ukraine,
and Guatemala will likely account for most of the increase in world sugar
exports this season.  These countries' higher exports should offset lower
forecasts for leading exporters such as Australia and the EU.  Anticipated
lower sugar production in Australia could hamper its export availabilities,
while the need to rebuilt stocks will limit the EU's sugar shipments.  In
recent years, Brazil, Thailand, and Australia have substituted for decreased
Cuban sugar exports in world markets (figure 5).
 
Increased sugar imports in the United States, Russia, and the Philippines
will be a major factor in the anticipated increase in world sugar trade in
1995/96.  China will continue to be a major importer.
 
The structure of world sugar trade continues to be highly concentrated on the
export side compared with imports.  The top six exporters for 1990/91-
1994/95--EU, Australia, Brazil, Thailand, Cuba, and Ukraine--accounted for
about 70 percent of world exports.  The top six importers--Russian
Federation, EU, China, United States, Japan, and South Korea--accounted for
about 40 percent of global imports.
 
Total sugar trade over the past decade has oscillated within a fairly narrow
band between 27 and 33 million tons.  Nonetheless, sugar continues to be
among the world's most heavily traded agricultural commodities.  In 1994/95,
about 26 percent of world sugar production was traded, compared with 5
percent of paddy rice, 21 percent of wheat, 14 percent of corn, and 25
percent of soybeans.  In contrast, 81 percent of coffee production was
traded.  By volume, the 30 million tons of sugar traded in 1994/95 was
exceeded only by wheat (96 million) and corn (58 million), and was about
equal to soybean trade (31 million).
 
Of the roughly 30 million tons of sugar traded last year about half was raw
cane sugar and  the other half refined beet and cane sugar.   Major raw cane
sugar exporters are Australia, Brazil, Cuba, South Africa, and Thailand. 
Their markets include the United States, Japan, and the EU and a wide set of
other countries--some of which import raw  cane sugar and reexport refined
sugar--such as China, South Korea, and also the United States.  The EU has
been the major supplier of refined sugar, but in recent years countries such
as Brazil and Turkey have become important sources of supply.  Leading
markets for refined sugar continue to be the Middle East and the Russian
Federation.  Over the past decade, refined sugar trade has grown from about 9
million tons or 35 percent of world trade  to about 15 million tons or 50
percent of the global sugar market last year.
 
Stocks and Prices
 
USDA forecasts stocks at the end of 1995/96 at 20.8 million tons, the highest
since 1992/93.  The stocks-to-use ratio is forecast at 17.9 percent, up from
a low of 16.4 percent 2 years ago (figure 6).  Prospects of large crops this
year will facilitate the rebuilding of stocks in a number of countries,
including the EU, particularly France, Germany, the Netherlands, Argentina,
Colombia, and Zimbabwe.  China and India's stocks are expected to be large,
allowing China to reduce imports and India to export.
 
World spot prices for raw sugar (f.o.b. Caribbean contract No. 11) averaged
12.39 cents a pound for the first 11 market days of December (through
December 15), compared with 11.94 and 11.96 cents a pound in October and
November.  This compares with prices a year ago of 14.57 for the first half
of December, and 12.75 and 13.88 cents for October and November.
 
Prices are likely to weaken into the spring due to the outlook for a record
1995/96 global sugar crop, and a further buildup in world sugar stocks.  A
forecast record 1995/96 crop in Thailand and reduced sugar consumption in
Russia will make them key countries to watch.  Prospects for record 1995/96
global sugar consumption, relatively low world sugar carryover stocks,
possible higher imports by Russia, larger 1995/96 imports by the United
States, and strong Middle Eastern import demand, could provide support to
futures prices in the next few months.
 
Analyzing world sugar prices for the past decade, USDA data indicate years of
low prices--6.0 cents a pound in 1985/86 and 1986/87--coinciding with a
build-up of world stocks and 2 years--1989/90 and 1994/95--when prices moved
up to near 14 cents a pound when stocks were drawn down.  However, a major
price spike did not occur, in fact the last major price increase occurred in
1981/82 when world prices averaged around 23 cents a pound.  USDA believes
the conditions which led to past world sugar price spikes have been largely
removed since 1982.  These changes include:
 
o  The bulk of import demand on the world market is no longer from
high-income, price-inelastic countries but from poorer, price-elastic
countries; i.e., they have to stop buying when the price rises.
o  Corn sweeteners now provide a viable substitute to sugar in many countries
(such as the United States, Japan, and Canada).  High intensity sweeteners
are also a factor in the United States, Japan, Western Europe and China (i.e.
unusally high use of saccharin in recent years in China). The increased
availability of substitutes has greatly increased the price elasticity of
sugar demand; i.e. customers can switch to the substitute if the prices rise.
o  Policy reform has occurred in many countries (such as Australia,
Argentina, Brazil, Chile, China,  Eastern Europe and Mexico) which has
increased price transmission to internal markets.
 
Previous world sugar price spikes led to expansion of global sugar capacity
and periods of relatively low prices.  If there are no future world price
spikes, there also will not be the tendency for prices to go as low.
 
BOX TEXT
Colombia: Growth in Production and Exports
by
Nydia R. Suarez*
 
*The author is an agricultural economist in the Commercial Agriculture
Division, Economic Research Service, USDA.
 
Colombia has displayed strong sugar production growth in the last 10 years,
underpinned by expanded area, improved yields, and increased use of varieties
with high sucrose content. Production jumped from 1.2 million tons raw value
in the mid-1980's to a record 2.04 million tons in 1994/95. USDA's production
forecast for 1995/96 is 2.07 million tons.  This forecast assumes normal
weather conditions and yields, and only 1 percent growth in area.  Expansion
may be slowing, as Colombian producers anticipate lower world prices in the
next few years.
 
Colombia's sugar production is concentrated in the Cauca Valley where cane is
planted and harvested year round and cane milling is spread evenly throughout
the year. Thus, a relatively small cane milling infrastructure is needed to
produce the same amount of sugar produced in other countries, giving Colombia
a competitive advantage.  Colombia, Hawaii, and Peru are the only places in
the world that cultivate sugarcane year round, Colombia being the largest
producer.  Colombian farmers have continued their efforts to raise yields to
boost overall production with the aid of the Cenicana Research Institute. 
Sugar area cannot be expanded much more without a drop in average yields. 
This is why the trend toward greater use of disease-resistant cane varieties
continues.  Experts in the field forecast that by the year 2000 more than 60
percent of the centrifugal sugarcane area will be planted to a variety that
is highly resistant to both rust and smut diseases.  Also, cane and sugar
yield for this variety are higher than the older varieties, and sugar
extraction yields are reportedly 12 percent higher.  Colombia has one of the
highest productivity rates and one of the lowest costs in the world.  
Colombia has consistently been among the world's most efficient producers and
possesses one of the world's most competitive sugar industries.   According
to cost data developed by LMC International, Colombia ranked 6th among 62
world sugarcane producing countries during the period 1987/88-91/92. From
1979/80 to 1991/92, Colombia enjoyed total production costs that were nearly
25 percent lower than the global cane average.  Colombia's average factory
costs were the lowest in the world in 1987/88-91/92 due to its year-round
milling.  Colombia also performs well at the field level.  Average field
costs in 1987/88 to 1991/92 were the 8th lowest among 62 world sugarcane
producing countries.  This compared with a ranking of 26th from 1983/84 to
1987/88.
 
Besides centrifugal sugar, Colombia produces crude, non-centrifugal sugar
called panela. Although area planted to cane for panela is almost 2 times
larger than the area for centrifugal sugar, panela production is only
two-thirds of the amount of centrifugal sugar. Cane for panela production is
grown mostly by small farmers using traditional methods. Their yields cannot
compare with those obtained by large commercial producers of cane for
centrifugal sugar who have access to modern technology, equipment, and
disease resistant varieties.  
 
Colombia's centrifugal sugar consumption for 1994/95 is estimated at 1.22
million tons, up 3 percent from the previous year and 6 percent higher than
the 1985/86-89/90 average. In addition to the population growth, sugar use
increased because sugar retail prices increased less than the growth in the
consumer price index. For 1995/96 and the next 3-5 years,  consumption is
expected to increase about 2 percent per year, the same as the population
growth rate. In addition, Colombia consumed more than 1 million tons of
panela. This amount varies with the price of panela vis-a-vis white sugar. In
September 1991,  panela and white sugar prices were the same, but 2 years
later, the panela price was 24 percent lower and by 1995, the difference is
forecast at 40 percent. Another factor that affects consumption is the
unemployment rate. As it  declines consumption of white sugar increases as
disposable income increases. 
 
Colombian sugar exports currently account for about one-third of total
output. Colombia began exporting raw sugar in 1961 when world prices were
attractive and the country had plenty of exportable sugar. Stimulated by
favorable world prices, Colombia's sugar exports grew steadily until 1982,
and then began to fall as world prices dropped. In 1987 exports were only
96,000 tons or 55 percent lower than the previous year. Sugar exports during
1985-89 averaged a little more than 230,000 tons per year, with the United
States receiving almost two-thirds of the total.
 
A shift in export distribution occurred in 1991 when the Andean-Pact
countries opened their borders to certain products, including sugar. Exports
to Ecuador, Peru, and Venezuela represent more than 50 percent of Colombia's
exports for 1990-94. The United States dropped to 26 percent.  In January
1992, Colombia and Venezuela established the Andean region's first binational
custom union to apply a common external tariff.  Colombia and Venezuela's
bilateral trade accord for several agricultural commodities was expanded by
the Group of Three (G3) Agreement to include Mexico. Under this Agreement,
the Colombian Government is negotiating with Mexico over the possibility of
exporting Colombia sugar to Mexico duty free in exchange for a gradual
reduction of Colombian import tariffs for fruits, vegetables, pulses, and
orange juice imported from Mexico. Major changes in Colombia's trade policy
orientation are expected from either future NAFTA accession or participation
in a Western Hemisphere Trade Agreement.
 
End of box text
 
U.S. Sweeteners
 
Overview
U.S. Sweetener Market Expands
 
The U.S. caloric sweetener complex, the world's largest and most diverse in
terms of consumer products, continues to expand in quantity and variety.  
Use of refined sugar, corn sweeteners (HFCS, glucose, and dextrose), honey,
maple syrup, and edible molasses in 1995, will likely total 19.7 million
short tons, compared with 19.3 million last year, and 15.5 million in 1985. 
This expansion reflects growth in the U.S. population (including Puerto Rico)
to over 269 million in 1995, up from 242 million in 1985; increased income;
and changes in consumer lifestyles and tastes.
 
Total per capita use of caloric sweeteners in the United States is forecast
at 148 pounds in 1995, compared with 146 last year, and 128 in 1985.  Refined
sugar use in 1995 is expected to account for 43.7 percent of the total per
capita use or 64.6 pounds, while corn sweeteners should represent 55.3
percent or 81.8 pounds.   Growth of corn sweetener use per capita continues
to outpace the growth of sugar use, a trend established over the last decade.
 
In addition, caloric sweeteners are increasingly supplemented by high-
intensity (low-calorie) sweeteners, mainly aspartame,  saccharin, and
acesulfame-k.  This segment of the industry is changing rapidly because of
new uses for high intensity  sweeteners approved by the Food and Drug
Administration (FDA), the prospective introduction of new high intensity 
sweeteners, and growth in the number and availability of  "light" foods
sweetened with high-intensity sweeteners.
 
Domestic supplies of sweeteners are also supplemented with imports of sugar,
HFCS, honey, maple syrup, and aspartame.  Import levels change from year-
to-year, largely based on weather-related production conditions, prices, and
Government policy.  U.S. sweeteners are also exported in significant
quantities.  For calendar 1994, U.S. exports of refined sugar totaled 480,000
tons, raw value; HFCS, 118,000 tons; honey 8.3 million pounds; and maple
syrup, 569,000 gallons.    
 
