SUGAR AND SWEETENERS                                       September 27, 1995
               Approved by the World Agricultural Outlook Board
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Sugar and Sweetener Situation and Outlook Report.  Commercial Agriculture
Division, Economic Research Service, U.S. Department of Agriculture,
SSSV20N3.
 
Summary
 
World sugar production and consumption for 1995/96 are forecast at 118.3 and
117.1 million metric tons, respectively.  The implied surplus of 1.2 million
tons for 1995/96, together with a similar surplus estimated for 1994/95,
allows the rebuilding of global stocks and puts downward pressure on world
prices.  The surplus in 1994/95 follows 2 years of sugar deficits.  The large
drawdown of world sugar stocks that resulted explains the strong world prices
that were at a 5-year high during the first quarter of 1995.
 
The 1995/96 world sugar production forecast is up 580,000 metric tons from
the earlier forecast published in the June Sugar and Sweetener Situation and
Outlook report, and 2.45 million tons above the revised estimate for the
global 1994/95 crop. 2/
 
Since the June report, improved production prospects are foreseen for a
number of large producing countries in Latin America including Mexico,
Guatemala, Argentina, Brazil, and Colombia.  In Africa, improved crops are
foreseen in South Africa and Zimbabwe, both hard hit by drought in recent
years.  For Asia, large crops are again forecast for India and Thailand. 
These upward adjustments in forecasts for 1995/96 more than offset the
trimming of estimates for the United States, the European Union (EU)-15,
(mainly due to lower forecasts for Spain, Italy, and the United Kingdom) and
the Russian Federation, Turkey, China, Pakistan, and the Philippines.
 
Global sugar consumption for 1995/96 is forecast at a record 117.1 million
tons, up 2.4 percent or 2.76 million tons from the revised estimate for
1994/95.  Sugar consumption continues to expand in Latin America, largely
driven by trends in the most populous countries, Brazil and Mexico.  Sugar
use in other countries in the region is also growing.   For example Central
American countries, which together are forecast to consume 1.28 million tons,
are up 21 percent from 1990/91.  A similar growth pattern is seen in the
Middle East (6.6 million, up 15.8 percent since 1990/91).  The estimates are
even more impressive for the countries of Asia which together are expected to
consume 39.8 million tons, up 16.5 percent since 1990/91 and accounting for
one-third of global sugar use.
 
In contrast, sugar consumption growth year-to-year continues to be weak or
non- existent in many of the world's industrialized economies in North
America, Europe, and Japan where sugar markets are mature and alternative
caloric sweeteners and high-intensity sweeteners are popular.  World sugar
trade for 1995/96 is forecast at 30.7 million tons, or about 26 percent of
forecast world sugar production.  Among the world's leading sugar exporters,
prospects for improved crops in Cuba, Brazil, and Ukraine will permit
increased exports.  India's record crop and high carry-in stocks are
fostering a shift of India from net importer to net exporter.  Among the
world's major sugar importing countries, imports are expected to remain
strong for the Russian Federation, up 11 percent to 3.00 million tons, while
China will slacken to 2.50 million tons after an estimated 3.0 million tons
of imports registered for 1994/95, the highest since 1987/88.
 
World spot prices for raw sugar (f.o.b. Caribbean, Contract No. 11) averaged
12.80 cents a pound for the first 11 market days of September, compared with
13.46 and 13.75 cents a pound in July and August.  This compares with prices
a year ago of 12.54 cents for the first 11 days of September, and 11.73 and
12.05 cents for July and August 1994.  USDA forecasts stocks at the end of
1995/96 at 21.3 million tons, the highest since 1991/92.  The stocks-to-use
ratio is forecast at 18.2 percent, up from a low of 16.4 percent 2 years ago. 
Prospects of larger crops this year will facilitate the rebuilding of stocks
in a number of countries, including the EU-15, Argentina, Colombia, and
Zimbabwe.  India alone will account for one-quarter of the world's stocks.
 