The U.S. sweetener industry also generates valuable byproducts.  From the
U.S. beet and cane sugar industry, the key byproducts are molasses, beet
pulp, and bagasse from sugarcane milling.  Domestically produced molasses is
used as an animal feed.  Imports supplement domestic supplies.  Imports of
industrial or feed molasses were at a record 1.8 million tons last year, but
are expected to fall in 1995 due to increased demand and higher prices in
Asia and Europe.  A large share of beet pulp production is shipped to Asian
markets.  Bagasse is mainly used as mill fuel.  The corn wet milling process,
in addition to sweeteners, produces the byproducts of corn oil, corn gluten
meal, and corn gluten feed.  Corn gluten feed, in particular, has a large
market in the EU.
 
U.S. Sugar
 
Production
Beet Sugar Production Lower
 
U.S. sugar production for fiscal 1995/96 (October-September) is forecast at
7.49 million short tons, raw value, down 5.5 percent from the record outturn
achieved in 1994/95.  U.S. sugarbeet production is expected to total 28.9
million tons, a decrease of 10 percent from 1994.  Area for harvest, at 1.42
million acres, is down 1.2 percent from last year.  The average yield,
forecast at 20.3 tons per acre, is 1.9 tons below last year.  A cool, wet
spring got the 1995 sugarbeet crop off to a poor start and lowered
expectations.  Yield-reducing disease problems in Michigan and late season
harvest problems in parts of the Great Plains and in southern Minnesota, have
caused USDA to reduce the beet sugar forecast from the September estimate by
300,000 tons to 4.1 million tons, raw value, 55 percent of U.S. sugar
production and 393,000 tons less than the record 1994/95 crop.
 
The decline in the beet sugar forecast is partially offset by an increase in
the cane sugar forecast to 3.39 million tons, up 140,000 tons from an earlier
forecast due to the improved outlook for sugarcane yields in Louisiana and
Texas.  Despite these upward revisions, the overall outlook for cane sugar is
expected to be down slightly from 1994/95, reflecting a further contraction
in the Hawaiian sugar industry.
 
Over the past decade (fiscal 1985/86 - 1994/95), the growth trend for U.S.
beet sugar production has been 128,000 tons per year, while the growth trend
for cane sugar production has been 20,000 tons per year (figures 7 and 8). 
Beet sugar has increased its share of U.S. sugar production from 49 percent
in 1985/86 to a record 57 percent in 1994/95.  Growth in beet acreage in the
upper Midwest States of Minnesota and North Dakota has been a major
contributing factor in the expansion of U.S. beet sugar production (figure
9).  Cane sugar's reduced share is largely due to the sharp contraction in
Hawaii's production (figure 10).
 
Developments in the Beet Sugar Producing Region
For the 1995 Crop 3/
-------------------------------------------
3/ The sugarcane harvest is still underway in all sugarcane producing States.
Detailed analysis of the crop will appear in the March 1996 Sugar and
Sweetener report.
-------------------------------------------
 
The 1995/96 sugarbeet harvest has been completed with the exception of the
upcoming spring harvest in California.  As of mid-December, beet processors
outside California are continuing their slicing campaigns largely from piled
beets.  The major remaining threat to the crop would be possible
deterioration of sucrose levels in beet piles over the next several months
due to alternating freezing and thawing of piles which can occur during wide
swings in temperatures.  This season's harvested tonnage and sucrose levels
were  adversely affected by weather and crop disease problems.  Developments
in the various growing regions are as follows:
 
Great Lakes--Sugarbeet acreage in Michigan and Ohio for 1995/96 was 204,200
acres, up marginally from last year due to increased acreage in Michigan that
offsets a decline in Ohio.  Yields were expected to average 16.0 tons per
acre, comparable with last year, but 4 tons below the national average. 
Industry sources indicate that sucrose content was 16.4 to 17.5 percent. 
USDA estimates total tonnage to be processed at 3.28 million tons.  Regional
sugarbeet processing plants concentrated in the Saginaw Valley of Michigan
(five) and Fremont, Ohio (one) began their slicing campaigns in early October
and will run through the end of January in Michigan and mid-December in Ohio.
 
Agronomically, the 1995 crop proved challenging.  Significant spring rains in
April and May delayed plantings.  However, beet emergence was excellent and
combined with closer seed spacing, provided above average beet populations. 
Climatic conditions through the summer months provided below normal
precipitation and above normal temperatures.  Coupled with a heavy
infestation of root aphids in the Michigan growing area, these conditions had
a negative effect on yields and beet quality.  Despite wet conditions and
temperatures that were alternately too warm or too cold, about 80 percent of
the harvest was completed by November 1.  Most of the remaining beets were
harvested under wet and freezing conditions during the first 3 weeks of
November.
 
Red River Valley and Southern Minnesota--Sugarbeet harvested area in
Minnesota and North Dakota is estimated by USDA at a record 625,000 acres for
1995/96, up 2 percent from the previous season and equal to 44 percent of the
national beet acreage.  Yields, however, are down in Minnesota by 10 percent
to 18.5 tons per acre and 9 percent in North Dakota to 19.3 tons reflecting
generally adverse conditions both at planting and harvest.  Total beet
tonnage harvested for the two States is estimated at 11.7 million tons versus
12.7 million tons for 1994/95.  Processing of the crop is underway at six
beet factories in the Red River Valley and one at an adjacent area in
southwestern Minnesota.  The last processing plant in the region is expected
to complete its slicing campaign by mid-April.
 
In the Red River Valley the 1995 planting season experienced a late start due
to excessive soil moisture and wet spring weather.  To offset expected yield
reduction due to late plantings, acreage was increased 3 percent.  After
planting was completed in late May, warm, humid weather with frequent rains
prevailed through August and September.  Reflecting the warm and moist soil
conditions, root rot diseases such as aphanomyces and rhizoctonia were more
prevalent this year.  Also, cercospora leafspot infections were reported to
be the most severe since the early 1980's.  Restricted harvest started in
mid-September and full harvest started the first week of October.  Sugar
content was negatively influenced by excessive rainfall during harvest, an
early killing frost (September 23), and heavy cercospora pressure.
 
In the southwestern Minnesota growing area, wet conditions in the spring
delayed plantings.  For example, by May 2 only 13 percent of the crop was
planted versus the normal 52 percent.  As a result, yield expectations were
reduced due to a lack of significant early planted acres.  Compounding the
slow start of the crop, heavy rains during late June and early July caused
severe retardation of root development.  In the summer months, temperature
and humidity conditions were ideal for development of cercospora leafspot. 
Despite multiple applications of fungicides, significant leaf damage resulted
from the intense infection which further reduced yield and sugar
accumulation.
 
Harvest was delayed until mid-September to allow the crop additional time to
mature.  October was punctuated with additional rainstorms, and finally three
snowstorms near the final week.  Several growers were unable to complete
harvest before the soil froze to a depth of 4 to 6 inches.  This resulted in
additional lost acres and reduced tonnage, not all of which are reflected in
current USDA data.
 
Northwest--The Idaho and Oregon 1995/96 sugarbeet crops were harvested from
216,000 acres, marginally lower than 1994/95.  Yields are estimated at 25
tons per acre, down more than 2 tons from last year.  USDA estimates beet
tonnage at 4.95 million tons for Idaho, down 12 percent from last year's
record, and 464,000 tons in Oregon, comparable with last year.  The slicing
campaigns got underway at the region's four plants (three in Idaho and one in
eastern Oregon) in mid-September and are expected to be finished by early
February.
 
A wetter-than-normal spring delayed plantings somewhat.  However, the wet
conditions were favorable for germination and crop establishment, resulting
in very good stands and high per-acre populations.  Cooler-than-normal
temperatures prevailed throughout the growing season and resulted in
considerably below-normal heat unit accumulation for the season.  While this
retarded crop development, it also reduced irrigation water demand.  In
addition, the season's coolness created conditions less favorable for
yield-reducing rhizomania's development.  Weather during harvest was nearly
ideal, facilitating a relatively smooth harvest season and enabling beets to
go into storage piles for processing in good condition.
 
In addition to the traditional growing areas, the Northwest has a relatively
new growing area in the Moses Lake section of central Washington. 
Approximately 7,500 acres were harvested in the Moses Lake area starting in
mid-October.  Yields are reported to be over 30 tons per acre, reflecting the
area's highly fertile soil.
 
Since this growing area does not have a mill close by, beets are shipped by
rail to Nampa, Idaho, and Hamilton City, California, for processing.  But a
November 3 industry press release indicated that this mode of processing will
change in the near future.  Columbia River Sugar Company, a grower owned
sugarbeet production cooperative based in the Moses Lake area, announced that
it has completed negotiations with Holly Sugar Corporation, to construct and
operate a sugarbeet factory in the Moses Lake area.  The factory's initial
slicing capacity when it commences operations in 1998 will be 6,000 tons per
day, and its design provides for incremental expansion should market
conditions warrant.   This will represent the first new beet processing plant
to be built in the United States since 1975. 
 
Great Plains--Sugarbeet production results in the Great Plains are mixed. 
Regional sugarbeet area harvested, including the States of Colorado, Montana,
Nebraska, Texas, and Wyoming, totals 250,600 acres, down 2.6 percent from
last year. Yields are expected to be somewhat below normal for the region,
averaging 19.5 tons per acre.  Total sugarbeet tonnage is estimated by USDA
at 4.88 million tons, 17 percent of the national total, and 9 percent below
last year.  The beet slicing campaign began in late September at the region's
11 processing facilities:  Colorado, 2; Nebraska, 3; Wyoming, 3; Montana, 2;
and Texas, 1.
 
In Montana the growing season was marred by a cold, wet spring which delayed
the emergence of the sugarbeet crop.  Hail storms plagued the area during the
summer months and freezing temperatures in late September kept sugar content
from reaching the record levels of recent years, and yields were 15 percent
below the most recent 5-year average.  Total tonnage for the State is
estimated at 1.22 million tons, 6.6 percent below last year. 
 
The sugarbeet crops in northern and central Wyoming were subject to similar
spring conditions, but the summer growing season was nearly ideal.  However,
in southeast Wyoming poor spring planting conditions, coupled with adverse
weather through the growing season adversely affected the sugarbeet crop, and
harvesting results were poor.  State-wide sugarbeet production for Wyoming is
estimated at 1.30 million tons, up 18 percent from last year.
 
This season proved to be particularly difficult agronomically in Nebraska and
Colorado, with year-to-year yields falling 19 percent to 16.5 tons per acre
in Nebraska and 17.7 tons in Colorado.  In both States a cold wet spring
accented disease problems with higher incidence of seedling stress, fusarium,
and rhizoctionia.  At harvest both areas were hard hit by frost in late
September, especially to the growing area in western Nebraska.  With the
short crop, processing campaigns will wind up during the first 2 weeks of
January in both States.   
 
In the southern part of the Great Plains, very little moisture was received
in the growing area around Hereford, Texas during the summer months.  Yields
were slightly below normal and due to a fall-off in acreage--19,500 acres
this season versus a high of 41,000 in 1990--total sugarbeet production is
expected to be only 429,000 tons compared with nearby 500,000 tons last year
and an  average of 837,000 tons for 1990-93.
 
California--Sugarbeet agriculture in California spreads from the Imperial
Valley on the border with Mexico through the Central Valley and to the
Klamath Basin straddling the Oregon line.  Sugarbeet acreage harvested
continues to decline in California and is estimated at 114,000 this season,
compared with annual averages of 151,000 for the first 5 years of the 1990's
and 201,000 acres during the 1980's.   The downturn this year is explained by
heavy rains last spring which delayed plantings and caused some plant loss,
especially in the Sacramento Valley, and the availability to growers of more
remunerative alternative crops.
 
The decline in area will be offset somewhat by yields that are the highest in
the nation at 27 tons per acre.  Total harvested tonnage from California
grown beets is estimated by USDA at 3.1 million tons, down 25 percent from
1994.  Sugarbeets in California are processed at six plants, one located in
the Imperial Valley and five others located in the Central Valley.  These
plants also process sugarbeets from the Klamath Basin in Oregon, Central
Oregon, and Washington.
 
In the Imperial Valley, the beet crop got off to a good start as soil
temperature remained above average until early spring.  The 1995 April-July
harvest was a record, yielding over 5.5 tons of sugar per acre compared with
a national average of 3.0 tons per acre.  In the Central Valley, the fall
tonnage and sucrose content were slightly  below average.  Next spring's crop
will be short due to rain delays that prevented planting.  In addition, the
State has experienced its driest fall on record along with unseasonably warm
temperatures, and these developments could affect yields.
 
Consumption
Sugar Use Growth Slows
 
The U.S. sugar consumption forecast remains unchanged at 9.4 million short
tons, raw value, up 90,000 tons or about 1.0 percent from 1994/95.  Demand is
forecast  to run only slightly ahead of the 0.8 percent annual population
growth, compared with the 1.6 percent growth rate of recent years.  The lower
rate of growth is attributed to encroachment of high fructose corn syrup into
traditional sugar markets and weak demand for confectionery and bakery
products--major industrial users of sugar.  Following the major contraction
in sugar use in the early 1980's due to the substitution of high fructose
corn syrup (HFCS) for sugar in soft drinks, sugar use has expanded an average
of 164,000 tons per year over the last decade (fiscal 1985/86-1994/95),
(figure 11). 
 
For the fiscal year ended September 30, 1995 sugar consumption is estimated
at 9.34 million tons, about the same as use in 1993/94. Industrial users'
switch from traditional stocking patterns to just-in-time delivery systems,
which may be causing a one-time reduction in apparent sugar deliveries. 
Crystalline fructose use, while small, also may be taking some sugar markets. 
Reduced transfers to sugar-containing products for export also was a factor
in 1994/95.
 
Sugar deliveries for confectionery and cereal/bakery products in 1994/95
totaled 1.88 and 1.34 million tons, refined value, respectively.  Together
these two categories accounted for 64 percent of industrial use and were down
slightly from the year before.  Growth in sugar use by the bakery/cereal and
confectionery sectors had underpinned the growth in total sugar use in recent
years.  The decline in growth in these two key use categories is attributed
to sluggish demand for cookies, sweet goods, and confectionery, including
lower confectionery exports (figure 12).
 
Trade
Sugar Import Quota Raised
 
Reacting to a tight supply situation and firm prices, the Secretary of
Agriculture on November 9,  increased the fiscal 1995/96 tariff-rate-quota
(TRQ) for raw-cane sugar by 330,693 short tons (300,000 metric tons) after
the release of the monthly WASDE report.  This action raised the TRQ to 1.56
million short tons, and raised total supply (carrying stocks, production, and
imports) to 11.0 million tons, comparable with the 11.1 million forecast in
September as the reduction in the sugar production forecast largely was
offset by the TRQ increase.
 
According to USDA's Foreign Agricultural Service, TRQ imports for the first 2
months of fiscal 1995/96 (October 1-December 1) totaled 91,116 short tons. 
At the request of several countries, USDA allowed early entry of 1995/96 TRQ
sugar.  These early entries, arriving before October 1, 1995, totaled 82,960
tons.  As of December 1, 1.395 million tons of  TRQ sugar were available for
entry into the United States prior to September 30, 1996.
 
As of December 1, 1995, all but about 200 tons of the refined sugar
tariff-rate-quota for 1995/96 set at 24,251 short tons (22,000 metric tons)
had been filled.  There are also specialty sugar quotas for 23 countries,
each allocated 79 tons.  These specialty quotas are not usually all filled.
At the present time several countries, including Japan and United Kingdom,
are not eligible to fill their specialty sugar import quotas, since they have
failed to give assurance that no Cuban sugar will be transhipped in their
quota.
 
Over the past decade, the United States has remained a major importer of
sugar as growth in consumption needs has largely offset upward trending
domestic sugar production.  Total U.S. sugar imports averaged 2.0 million
tons annually from 1985/86-1989/90.  Imports were composed largely of TRQ
imports averaging 1.45 million tons, and 511,000 tons of quota-exempt imports
for reexport as refined sugar or in sugar-containing products.  For the
period 1990/91-1994/95, U.S. sugar imports averaged 2.1 million tons of which
TRQ imports accounted for 1.6 million and quota-exempt imports 548,000 tons.
 
Starting October 1, 1995 the United States has a commitment, under the
Uruguay Round Agreement, to the World Trade Organization (WTO) to allow
import access for at least 1.256 million short tons per year at the low
tariff level of the TRQ.
 
The United States also remains a small, but consistent exporter of sugar. 
These exports are largely refined sugar produced from quota-exempt raw sugar
imported, refined, and reexported.  For 1994/95 total exports were 502,000
tons of which reexports were 445,000 tons.  Despite the changes in trade with
Canada, U.S. sugar reexports in 1995/96 are expected to drop only slightly
because of favorable markets for refined sugar in other countries, and
currently a large differential between raw and refined sugar prices on the
world market.  Over the last decade, (1985/86-1994/95), U.S. sugar exports
averaged 494,000 tons annually of which reexports accounted for over 95
percent of the annual total.
 
U.S. Canada Sugar Trade Developments
 
On November 6, 1995, the Canadian International Trade Tribunal (CITT) ruled
that sugar imports from the United States, certain member States of the
European Union (EU), and Korea are being dumped in Canada.  Revenue Canada
found dumping and subsidies in a final ruling in September or October.  The
CITT ruled in November that the dumped and subsidized sugar threatened to
injure the Canadian sugar industry.  The CITT also found that sugar imports
from the EU are being subsidized.  The investigation was initiated in March
1995 following a petition from the Canadian Sugar Institute, and in July,
Revenue Canada announced a preliminary finding of dumping and subsidizing in
the case and imposed provisional anti-dumping and countervailing duties.  The
CITT ruled in November that, although the imports threaten the livelihood of
Canadian sugar refiners, no damage had yet occurred.  Any duties paid since
July were refunded, but the tariffs will apply from November 6.
 
The anti-dumping duties on U.S. companies exporting sugar range from 69 to 85
percent.  The duties against Korea were dropped due to the small volume of
trade involved.  It is possible that this ruling may be appealed by parties
in the United States and/or in Canada.  The ruling effectively eliminates
U.S. sugar from the Canadian market.  In 1994/95 the United States exported
158,000 tons, raw value of refined sugar to Canada including approximately
101,000 Tons under the reexport program.
 
Stocks and Prices
Stocks Forecast Lower
 
U.S. sugar stocks at the end of fiscal 1995/96 (September 30, 1996) are
forecast at 1.19 million tons, down about 3 percent from the revised estimate
for fiscal 1994/95.  Stocks reflect a projected total supply of 11.01 million
tons and total use of 9.82 million.  The fiscal 1995/96 stocks-to-use ratio
is forecast at 12.1 percent, compared with 12.5 percent for 1994/95. 
According to USDA's stocks and price model, a 1-percent drop in the ending
stocks-to-use ratio has historically corresponded to a 0.3-cent a pound rise
in the New York price for domestic raw cane sugar.
 
For the year ending September 30, 1995, stocks are estimated at 1.23 million
tons.  This compares with 1.45 million tons estimated in September.  The
217,000 ton decline in the stock estimate can be attributed to downward
revisions in supply variables, such as production, and upward adjustments to
use variables such as exports.  From 1985/86-1994/95, end of year stocks and
the stocks-to-use ratio averaged 1.42 million tons and 15.4 percent,
respectively.
 
Sugar Prices Remain Firm
 
U.S. raw cane prices averaged 23.21 cents a pound in September and 22.67
cents in October (Contract No. 14, nearby futures), more than 1 cent above
the level for the same months in 1994.  Since the quota increase, prices have
remained firm averaging 22.60 cents a pound for November and 22.64 cents for
the first 11 market days of December. As indicated in the November 9 press
release announcing the quota change, USDA will continue monitoring import
requirements and will adjust the TRQ accordingly.
 
U.S. prices of raw cane sugar and refined beet sugar have remained relatively
stable over the last decade because of the U.S. sugar program (figures 15 and
16).  Raw cane sugar prices  averaged 21.96 cents a pound between
1985/86-1994/95, with a low of 20.46 cents in 1985/86 and a high of 23.29
cents in 1989/90.  Wholesale refined beet sugar prices averaged 25.74 cents a
pound between 1985/86-1994/95, with a low and high of 23.30 in 1985/86 and 
30.14 cents in 1989/90, respectively.  U.S. retail refined sugar prices 
averaged 39.31 cents annually over the 10 year period, ranging from a low of 
35.12 cents in 1986/87 to a high of 43.08 cents in 1990/91.  The spreads 
between the low and high years for raw cane sugar were 2.45 cents a pound, 
for wholesale refined beet sugar 6.85 cents, and for retail refined sugar 
7.96 cents.
 
Costs
New USDA Estimates on Processing Costs
 
In the winter and spring of 1994-95, ERS contacted all beet and cane sugar
processors to collect processing cost information for the 1992 crops.  Based
on these data, processing costs for the 1993 and 1994 crops have been
estimated and previously published processing costs for 1992 have been
revised.  For beets, the traditional East (Red River Valley and eastward) and
West (all other) processing regions have been maintained.  For cane, however,
Louisiana and Texas have been combined to prevent disclosure of confidential
accounting data for the one factory in Texas.
 
In fiscal 1993/94, a record 4.55 million tons of raw beet sugar were
produced, an 11-percent increase over 1993.  Costs of processing this sugar
rose 3.6 percent, averaging $35.06 per net ton sliced.  However, after
accounting for credits for byproducts, net processing costs averaged $26.50,
a 2.7-percent drop from 1993.  This difference is explained by increased
returns from pulp and molasses offsetting higher, primarily fixed, processing
costs.  Similar relationships were found on a cents-per-pound basis.  Total
processing costs rose in 1994 but were offset by higher credits, even with a
slight drop in sugar recovery.
 
Over the 1992-94 period, total costs per ton of beets sliced were
consistently higher in the East than in the West.  However, this can be
offset by the higher sugar recovery rates in the East.  On a cents-per-pound
basis, total beet sugar processing costs were lower in the East.  In 1994,
recovery rates narrowed and, while recovery was still higher in the East,
processing costs per pound of sugar were lower in the West.  
 
Raw cane sugar production for fiscal 1993/94 was up nearly 2 percent.  U.S. 
total processing costs for the 1994 sugarcane crop averaged $19.22 per ton,
up 2.3 percent from 1993.  Most of the increase was due to increases in the
costs of materials and supplies for cane transportation and factory repairs
and maintenance.  On a cents-per-pound basis, costs rose even more (5.1
percent) due to a 2.7-percent drop in the average sugar recovery rate.
 
There was considerable cost variation across the major sugarcane regions. 
Florida is the major producer and had costs of 6.98 cents per pound, compared
with Louisiana/Texas costs of 8.26 cents and Hawaii costs of 11.345 cents. 
On a percentage basis, Louisiana/Texas had the largest increase for the year
due to a nearly 9 percent drop in recovery rate.
 
After subtracting credits for molasses and other byproducts, net processing
costs ranged from 6.30 cents in Florida to 9.3 cents in Hawaii, averaging
7.22 cents at the U.S. level.
 
Adjustment to Production Costs
 
USDA has revised its sugarcane costs and returns estimates published in the
Sugar and Sweetener report in September to account for yields on a net ton
per harvested acre basis rather than a gross ton basis.  This change will
bring the estimates into conformity with yield estimates published by USDA's
National Agricultural Statistics Service (NASS) in  Crop Production reports.
 
The change has two effects:
o  Gross value of production (price times yield) was revised to reflect the
change in yield.  This also affects the returns estimates which are the
difference in gross value of production and either total cash expenses or
total economic costs.
 
o  Costs for land were reduced in the Louisiana-Texas region.  This is due to
a change in the share rent cost which is based on the imputed gross value of
production.  Per acre cash costs were not affected.
 
The estimates for 1994 still remain preliminary in that regional sugarcane
prices will not be published by USDA until January, 1996.  When 1994 prices
are published, estimates will be revised to reflect the new estimates.  Until
then, 1994 prices have been kept at their 1993 levels.
 
USDA's latest costs of sugar crop production and processing estimates, as
well as sugar crop loan rates, are provided in tables 31-39.
 
U.S. Sugar Import Duties 1/
by
Ron Lord*
 
-------------------------
1/ The words duty and tariff are used interchangeably.
-------------------------
U.S. import duties on sugar agreed to during the Uruguay Round negotiations
of the General Agreement on Tariffs and Trade (GATT) generally became
effective on January 1, 1995. 
 
October 1, 1995, the United States has agreed to set an access level for
sugar imported under the low duty 2/
 
---------------------------------
2/ The term "first-tier duty" is sometimes used for the low duty, which
refers to general column (column 1) in the HTSUS.  The term "second-tier
duty" refers to the high, or special column duty.  For a very few countries,
there are even higher duties, but these are not significant for sugar.
 -------------------------------
 
of 1.256 million short tons a year.  There are now  separate quotas for raw
sugar and refined sugar, 3/
------------------------------
3/ The category here called "refined sugar" consists of 5 products in the
HTSUS:  1701.12.10, 1701.91.10, 1701.99.10, 1702.90.10, 2106.90.44.
-----------------------------
 
and the time period of the import quotas is fixed as of October 1 through the
following September 30.  The minimum low-duty tariff-rate-quota (TRQ)  for
raw cane sugar is 1.231 million short tons, and for refined sugar, 24,251
short tons, raw value.  With either the raw or refined sugar quotas, the
Secretary of Agriculture may reserve a TRQ quantity for the importation of
specialty sugars as defined by the United States Trade Representative.  The
Secretary of Agriculture has authority to set a TRQ higher (but not lower)
than the above minimum levels.  For example, on November 9, 1995, the
Secretary announced an increase in the raw cane sugar import TRQ for 1995/96
of 331,000 tons above the minimum level.
 
The low duty for raw cane sugar under quota, as determined under Additional
U.S. Note 5 of Chapter 17 of the Harmonized Tariff Schedule of the United
States (HTSUS), is 0.625 cents a pound, raw value.  This duty is waived for
countries under the Generalized System of Preferences (GSP), the Caribbean
Basin Initiative (CBI), and the ANDEAN trade pact.  Thus the low duty on TRQ
imports is waived for all countries currently allocated a share of the U.S.
sugar import quota except Australia, Brazil, 4/
---------------------------
4/ Brazil is a GSP beneficiary, but does not qualify for sugar because of a
"deminimus" requirement which limits the benefits to countries which export
less than a certain predetermined value of the GSP-eligible product to the
United States.  
--------------------------
Gabon, and Taiwan.  There is a polarization adjustment (i.e. an adjustment of
the duty for quality differences) on the low duty.  For the purposes of
subheadings 1701.11 and 1701.12, "raw sugar" means sugar whose content of
sucrose by weight, in the dry state, corresponds to a polarimeter reading of
less than 99.5 degrees.
 
The low duty for refined sugar under the quota is 1.66 cents a pound for
100-degree sugar.  There is a polarization adjustment for refined sugar
testing less than 100 degrees.
 
Any amounts of sugar imported in excess of the announced TRQ levels pay the
high duty.  The high duty is based upon a tariff equivalent to the quotas in
place during the period 1986-88, and is scheduled to decline by 15 percent
over 6 years to the year 2000.  For raw cane sugar, the base period duty was
established at 18.08 cents a pound, and the first 2 -percent reduction which
took effect January 1, 1995, resulted in a duty of 17.62 cents a pound for
1995.  The duty will fall to 15.36 cents a pound in the year 2000.  The high
duty on refined sugar is about 1 cent higher, and will fall to 16.21 cents a
pound in the year 2000.  There is no polarization adjustment for the duties
on sugar imported above the TRQs, but the United States is considering a
technical revision of the HTSUS to provide for such polarization adjustments.
 
U.S. duties on sugar imports from Mexico are covered under the North American
Free Trade Agreement (NAFTA) which became effective January 1, 1994.  The
duty on Mexican sugar imported under the access provisions of NAFTA is zero,
and the duty for sugar above the access provisions is 15.20 cents a pound in
1995.  This NAFTA high duty will decline to zero by the year 2008.  
 
Sugar imports from Canada are composed entirely of refined beet sugar, since
Canada's export control regime only allows domesically produced sugar to be
exported.  Sugar imported from Canada under the provisions of HTSUS
Additional Note 5 faces a duty of 0.20 cents a pound in 1995, and this will
fall to zero in 1998 as agreed to in the U.S.-Canada Free Trade Agreement
which became effective in 1989.  The available TRQ for refined sugar for
1995/96 is 22,426 tons, which is the announced total TRQ for refined sugar of
24,251 tons minus 1,825 tons set aside for specialty sugar allocations for 23
countries.  In fiscal 1996, this refined sugar TRQ is available on a
first-come, first-served basis.
 
Duties on HFCS between the United States and Canada are low and scheduled to
decline to zero in 1998.  The Mexican duty on HFCS from the United States is
scheduled to decline from a base of 15 percent (prior to the implementation
of NAFTA in 1994) to zero over 10 years, and in 1995 is 12 percent.  Between
October 1, 1990 and January 1, 1995 sugar imports from Canada were not
subject to quota. 
 
World and U.S. Corn Sweeteners
 
World Production
World Production Growing But
Remains Highly Concentrated
 
The world's leading non-sucrose caloric sweetener is high fructose corn syrup
(HFCS).  HFCS is a liquid sweetener which can be produced from a variety of
feedstocks provided they contain sufficient amounts of starch.  The most
prominent source of starch in the United States is corn, but some producers
in Asia use sweet potatoes or tapioca.  In Europe, wheat and potatoes are
also used as starch feedstocks.
 
Globally, HFCS first started to make an economic impact in the mid-1970's
when sugar prices soared and new technologies became available.  The global
sugar price boom of the mid-1970's provided a much needed protective umbrella
for the first attempts to produce HFCS on an industrial scale.  Global sugar
prices boomed again in the early 1980's, at about the same time that further
major technological breakthroughs occurred and proved that this alternative
caloric sweetener was commercially attractive even when lower sugar prices
prevailed.
 
While sugar prices have historically been the leading reference value for
determining the market penetration of HFCS, sugar and HFCS are not perfect
substitutes.  For example, sugar has a number of bulking, texture, and
browning characteristics which make it the sweetener of choice for the
confectionery, bakery, and cereal industries.  World-wide, HFCS is competing 
primarily with liquid sugar in  carbonated soft drinks.  The availability of
HFCS in liquid form creates constraints for storage and trade.  Transport of
HFCS is costly and therefore trade has been restricted to short-distance
exchanges.
 
According to leading international sweetener analysts, some combination of
five prerequisites are usually necessary for successful development of an
HFCS industry.
o  Import status for sugar and a high internal price for sugar
o  Sufficient supplies of starch at a reasonable net price
o  Well developed food production and consumption infrastructure
o  Capital for investment in research and development (R&D) and plant and
equipment
o  Favorable government policy
 
A decade ago world HFCS production was estimated at 5.4 million metric tons,
dry basis.  By 1987, production had expanded to 6.8 million tons, and for
1995 the forecast is 9.4 million tons, up 22 percent since 1990.  Globally,
production remains concentrated, with the United States accounting for 75
percent (7.1 million metric tons) of the world total in 1995, Japan 8 percent
(750,000 tons), and the EU 3 percent (303,000 tons), followed by Canada,
Korea, Argentina and Taiwan at between 2 and 3 percent each.  Together these
seven countries are expected to account for 96 percent of global HFCS
production this year.
 
While this year-to-year growth in global HFCS production has been
significant, its production and use remains small compared with sugar.  For
example, USDA's global sugar consumption forecast for 1995/96 is 117 million
metric tons versus 9.4 million for HFCS.  Moreover, the outlook for the short
run is that the substitution of HFCS for sugar will remain confined to a
small set of countries and largely to liquid sweetener markets.
 
U.S. Production
U.S. Corn Crop Lower;
Corn Sweetener Output Continues To Grow
 
The 1995/96 (September/August) U.S. corn crop is estimated at 7.37 billion
bushels, down 27 percent from the record high 1994 corn crop, due to reduced
area and lower yields.  According to USDA's November Crop Production report,
1995/96 corn harvested acreage is estimated at 64.8 million, down 11 percent
from last year.  The reduction reflects prolonged wet conditions in the
Midwest this spring which prevented some plantings and delayed others.  Based
on conditions as of November 1, the average corn yield is forecast at 113.7
bushels per acre compared with a record 138.6 bushels in 1994/95.  The sharp
decline is due to a very hot dry summer in many leading production States as
well as production losses this fall.  For example, yield estimates were
reduced in Kansas due to damage from early frost.  In Nebraska and some other
areas, high winds led to reports of lodging and ear droppage.  With generally
favorable conditions, farmers made rapid progress harvesting corn in October. 
As of November 5, 87 percent of the crop was harvested in the 17 major
producing States accounting for 94 percent of estimated production.  This
compares with an average of 74 percent.
 
This year is shaping up as one of the tightest ever for U.S. corn.  With
importers' buying continuing at a breakneck pace, limited corn supplies and
higher prices are expected to have a larger impact on domestic users despite
strong potential demand.
 
According to the December World Agriculture Supply - Demand Estimates (WASDE)
report, domestic corn use for 1995/96 is forecast at 6.28 billion bushels,
with feed and residual use taking 73 percent or 4.58 billion bushels, and
food, seed, and industrial (FSI) use the remainder, 1.70 billion bushels. 
Within the FSI use sector, the corn grind for corn sweeteners is forecast at
a record 705 million bushels, 19.7 million short tons, up 1.7 percent from
1994/95.  Corn sweeteners represent about 9.6 percent of the forecast
domestic use of the 1995/96 crop, and 41 percent of FSI use.  Over the last
decade, corn use for sweeteners have climbed from around 500 million bushels
annually to a record of over 700 million expected this year.
 
U.S. corn sweetener production in fiscal 1995/96 (October/September) is
forecast to total 12.1 million tons, dry basis, up 3.9 percent from the year
that ended September 30.  This forecast reflects expanded industry capacity
and is based on recent growth trends.  Figure 19 provides a detailed
flow-chart of the corn wet-milling process yielding corn sweeteners.
 
HFCS production is forecast at 8.1 million tons, dry basis, up 4.2 percent
from 1994/95 and accounting or about two-thirds of expected total corn
sweetener production for the coming year.  For fiscal 1994/95, HFCS
production totaled 7.8 million tons, up 4.4 percent from the corresponding
period in 1993/94.
 
Glucose syrup and dextrose are the other primary corn sweeteners produced by
the U.S. corn wet milling industry.  Combined glucose and dextrose production
for fiscal 1995/96 is forecast at 4.0 million tons.  This is up 125,000 tons
from the fiscal 1994/95 estimate and accounts for about a third of total
expected corn sweetener production during fiscal 1995/96.
 
U.S. Consumption
HFCS Use Higher
 
Total U.S. corn sweetener use is expected to reach 11.2 million tons of which
U.S. production is expected to supply 98 percent.  The United States
supplements domestically produced corn sweetener supplies with imports,
mainly from Canada.  USDA forecasts HFCS consumption at 8.0 million tons, up
3.9 percent from 1994/95.  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 59.3 pounds in fiscal 1995/96, up
from 57.7 pounds for last year, and 45.2 pounds a decade ago.  Glucose syrup
and dextrose deliveries are forecast at 3.3 million tons, up 2.6 percent from
1994/95.
 
HFCS deliveries for fiscal 1994/95 totaled 7.68 million tons, up 3.5 percent
from the preceding year.  HFCS-55 use is driven largely by demand by the
nonalcoholic beverage sector which normally accounts for 90 percent of its
total use.  Tables  44 and 45 provide a breakout of HFCS-55 and HFCS-42 use
by major food use categories and beverages. For HFCS-55, there appears to be
only small growth in food categories such as processed foods; with beverages
remaining the leading category of use.  HFCS-42 depends on beverages for only
about 40 to 45 percent of its total use.  Other food use categories in total
are more important and expanding, especially use in processed foods, and the
cereal and bakery category.  For 1995, soft drink use growth is estimated at
3 to 4 percent, somewhat below increases in recent years.  While summer soft
drink use was reported to be strong, price increases--mainly due to increased
costs for plastic and aluminum packaging--earlier in the year dampened demand
somewhat.
 
U.S. Prices and Costs
HFCS Prices Remain Low Through Summer
 
HFCS-55 and HFCS-42 list prices averaged 18.96 and 16.92 cents a pound, dry
weight basis respectively, for the period October 1994 through May 1995.  For
the June through September period, prices for HFCS-55 averaged 18.51 cents a
pound and for HFCS-42, prices averaged 16.62 cents.  Normally, prices move up
sharply during the summer due to the high demand for HFCS from the beverage
sector and because of tight processing capacity.  However, this past summer,
while demand was strong due to unusually hot summer temperatures in many
parts of the country, prices did not move up.  This reflects added corn
sweetener processing capacity, as much as 25 percent according to some
estimates, that came on line in the last year. With the very sharp downturn
in this season's corn crop, HFCS prices have increased.
 
HFCS prices are consistently lower than refined sugar in the U.S. market. 
For the 10 year period 1985/86-1994/95, wholesale HFCS prices averaged 20.76
cents a pound, dry basis, compared with 25.74 cents for refined beet sugar. 
This price spread of nearly 5 cents is one major reason for the substitution
of HFCS for sugar in beverage and certain food markets.  Moreover, these HFCS
prices are "list prices" and likely do not reflect significant price
discounts received by major buyers.
 
Fundamental also to the growth of the corn sweetener industry in the United
States has been the abundant availability of corn coupled with its relatively
low cost.  The cost of corn as a raw material input can be viewed either on a
gross or net basis.  The wet-milling process creates three valuable
byproducts:  corn gluten feed, corn gluten meal, and corn oil.  Sale of these
byproducts generates revenues that reduce the gross cost of corn.  When corn
prices rise, so usually do the byproduct prices, partly offsetting the effect
of higher corn prices on corn sweeteners.  In the calculation of byproduct
credits, it is assumed 1 bushel of corn weighs 56 pounds and produces 1.55
pounds of crude corn oil, 13.5 pounds of corn gluten feed, 2.65 pounds of
corn gluten meal, and 33.33 pounds of corn sweetener, dry weight.  Table 51
provides net cost of corn starch data through November 1995.
 
The Midwest price of number 2 yellow dent corn, the grade used by wet
millers, averaged $2.28 per bushel for the first 9 months of fiscal 1994/95,
compared with $2.67 for the corresponding period in 1993/94.  The lower corn
prices in 1994/95 reflected the record corn crop.  But corn prices have been
rising in recent months averaging $2.77 per bushel July-September, $3.12 in
October and $3.22 in November, reflecting the forecast sharp downturn in corn
production in 1995/96.  The December WASDE forecast corn prices for 1995/96
to range from $2.95-3.35 a bushel, compared with $2.26 per bushel for the
whole season of 1994/95.
 
Net corn cost averaged $1.67 per bushel in October 1995 versus 1.27 per
bushel for the first 9 months of 1995.  For the previous decade (1985-1994),
net corn costs averaged 90 cents a bushel.
 
U.S. Honey and Maple Syrup
 
Production
Honey Output Unchanged
 
U.S. honey production in 1995 is estimated at 216 million pounds (108,000
short tons), practically unchanged from 1994.  Production of honey in the
United States have been hampered by a continued decline on bee colonies.  The
number of commercial bee colonies in the United States has gradually declined
from a peak of 5.9 million in the late 1940's, to 4.3 million in 1985, and to
an estimated 2.7 million in 1995.  Declining colony numbers are mainly due to
fewer easily accessible floral sources, increased use of pesticides,
increasing losses from mites, rising production costs, and declining net
income.
 
In addition, the migration of Africanized bees into the southern United
States may have contributed to a decline in beekeeping, and therefore,
reduced bee colonies.  Although the number of producing colonies has declined
over the past years, honey yields per colony have increased.  Yields per
colony averaged 35 pounds in 1985, 62 pounds in 1990, and compared with an
estimated 78 pounds in 1994. The lower colony numbers and higher yields
likely reflect structural adjustments in the U.S. honey industry in which
smaller producers continue to leave the industry, while larger apiaries
continue technological improvements.  More than one-third of all colonies in
the United States are located in California, North Dakota, South Dakota,
Minnesota, and Florida.  These States continue to account for over half of
U.S. honey production.
 
Maple Syrup Lower
 
Maple syrup production for 1995 is estimated at 1.1 million gallons, down 17
percent from 1994.  The downturn is largely attributed to a fall-off in
production in Vermont, the largest producing State, from 435,000 gallons in
1994 to 365,000 gallons this year, due to less than optimal weather.  To
generate the best sap flows, freezing conditions at night followed by warm
days are required.  Production was up somewhat in Maine, the second largest
producer but down in New York, the third largest producer.  In New York, the
first sap run was reported March 4 and the last April 1, with an average of
47 gallons of sap per gallon of syrup.  In 1994, the first and last run were
March 16 and April 11, respectively, average yields were 41 gallons of sap
per gallon of syrup.
 
Consumption
Honey Use Expected Lower
 
U.S. honey consumption has been increasing in the last few years, due to
population growth and increased use by bakery, cereal, and health food
manufacturers.  However, U.S. domestic demand for honey in 1995 is forecast
to decrease by 4 percent based on lower supplies and higher prices. 
Household consumption accounts for approximately 40 percent of total U.S.
honey domestic use.  Honey for table use is generally liquid, light color,
and with mild flavor.  The United States is also one of the world's largest
markets for industrial honey, which accounts for about 45 percent of total
domestic consumption.  The food manufacturing industry, primarily bakery,
health food, and cereal manufactures, is the major user of industrial honey. 
The food service industry, which is comprised of restaurants, schools,
hospitals, and other institutional operations, accounts for the remaining 15
percent of the honey consumed annually in the United States.
 
Maple Syrup Demand Trading Up
 
Maple syrup use continues to grow in popularity.  Total use was estimated at
4.0 million gallons in 1994, compared with 2.5 million in 1985.  The upturn
in use can be attributed to wider marketing of domestic output increasingly
supplemented by imports. 
 
Trade
U.S. Net Honey Importer
 
Exports of U.S. honey in 1994 were 8.3 million pounds or 4,171 short tons, 2
percent below 1993 shipments, mainly due to increased competition from low
priced Chinese and Argentine honey in international markets.  U.S. honey
exports in 1995 are forecast at 9.3 million pounds or about 12 percent above
1994 shipments.  Although U.S. honey supplies are expected to be lower in
1995, higher international prices, combined with continued promotion
campaigns in principal U.S. markets, like those in the Middle East, have
improved U.S. honey export prospects this year.  Total U.S. honey shipments
during the period January-August, 1995, reached 5.7 million pounds, up 25
percent from exports during the same period last year.  Moreover, exports to
date to important markets such as Germany, Yemen, and Saudi Arabia are also
running ahead of last year.
 
About 55-60 percent of U.S. honey is exported in bulk form, with the
remaining 40-45 percent directed to the retail consumer-ready market. 
Exports of high-quality, consumer-packed honey have been increasing in recent
years due to increased world demand and to promotional efforts under the
Market Promotion Program, which is administered by the National Honey Board.
 
U.S. imports of honey in 1994 were 123.2 million pounds or 61,615 tons, 8
percent less than imports in 1993.  Anti-dumping investigations regarding
honey imports from China, the major supplier to the U.S. market, discouraged
exports of Chinese honey to the United States last year.  Still, U.S. honey
imports from Argentina in 1994 increased for the sixth consecutive year to
40.3  million pounds.  
 
U.S. imports in 1995 are forecast to decrease further to 84.0 million pounds
based on a new agreement reached this year with China, which will restrict
the amount of  Chinese honey imported into the United States.  Moreover,
decreased world honey supplies and higher international prices will likely
discourage U.S. honey imports in 1995.  U.S. honey exports during the period
January-August 1995, were 58.6 million pounds, compared with 85.8 pounds
during the same period last year.  Moreover, imports from China and
Argentina, the two top U.S. suppliers, are running behind last year's pace by
64 and 33 percent, respectively.  China, Argentina, Canada, and Mexico have
been the leading suppliers of honey to the United States, accounting for
nearly 90 percent of U.S. honey imports.  Honey imports account for about 30
to 35 percent of U.S. honey consumption.  Over the past decade (1985-94),
U.S. honey imports have exceeded exports by about 90 million pounds annually.
 
Maple Syrup Exports Small,
Imports Growing
 
U.S. maple syrup exports continue to be small, totaling only 569,000 gallons
in 1994, and averaging 364,000 annually for the previous 5 years.  In
contrast, imports of maple syrup, mainly from Canada, were a record 3.3
million gallons in 1994 with annual imports averaging 51.5 million gallons
for the previous 5 year average.  The upturn in imports reflects increasing
demand for maple syrup in the United States and the need to supplement
domestic supplies.
 
Programs and Policies
Honey Support Program Changed
 
The U.S. Honey Price Support Program was amended by the Agricultural
Reconciliation Act of 1993.  The 1993 Act reduced the minimum honey loan rate
from 53.8 cents a pound for the 1991-95 crops, to 50 cents a pound for the
1994 and 1995 crops, 49 cents a pound for the 1996 crop, 48 cents for the
1997 crop, and 47 cents a pound for the 1998 crop.  The 1993 Act also dropped
the 1 percent (0.538 cent) nonrefundable marketing assessment, which growers
paid on each pound of domestically produced honey.  However, the funding for
the price support portion of the honey program was eliminated for the 1994
and 1995 honey crops.  Also, the loan portion of the program is now operating
as a recourse, interest-charged loan program.  Loans are available for 9
months to provide interim financing while a producer markets the honey. 
Table 62 provides data on loan activity.
 
Chinese Imports Restricted
 
U.S. honey imports from China expanded steadily from about 26.5 million
pounds in 1989 to 75 million in 1993.  In response to a petition from the
American Beekeeping Federation and the American Honey Producers Association,
the U.S. International Trade Commission (ITC) instituted an anti-dumping
investigation on imports of honey from China in October 1994.  On November
14, 1994, ITC voted unanimously to pursue a complaint that Chinese honey was
being dumped in the United States and harming U.S. honey producers.  After
the ITC decides to accept a case, the actual anti-dumping investigation is
done by the International Trade Administration, Department of Commerce. 
After ITC found that honey from China had been dumped in the United States,
anti-dumping duties on imports from China were established.
 
In August 1995, the U.S. Department of Commerce and the Government of China
reached an agreement, which suspends punitive U.S. anti-dumping duties and
places quantitative and a price limits on Chinese honey or shipments to the
United States.  The agreement, which covers 5 years beginning in 1995, will
allow China to export 44 million pounds (21,982 short tons 19,942 metric
tons) of honey annually to the United States.  The agreement also established
that Chinese honey cannot be sold at a price lower than  a reference price,
equivalent to 92 percent of the average unit value of honey imported by the
United States from all other countries.  The reference price will be updated
quarterly.  Tables 58-64 provide supply use and price statistics for honey
and maple syrup.
 
World and U.S. High Intensity Sweeteners
 
World High Intensity Sweetener Use Continues To Expand
 
World production and use of high intensity (low calorie) sweeteners continues
to expand around the globe.  While USDA does not have an independent
production survey system for high intensity sweeteners, a prominent market
analyst places combined production of saccharin, aspartame, and acesulfame-k
at about 37 million pounds (table 65).  No public data are available for the
other major high intensity sweeteners cyclamate, sucralose, and alitame.  The
approximate sugar sweetener equivalent (SSE) to the major high intensity
sweeteners is as follows:   cyclamate (30), aspartame (180), acesulfame-k
(200), saccharin (300), sucralose (600), and alitame (2,000).
 
The growth in the use of high intensity sweeteners reflects their cost
economics compared with sugar and HFCS.  One of the most notable features of
the world intense sweetener sector in recent years has been the growing trend
towards the blending of different sweeteners with one another.  From a
commercial point of view, one of the most important advantages of such blends
is their sweetening synergies.  The sweetness intensity delivered by a blend
is nearly always far greater than the sum of the sweetness potencies of the
individual sweeteners, enabling food and drink manufacturers to realize
substantial sweetener cost savings.  Moreover, blending often results in
taste synergies and enhanced stability.
 
For markets to grow, these products must first gain approval by food safety
authorities in various countries.  For example, both sucrolose and alitame
were approved for use in Mexico and Australia this past year.  In contrast,
both products are awaiting approval by the Food and Drug Administration (FDA)
for use in the United States.
 
Saccharin is one of the most widely used high intensity sweeteners.  It is
approved for use in the EU, Japan, China, Canada (for table top use and
pending approval in soft drinks and food), and the United States.  Saccharin
has been low priced averaging about 1 cent a pound SSE, in the United States. 
It is widely used in China and Indonesia as a substitute for sugar in soft
drinks and other foods.  In the United States and Europe, saccharin is also
widely used in non-food uses such as toothpaste and pharmaceuticals.
 
One of the oldest and most widely used blends is that of saccharin with
cyclamate.  Used on their own, the taste profiles of these sweeteners are
poor, both having slight metallic after tastes.  However, when used together,
the overall taste profile is much improved.  Moreover, because of sweetening
synergies that exist between the two sweeteners and low costs, the potential
cost savings are significant.  However, in some of the world's largest
sweetener markets regulatory barriers prohibit the use of one or either of
these sweeteners.   For example, in the United States and United Kingdom
cyclamate have been banned for use since 1969.
 
Aspartame has achieved wide-approval in the EU, Canada, Japan, and the United
States.  Applications in the United States include carbonated soft drinks,
refrigerated and non-refrigerated ready-to-drink beverages, table top use,
frozen desserts, yogurt, and candies.   Aspartame gradually loses its
sweetness in liquids as a function of time, temperature, and pH.  It also
loses its sweetness when exposed to high heat, as in baking.  A new
encapsulated form of aspartame was recently approved by FDA for baking. 
Encapsulation protects aspartame under high heat and releases the sweetener
only during the final stage of baking.
 
Aspartame's advances in the U.S. market were spurred largely by growth in
demand for "diet" soft drinks, despite its high cost--in 1989 $60-$70 per
pound, or 36 cents a pound SSE.  Since NutraSweet's patent on aspartame
expired in December 1992, the price has fallen and currently is estimated at
about $20-$35 dollars a pound, or 17 cents a pound SSE.  While most of the
aspartame used in the United States is produced domestically, dependence on
imports is growing.  In 1994, the United States imported a record 5.9 million
pounds (2,683 tons) valued at $92.4 million, most of it from Japan.  The unit
import value was $15.62 per pound, or 8.68 cent a pound SSE (table 66).
 
Acesulfame-k has broad approval for use in food and beverages in the EU and
Canada.  It has not been approved yet in Japan.  In the United States it has
been approved for a number of food products such as baked goods, yogurt, dry
drink mixes, and as a table top sweetener.  Approval is pending for its use
in carbonated soft drinks.  In the United States, its price on a sugar
equivalent basis is about 17 cents a pound.  In Europe an increasingly
popular blend is acesulfame-k and aspartame.
 
Competition in U.S. Soft Drink Market Between High Intensity
Sweeteners, Sugar, and HFCS
 
During the 1980s, U.S. sweetener analysts generally believed that aspartame
was not having much negative impact upon the market for  caloric sweeteners
such as sugar and HFCS.  Instead, aspartame was competing with saccharin.  It
was also felt that aspartame had played a major role in revitalizing the diet
beverage market, but that these extra sales represented a new form of soft
drink demand, which was largely in addition to the existing large non-diet or
regular soft drink sales.  More recently, this view has been changed. 
Analysts now believe that there is some "cannibalisation" or substitution of
the regular soft drink market by diet products--that is, high intensity
sweeteners are competing directly with the caloric sweeteners, sugar, and
HFCS.
 
Ukraine's Sugar Industry: Recent Developments and Prospects
by
Peter Buzzanell, Yuri Markish, and Roger Hoskin 1/
-------------------------------------------
1/ The authors are agricultural economists in the Commercial Agriculture
Division, Economic Research Service, USDA. The authors wish to thank Samuel
Rosa, Foreign Agricultural Service, Washington, and the staff of USDA's
Office of Agricultural Affairs, Moscow for their insights drawn from a recent
field visit to the Ukraine to study the sugar industry.
 
Note: This is the second in a series of three articles on the republics of
the former Soviet Union that will appear in the Sugar and Sweetener Situation
and Outlook report. The first article, "The Russian Federation: Sugar
Industry in Transition" appeared in March 1994. 
-------------------------------------------
 
Abstract: Four years after the end of the Soviet period, Ukraine remains one
of the world's largest sugar producers despite declines in area, yield, and
production.  The processing industry is plagued with outmoded equipment and
production practices which hamper productivity.  To date, government
privatization efforts have meant no real change in administration.  High
prices and falling incomes have lowered Ukrainian sugar consumption.  The
country remains self-sufficient in sugar and exports about half of its
production, mostly to other FSU countries.  Current tariff regimens,
especially in Russia, could favor the resurgence of raw sugar imports for
refining and reexport.       
 
Keywords:  Ukraine, sugar, production, trade, FSU, Russian Federation.
 
Introduction
 
Ukraine's sugarbeet industry ranks as one of the world's largest in terms of
area  harvested,  processing  capacity, beet sugar production, and trade. 
However, field and factory  performance continues to be constrained by high
prices and shortages of agricultural inputs, fuel, machinery, spare parts,
and low capital investment.    The industry is struggling with policy reforms
as it adapts to the country's shift  from state planning  to market forces. 
The outlook for Ukraine's sugar industry, a key component of the nation's
rural economy and export earnings, is being shaped by the lack of initiatives
to increase production efficiencies and the slow reform of the industry's
organizational structure.
 
Structure of Production and Processing--
Sugarbeets is a Leading Crop
 
Ukraine is the world's fourth largest producer of sugarbeets and beet sugar
behind France, the United States and Germany.  For 1995/96, USDA forecasts
Ukraine`s sugarbeet harvest from an estimated 1.43 million hectares, the
largest of any country in the world (table A-1).  USDA forecasts Ukraine's
1995/96 sugarbeet production at 33.0 million tons yielding 4.0 million tons
of beet sugar, raw value (table A-2).
 
In recent years, sugarbeets have been processed in 19 of the Ukraine's 25
oblasts (similar to states in the United States or provinces in Canada). 
Ukraine's sugarbeet crop is sown in the spring and harvested in the fall.  Of
more than 1.6 million hectares sown to spring crops in 1995, sugarbeets
accounted for about 6 percent.  More than  half of spring planted area was
devoted  to grain crops such as barley, corn, and fodder crops. 
Sunflowerseed plantings were also somewhat larger than sugarbeets at 1.8
million hectares.  Although sugarbeets occupy less than 10 percent of
cultivated land, the crop accounts for about 30 percent of gross farm income
and 15 percent of net farm profits.  Moreover, the byproducts of the
sugarbeet crop (beet tops, beet pulp, and molasses) provide valuable animal
feed to supplement fodder crops.
 
Sugarbeets are grown on an estimated 7,500 to 8,000 agricultural collectives
and farms spread across the country.  Key producing oblasts are located in
the central and western parts of the country, generally near sugarbeet
processing facilities (figure A-1).  Among the leading oblasts in terms of
sugarbeet area are Vinnytsya, Cherkasy, Khmel'nyts'kyy, Kiev, and Sumy. 
Together these five oblasts account for over  50 percent of the total area in
sugarbeets.
 
The Ukraine has excellent natural advantages for growing sugarbeets,
including fertile soil and a good climate.  Sugarbeets are grown in rotation
with other crops, particularly grains, and year-to-year changes in beet area
planted reflect the relative prices received by farmers for sugarbeets
compared with other crops.   Planted area in 1995 was 11 percent below the
average 1.66 million hectares harvested in the late 1980's (table A-2).  In
part the decline effects the disappearance of Soviet Union's central planning
schemes, under which the Ukraine was obligated to produce sugar to meet  the
needs of other republics of the former Soviet Union (FSU).  The lower acreage
also reflects a shift to more profitable grains or sunflowers, problems
between sugarbeet growers and processors, and removal of subsidies to
sugarbeet processing plants.  While some traditional sugarbeet areas have
gone out of production, new areas have come into production in the Crimea,
Dnipropetrovs'k, Luhans'k, and Kherson oblasts.  Only Zaporizhzhya oblast
does not currently grow sugarbeets (figure A-1).
 
In November, Ukraine's sugarbeet yields for 1995/96 were forecast at 23.2
tons per hectare, up from the drought-reduced yields of last season but well
below the average 30.4 tons of the late 1980's.   Recent reports indicate the
final result may have been somewhat lower.   Yields in the Ukraine in the
late 1980's were about 5 tons below the world average of about 35 tons 
(figure A-3).  France and Germany typically average yields of 42 to 45 tons
per hectare.  Quantity and quality of agrochemicals and other industrial
inputs in these countries historically have been several times higher than in
Ukraine.   However, Ukrainian yields have tended to be higher than in some
neighboring East European countries such as Romania, Bulgaria, and the
Russian Federation.
 
Ukrainian yields have declined since the end of the Soviet period because of
the declining use of fertilizers and plant protection products.  The end of
government subsidies of these inputs has led to sharply higher prices and
reduction of input use.  This season's production upturn represents a
recovery from 1994's severe drought.
 
In recent years, the productivity of Ukrainian sugarbeet agriculture has been
constrained by problems with seeds, field equipment, chemicals, and fuel. 
For example, sugarbeet seed has not been available in sufficient quantities. 
Average annual sugarbeet seed production is estimated at 17,000 tons, which
is enough to plant 1.1 million hectares.  The three sugarbeet seed factories
in Ukraine (Vinnytsya, Lebedyn and Buryn) all are reportedly in need of
modernization.  Foreign hybrids were planted on about 60,000 hectares in the
spring of 1995, 4 percent of total plantings.
 
Efforts to modernize the seed industry are underway.  To support breeders,
each beet  factory has to contribute to a special breeding fund of the
Ukrainian Sugar Concern (Ukrsakhar), a quasi-government agency.  Five new
Ukrainian-developed hybrid seed varieties are expected to be released soon. 
Domestically produced sugarbeet seeds were given by the government to
sugarbeet factories without advance payment for the 1993-95 planting seasons,
and  then distributed  to farmers, also without any advance payment.  In
1995, seeds will be reportedly paid for after the crop harvest at a cost of
200 kilograms of sugar per hectare.   Higher yielding, foreign hybrid seed
costs about three times as much as Ukrainian varieties.
 
Fertilizer and pesticide applications have fallen since the Soviet era due to
higher prices, and removal of subsidies to growers to purchase inputs. 
Fertilizer applications  to sugarbeet fields have fallen from 300 to 450
kilograms per hectare in the mid 1980's to 80 to100 kilograms in some areas
for the 1994/95 crop.  Pesticide use has fallen to 20 to 30 percent of   the
amount applied during the Soviet period.  In the future, the rate of
fertilizer, and chemical use will be determined by their economic benefit. 
Application rates are unlikely to return to Soviet-period levels.  Like the
seed problem, the reduced use of production-enhancing inputs has shown up in
lower sugarbeet yields.
 
Growers initially were unable to obtain credit  for the spring planting
campaign in 1995.  However,  the Cabinet of Ministers decided to ignore the
Government anti-inflation guidelines and requested  the Ministry of Industry
to give fertilizers to sugarbeet farmers last spring without  prepayment. 
Final settling is supposed to be done after growers sell their  1995 harvest,
but is unlikely to happen.  Given the inflationary environment in Ukraine,
the government decision to delay payments represents a subsidy to growers.
 
Harvesting of sugarbeets normally begins in September and lasts about 60
days, while processing can last up to 100 days. According to Ukrainian
government sources,  average losses from the previous five crops averaged 
22.5 percent.  This staggering loss estimate includes beets unharvested and
those dug but not delivered to factories.  Despite the agronomic and capital
equipment problems, a return to more normal weather helped Ukrainian farmers
in 1995/96 to harvest and deliver an estimated 33.0 million tons of
sugarbeets to  processing  facilities.   While more than 20 percent below the
45 million ton average of the late 1980's, the volume will exceed that of any 
other country in the world.  Harvests  in  France, Germany, and the United
States, for example, each are expected to range around 26 million tons this
season.
 
Grower-Processor Relationship
 
Currently Ukraine regulations presume that all sugarbeets and byproducts
(molasses and beet pulp) are owned by the growers.  Growers pay sugar
factories a processing fee ranging from 19 to 42 percent with money, beets,
or sugar.  Sometimes shares of molasses and pulp also remain with the
factories.  Payment is done according to quality and quantity of beets,
taking into account data on sugar content and average sugar losses at the
factory through the entire beet processing campaign.  
 
This season, for the first time, there appears to be little or no state or
government mandated contract between growers and processors, and procurements
continue to be scaled back.  Growers and factories have to find their own
markets for their output and have to find supplies of inputs and equipment. 
The contracts between farmers and processors are understood to include
pricing alternatives such as: 1) growers pay a fee to cover the processing
and storage costs of sugarbeets, and  2) sugar produced, as well as molasses
and pulp, remains the property of the grower (after deducting storage losses)
and the factory retains part of the finished sugar as payment for processing
costs.
 
There are major disagreements between beet growers and processors regarding
the amount of sugar processors should receive under barter agreements. 
Processors want to implement a new regulation  stipulating  that 51 percent
of the sugar processed belongs to the growers and the remainder to them.  The
growers, in contrast, want a 70-30 percent split.  As a point of comparison,
in the United States there is generally a 60-40 percent grower-processor
split, with grower payments  based on their individual sugar content and the
market price of sugar received by the processor.  In the western U.S.
contract model, the processor keeps returns generated from byproducts.
 
Processing Facilities Need Modernization
 
Ukraine has one of the world's largest sugarbeet processing industries. 
According to the latest available statistics, there are 195 beet processing
plants located in 19 of the country's oblasts, although several are not
operational this season. 5/
 
-------------------------------------
5/ Some reports indicate that only 189 to 192 plants are operational this
season.   
-------------------------------------
   Total daily sugarbeet slicing capacity is about 500,000 tons (table A-3),
and beet sugar production capacity is about 50,000 tons per day.  In
addition,  Ukraine has five raw cane sugar refineries strategically located
throughout the country, the largest of which is situated at the Black Sea
port of Odessa (figure A-1). 6/
 
--------------------------------------
6/ Many of these refineries were former beet processing plants that were
refitted as raw cane sugar refineries to mill Cuban sugar for Russia.
--------------------------------------
Sugarbeets are shipped to processing plants generally located near growing
areas.  A large share of the plants are clustered in the central and western
part of the country with the highest concentration in the oblasts of
Vinnytsya (41), Cherkasy (23), Khmelnytskyy (17), and Kiev (15) (figure A-1). 
By world standards Ukraine's beet processing plants tend to be small.  For
example, in the oblast of Vinnytsya, 9 of the 41 beet plants have a daily
capacity under 1,500 tons; 25 have capacities of between 1,500 and 2,500
tons; 7 have capacities of between 2,500 to 5,000 tons; and only 1 has a
capacity of over 5,000 tons per day.  Only 17 plants, 9 percent of the total,
have capacities over 5,000 tons; and the national average is 2,623 tons per
day.  In contrast, the U.S. beet sugar industry's plant capacity averages
5,375 tons, and 18 of the 34 U.S. plants have capacities over 5,000 tons per
day.    About 50 of Ukraine's beet processing plants are characterized as in
good mechanical condition, 50 are in poor condition, and the remainder are
characterized as very poor. 
 
Ukraine's beet processing campaign usually starts in mid-September and runs
through mid-December.  The national average length of the processing campaign
is 90 to 100 days, with some regional variation. While portions of the
industry tend to run efficiently, large segments do not.  By western
standards processing losses are high.  Capacity utilization levels during the
short processing season tend to be low due to endemic problems of
insufficient beets and lack of fuel to maintain plant operations.  In recent
harvests, increasing transportation delays and lack of coordination between
growers and processors have contributed to below-optimum throughput in
factories.   High energy consumption has became a major problem for the
industry.   Ukraine's exports of sugar to Russia are tied to reciprocal
arrangements for oil imports, so the more oil required for each ton of sugar,
the more sugar that must be bartered to Russia.
 
According to statements  by Ukrsakhar, the Ukrainian beet processing industry
extracts about 72 percent of the sugar content of sugarbeets entering the
factory.  The vintage of equipment, lack of repairs and maintenance as well
as management practices in handling beets from the field to the factory, all
contribute to lower recovery rates in Ukrainian plants.  While this
extraction rate is similar to that achieved in Soviet times in the late
1980's, it is well below western standards.  For example, in the United
States, plants normally extract over 80 percent of the sugar in beets, and if
desugaring of molasses  is added, the figure goes to over 90 percent.  
However, the sugar content of Ukrainian harvested sugarbeets is comparable to
those of western countries--over 16 percent.  Thus, increased efficiencies in
the factories would reduce losses and decrease costs.  A good index to
compare both field and factory productivity levels is sugar produced per
hectare.  As figure A-4 reveals, Ukraine's sugar per hectare is well below
levels achieved in France and nearby Poland.
 
Yet, the sugar per hectare level in the Red River Valley of the United States
is closer to that of Poland than France.  This highlights the difference
between technical and economic efficiency.  If inputs or outputs are
subsidized, then agriculture will become very technology intensive; this may
explain the high sugar per hectare figure for France.  If product prices and
inputs are not subsidized then  it may not be economically profitable to
attain a higher technical level of productivity.  Ukraine's industry is
currently undergoing the removal of assets and inputs that results when
subsidies are ended, hence the value of fixed assets is low, perhaps
excessively so.  What the "optimal" use of these inputs is will depend on
costs and returns in a restructured industry.
 
However, there is no evidence that reported changes in ownership arrangements
have meant any changes in day-to-day administration.  The Ukrainian
government scaled back procurement more out of an inability to finance the
program than out of conviction that it should be ended.  Presently, domestic
sugar prices are high, $700 to $800 a ton, well above world prices, and
stocks are ample.  The fact that prices have not fallen, suggest that growers
and processors are holding stocks because they believe that they will
eventually convince the government to ratify the industry's high cost
structure by some form of subsidization or renationalization.
 
Processing Facilities Privatization
 
Until 1991 all of Ukraine's processing facilities were state owned and all
the major strategic decisions concerning plant investment and modernization
were made in Moscow and passed to Kiev for execution.  The state guaranteed a
supply of financial resources, raw material, energy, and machinery to run the
facilities.  After the collapse of the Soviet Union, central planning ceased,
but the state still owned the  factories.  
 
To help solve some of the endemic problems of the processing sector, the
Ukrainian government has begun to privatize plants and seek foreign
investment to help modernize the industry.  As of the first half of 1995, 31
beet factories were reportedly privatized, 16 percent of the total.  These
sugar factories were first leased, then privatized.  An additional 72
factories have been leased.
 
Since early 1995, the Ukrainian Parliament has shifted away from leasing to a
direct open-joint-stock company privatization method, with participation of
sugarbeet farmers.  Regulations require a 51-percent majority ownership by
sugarbeet farmers.  However, there have been some problems with this approach
due to a lack of  "farmer privatization certificates."  Moreover, there are
some proposals to renationalize factories already privatized because the
distribution of their shares does not correspond to the recent regulations
set up by the Parliament, (i.e. farmers should hold at least 51 percent of
the shares).  Ukrainian State Certificates are documents provided by all
Ukrainian state, private and cooperative enterprises to each employee in
these organizations.  Certificates are supposed to be able to be sold for
cash or traded for shares in other enterprises.  Some enterprise certificates
are worth more than others depending on the value placed on the enterprise's
assets.  Some enterprises and farms are prohibiting the use of certificates
by their employees for purchase of assets in other than the employer's
enterprise.  Also the problem has arisen  that often there are not enough
farmers at collective farms with certificates to cover the required 51
percent of the factory assets.  
 
A major stumbling block to privatization is that the government has set the
price of these "assets" too high and producers know it.  Consequently, it is
their preference to invest their certificates in paper assets rather than
factories.  Moreover, there is no incentive to own factories that are
virtually bankrupt nor is there any incentive to buy if growers and workers
perceive that the government could be persuaded to continue subsidization in
one form or another.
 
Foreign companies have shown little interest, to date, in participating in
joint ventures designed to privatize beet factories.  However, Ukraine is
getting some foreign investment for its raw cane sugar refiners.  Tate and
Lyle Inc. of the United Kingdom,  has invested $15 million in a joint venture
to upgrade the Odessa refinery.  The plan is to increase sugar output from
750 tons per day to 1,500 tons.  One attraction of the project is that under
current regulations, Tate and Lyle can avoid the Russian Federation's 25
percent import duty on refined sugar by supplying refined sugar made in the
Ukraine from imported raw sugar.
 
Lack of foreign interest in Ukrainian processing plants re-enforces the
notion that the asking price is too high given the uncertainty of the
business climate.  Furthermore, given Russia's import duty schedule for
refined sugar, refining raw sugar could be the most profitable segment of the
industry, depending on domestic sugar prices in Ukraine and Russia, hence the
foreign interest in refineries.
 
Marketing--Domestic Consumption and Exports
Per Capita Use Remains High
 
USDA forecasts 1995/96 sugar consumption in the Ukraine at 2.25 million tons,
raw value, down 50,000 tons from last year and 610,000 tons lower than the
annual average for the late 1980's and early 1990's (1987/88-1990/91).  For
1995/96, Ukraine's sugar consumption is expected to  account for 56 percent
of its  production, not unlike the recent trend.  Although Ukraine is
consistently a surplus producer, the downturn in sugar use also has come at a
time of declining production (table A-2).
 
Underlying the aggregate estimates are important changes in per capita use. 
Ukraine's sugar consumption averaged over 50 kilograms, refined, per capita
during the late 1980's, compared with 55 in the EU and 20 worldwide during
the period  (figure A-6).  The high per capita sugar use reflected heavily
subsidized prices to consumers.  Since the early 1990's sugar consumption has
fallen more than  20 percent because of lower real income, higher prices, and
increased availability of sugar-containing product imports.
 
The sources of sugar demand in Ukraine differ from western countries. 
Commercial food processing and other manufacturing account for about
one-third of total sugar use, compared with two-thirds or more in the United
States.  In Ukraine, retail sales and noncommercial home use account for
about two-thirds of total use.  For example, a large share of nonindustrial
use goes for home preservation of fruits, berries, and vegetables.  In
addition, Ukrainians traditionally use sugar for homemade vodka production.  
Some estimates show  that about 5 percent of the total sugar consumption goes
for home production of alcohol in Kiev, with a higher figure in the
countryside.
 
In 1991, after the demise of the Soviet structure, the Ukrainian state sugar
agency, Ukrsakhar, was created.  Ukrsakhar is responsible for sugar
distribution in domestic and export markets. Currently, Ukrsakhar issues
shipping notices to sugar factories for sugar to be procured under state
contract.
 
Because both growers and processors are paid in sugar, the amount remaining
for disposal by the state has been declining.  Increasing shares of the sugar
crop are in the hands of farmers or processors on a free market basis.  For
example, the volume of free market sugar handled by farmers totaled nearly
300,000 tons,  refined value,  in 1992; 600,000 tons in 1993; and around 1.0
million tons  in 1994.  These developments have created multiple domestic
markets for sugar.
 
World Ranking Exporter
 
Despite the downturn in export availability in recent years, Ukraine remains
one of the world's largest beet sugar exporters, and only the European Union
is larger (figure A-7).  For 1995/96, USDA forecasts that Ukraine will export
about 2.0 million tons, up 300,000 tons from the previous year, but down
sharply from the 4.2 million-ton-average achieved during 1987/88-1990/91. 
The exports are expected to be composed of about 1.5 million tons of
domestically produced beet sugar and 300,000 tons of imported raw sugar
refined for reexported  sugar ( table A-2).
 
Sugar exports account for about one-quarter of Ukraine's total agricultural
exports, ranking second only to grains, which account  for about one-half of
total exports.  Ukraine's other major agricultural export commodity is
sunflowerseed.
 
Of total beet sugar exports for 1995/96, 1.76 million tons, or nearly 90
percent, are expected to be shipped to Russia and other republics of the FSU. 
The remaining 10 percent  is expected to be exported to neighboring countries
(figure A-8).  According to International Sugar Organization (ISO) statistics
for 1994, Ukraine supplied nearly 40 percent or 1.5 million tons of the total
sugar imports of the FSU-12 and Baltic States (table A-4).  The Russian
Federation, Belarus, Uzbekistan, and Azerbaijan were the major destinations 
in terms of  volume.  For several FSU republics--Azerbaijan, Belarus,
Moldova, and Tajikistan--Ukraine accounted for two-thirds or more of their
sugar imports.
 
Non-FSU markets for Ukraine in recent years have included Bulgaria, Romania,
and China.  With Turkey--Ukraine's major regional export
competition--shifting  from a net exporter to a net importer position this
season due to a
fall-off in production, Ukraine could capture an increased share of the
import markets in Albania, Romania, the former Yugosolvia, Iran, and Iraq, as
well as Turkey.  In 1993 and 1994, Turkey exported 90,711 and 62,492 tons,
respectively, to the FSU-12 republics of Azerbaijan, Georgia, Russian
Federation, Tajikistan, and Uzbekistan.  However, Ukraine likely will be
unable to  fill the void left by Turkey in 1995/96 because of insufficient
availability.  USDA forecasts 1995/96 sugar imports by FSU-12 (excluding
Ukraine and Russian Federation) and  Baltic States will total about 1.8
million tons, raw value.
 
Ukraine's major trading partner has been Russia, which mainly trades oil for
Ukraine's sugar.  Traditionally, Ukraine has exported to Russia, the world's
largest sugar importer, a combination of domestically produced beet sugar as
well as imported raw cane sugar refined in Ukrainian  facilities.  During the
1980's, around 2.0 million tons of imported raw sugar were refined annually. 
This raw cane sugar, mainly of Cuban origin, was tolled in Ukraine as part of
the FSU's  barter exchange of Cuban sugar for Russian oil.  In recent years, 
sugar refining has been largely a commercial activity, with volume depending
upon the level of the refined premium--the difference between the prices of
refined and raw sugar.  As table A-2 reveals, imports of raw sugar into
Ukraine  dropped  sharply since the late 1980's, reflecting the fact that the
refined premium has generally not been high enough for toll refining to be
commercially viable.
 
USDA expects Russia's sugar imports to increase from 2.7 million tons in
1994/95 to about 3.0 million in 1995/96.  According to Russian Customs
Committee data, in calendar year 1994, Russia  imported 2.2 million tons of
sugar, of which Cuba accounted for 911,711 tons or 42 percent and Ukraine
681,502 tons or 31 percent.  For the first half of 1995, (January-June),
Russia's raw sugar imports  from Cuba totaled 364,757 tons, 59 percent of
total raw imports.  Ukraine provided 508,439 tons of Russia's refined sugar,
81 percent of the total of refined imports.  Historically, Russia imported
raw and refined sugar in about equal amounts, but  the share of raw sugar has
increased in  the last 3 years, with 1995/96 raw imports forecast at about 55
percent compared with 48 percent in 1993/94.  The reason for this change is a
higher import tariff for refined sugar (25 percent) compared with raw sugar
(1 percent).  Also since April 1995, imports of refined sugar have been
subject to a 10-percent value-added-tax (VAT) and a special tax of 1.5
percent.  The VAT on raw sugar, however, is 20 percent.  However, the refined
sugar import tariff of 25 percent does not apply to other FSU republics such
as Ukraine.
 
It is expected that 200,000 to 300,000 tons of raw sugar will enter Ukraine
during 1995/96 for refining and reexport.  Under Ukraine's tolling and
reexport regulations, imports of raw sugar for tolling have to be re-exported
within 90 days or be subject to the Ukrainian import tax.  Ukraine applies a
10-percent import duty on either raw or refined sugar.  A 20-percent VAT is
also applied to raw sugar imports, unless they are re-exported. 7/
-----------------------------------------
7/ Based on the self-sufficiency of Ukraine in sugar, it is unlikely that any
of the sugar produced from imported raws is consumed domestically. However,
some swapping of physical domestic and tolling sugar may take place from time
to time.
------------------------------------------
Ukraine's sugar import flows are controlled by Ukrsakhar under an import
license system.  Ukrsakhar is also responsible for export deliveries against
intergovernmental agreements with other FSU republics  and for refined sugar
exports from imported raw sugar based on tolling contracts with international
sugar trade houses.  Export licenses are issued by the Ministry of Foreign
Trade.
 
Prospects for the Future
Industry in Transition
 
Ukraine's sugarbeet growers,  processing sector officials, and government
policy makers continue to try to bring greater economic incentives,
production efficiencies, and market reform to the country's sugar industry. 
The outlook is uncertain with respect to production, consumption, trade, and
the reorganization of the industry.
 
Production--The data clearly point  to a significant gulf between the
technical performance of Ukraine's sugar industry and those in Western Europe
and the United States.  While this indicates the generally poor state of
Ukrainian sugarbeet agriculture, it suggests that with application of
appropriate technologies (i.e. seed, fertilizers, chemicals) and financial
support, Ukraine could  increase sugar production.  For example, assuming
current area in sugarbeet, a 15-percent increase in beet yields from the late
1980's level to 35 tons per hectare--still well below the level regularly
achieved in western Europe--would raise sugarbeet production  to around 50
million tons.  Assuming average recovery rates for the past four  seasons of
12.7 percent, beet sugar production could total about 6.0 million tons, up by
nearly 50 percent from recent levels.
 
While a larger volume of sugarbeets would help the general throughput problem
of Ukraine's processing sector, the industry is clearly in need of capital
investment and restructuring.  One plan mentioned with this focus concerns
the building of a 12,000 ton plant in Zhytomyr oblast and closing five small
nearby mills.
 
There are several factors  that  are likely to determine the direction of
production over the next few years.  On the positive side there are factors
that would encourage an increase in Ukraine's sugar production.  These
include  greater export opportunities  in Russia, other FSU countries, and
the world market.  On the negative side there are factors that could cause
further contraction.  These include the immense needs in capital investments,
the increasing energy costs of the processing sector, and a view that sugar
production should be only large enough to meet domestic consumption needs,
and resources should be shifted to more remunerative crops or activities.
  
Consumption--Ukraine's per capita sugar consumption remains high.  However,
high sugar prices and low consumer purchasing power are likely to continue to
curb demand growth until incomes improve.  Ukraine's population,  now
estimated at 52 million,  is growing slowly, so no significant increase is
foreseen in total sugar consumption.  What may change over time is a use
pattern from one dominated directly by consumers to one of greater
consumption of sugar-containing food products from an expanding western-style
food processing industry.
 
Trade--It is very likely that Ukraine could expand sugar exports if it is
able to raise production.  Assuming no change in consumption, production of
around 6 million tons would leave an annual exportable surplus of around 4.0
million tons, the same level achieved in the late 1980's.  Markets are
available to Ukraine both within the FSU and in neighboring countries.  The
magnitude of these exports will depend ultimately upon such factors as the
industry's production costs, the price it receives from world market sales,
and the price it receives from domestic sales.  Moreover, the need to improve
the general quality of sugar for export will also determine how competitive
Ukraine will be in international markets.
 
The role of tolling raw sugar for Russia is a question mark.  Russia will
remain a large importer of sugar.  Ukraine has sugar refinery capacity and a
developed infrastructure for unloading raws and shipping refined products. 
The level of exports to Russia is likely to continue to depend on 
intergovernment agreements on fuel and sugar, the raw-refined price
premimiun, and  border taxes--such as the waiving of the import tariff on
refined sugar from other FSU countries. 
 
Policy Reform--Ukraine's sugar industry faces many underlying structural
problems that have not been addressed in the initial transition from the old
Soviet command economy.  The privatization initiative is an important first
step for a long term development strategy.  However, it  remains to be seen
whether this launches a new restructuring process that will encourage
investment and  improve availability of some of the inputs and technologies
available to beet sugar industries in Western Europe and the United States.
 
Unresolved is a comprehensive policy concerning the country's sugarbeet 
factories.  To cut the high cost of sugar production, a large number of the
small, old sugar factories with low efficiency would have to be closed. 
However, a sizable shut-down of factories would increase rural unemployment. 
Clearly the privatization and potential factory modernization strategies will
be pivotal to the future vitality of the Ukrainian  sugar  industry.  In
addition, seeming contradictions among different Ukrainian Parliamentary acts
pertaining to enterprise privatization could seriously limit privatization of
Ukrainian agricultural enterprises.
 
Moreover, transition to a domestic market where prices are based on supply
and demand forces and payments are made in currency is also essential.  These
programs and policies will not be easy to formulate or implement and the
temptation to solve the industry's underlying structural problems by
government intervention will remain strong.
 
References  Page
(1) American Embassy, Kiev (1995) "Semi-annual Sugar Situation Report for
Ukraine," October 13, 1995.
(2) American Embassy, Moscow (1995) "Semi-annual Sugar Situation Report for
Russia," October 13, 1995.
(3) Gudoshnikov, S.  (1993) "Industry and Market Structure for Sugar in the
Ukraine," F.O. Licht's International Sugar and Sweetener Report, Vol. 125,
No. 35.  Nov. 26,  pp 669-673.
(4) Interfax (1995) "Russia Needs Sugar, but Can Do Without Oil-for-Sugar
Deal," February 22, Moscow.
(5) International Sugar Organization (1995) "Statistical Bulletin," monthly. 
London.
(6) International Sugar Organization (1995) "Sugar and Sweeteners
Yearbook-1994," London.
 (7)    LMC International (1995) "Developments in the Sugar Sectors of the
Republics
of the Former Soviet Union," (1995) Sweetener Analysis, pp 5-10.
(8)  Licht, F.O. (1995) "List of Ukraine's Sugar Factories," Sugar and
Sweetener Yearbook-1995 pp C185-190.
(9) Licht, F.O. (1994) "The Russian Enigma," F.O. Licht's International Sugar
and Sweetener Report. Vol. 126, No. 23.  August 4, pp 503-508.
(10) Kommersant (1995) " Oil with Sugar," Number 39, October 24, Moscow. 
(11) Melentjew, Boris O. and Zayets Yuriy  O. (1995) "Developmental Trends of
the Ukrainian Sugar Industry," Zuckerindustrie, Vol. 120, No. 8,  pp 
659-666.
(12) Unian-in Ukrainian (1995) "Kuchma Wants More Competitive Ukrainian
Products," Foreign Broadcast Information Service, October 16, Kiev.
(13) Sledz, S. (1995) "Christening of UAB (Ukrainian Agrarian Birzha) is
Held," Finansovaya Ukraina, October 24, Kiev.
(14) Pogorelov, A. (1995) "Quiet October Anti-privatization  Revolution,"
Finansovaya Ukraina, October 31, Kiev
(15) Organization for Economic Co-operation and Development (1994)
"Agricultural Policy and Trade Developments in the Ukraine in 1993-1994," Ad
Hoc Group on East/West Economic Relations in Agriculture, Paris.
(16) Reuters (1995) "Ukraine Refined Sugar Output Seen at 3.5 Million Tons"
December  3, 1995, Kiev.
(17) Rosa, S. (1995) "The Ukrainian Sugar Industry:  The Impact of the
Breakdown of the Soviet Regime" World Sugar Circular, Foreign Agricultural
Service, U.S. Department of Agriculture.
(18) The Carnikow Sugar Review (1995) "The Ukraine Sugar Industry" No. 1861,
pp 130-132 October, London.
 
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