U.S. sugar production in fiscal 1995/96 is forecast at 7.65 million short
tons, 4.2 percent less than 1994/95.  Beet sugar production is forecast at
4.40 million tons, down 150,000 tons from the record 1994/95 crop and 58
percent of U.S. sugar production.  U.S. sugarbeet production is expected to
total 29.1 million tons, a decrease of 9 percent from 1994.  Area for
harvest, at 1.43 million acres, is virtually unchanged from USDA's "Acreage"
report published in June and 1 percent below last year.  The average yield,
forecast at 20.4 tons per acre, is 1.8 tons below last year's near record
yield.  A cool, wet spring delayed the completion of sugarbeet planting,
leaving many northern States 2 weeks behind normal.
 
Cane sugar production is forecast at 3.25 million short tons, down 187,000
tons from 1994/95.  Lower production is expected in the major cane sugar
production States; Florida (1.70 vs 1.73 million tons), Louisiana (920,000 vs
1.02 million tons), and Hawaii (460,000 vs 500,000 tons).  Sugarcane
production for sugar and seed in 1995 is expected to total 29.1 million tons,
a decrease of 6 percent from 1994.  Area for harvest, at 922,200 acres, is
virtually unchanged from the June "Acreage" report but is 1.6 percent below
last year.  The yield forecast, at 31.5 tons per acre, is 1.5 tons below last
year's yield.
 
U.S. sugar consumption for fiscal 1995/96 is forecast up 1 percent or 90,000
tons from the revised forecast for 1994/95, to 9.42 million tons, an increase
less than the average of 1.6 percent growth of recent years.  For 1994/95
sugar consumption estimates were revised down 50,000 tons from the June
estimate to 9.33 million tons, comparable to the recorded use in 1993/94. 
Between 1986 and 1994, consumption grew about 2 percent a year, exceeding the
annual population growth rate of 0.8 percent.  The projected reduction in
demand growth is attributed to continued encroachment of HFCS (high fructose
corn syrup); weak demand for confectionery and bakery products--major
industrial users of sugar; and 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.
 
U.S. raw sugar prices (nearby futures, c.i.f. duty paid, contract No. 14, New
York) averaged 23.11 cents a pound for the first 11 market days of September,
compared with 24.47 cents in July and 23.81 cents in August.  The downturn
reflects USDA's decision to reallocate the 1994/95 tariff rate quota (TRQ)
shortfall, early announcement of the fiscal 1995/96 TRQ (July 28), and early
entry of fiscal 1995/96 quota sugar as requested by authorities in
quota-holding countries.  Price movements in the coming months will pivot on
development of the upcoming sugar crops, the level of current and anticipated
sugar consumption, and USDA's policy decision announced September 13 that
domestic marketing allotments, in force during fiscal 1994/95, are
unnecessary for the first quarter of fiscal 1995/96 (October-December).
 
HFCS production and consumption in the United States is expected to continue
to expand in 1995/96 to 8.15 million tons, dry basis, up 4.5 percent from the
current year.  Expanded production is made possible by a 25 percent increase
in wet-mill capacity between 1994 and 1995.  Consumption is being driven by
strong growth in the beverage sector and gradual inroads into traditional
sugar markets.
 
In the United States, HFCS-55 and 42 consistently sell at a discount to
wholesale refined beet sugar.  The average discount over the last 5 fiscal
years has been 4.2 cents a pound for HFCS-55 and 6.4 cents for HFCS-42.  For
June to August 1995, the discount has been 6.4 cents for HFCS-55 and 8.3
cents for HFCS- 42.  These price differences continue to encourage the
substitution of corn sweeteners for sugar where technically feasible.
 
World Sugar 1/
 
-------------------
 1/ In this report, world sugar estimates are given in metric tons equal to
2,204.6.2 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.
--------------------
 
Overview
 
World Production and Forecast Consumption Raised
 
World sugar production and consumption for 1995/96 are forecast at 118.3 and
117.1 million  metric tons, respectively.  The implied surplus of 1.2 million
tons for 1995/96, together with a similar surplus now estimated for 1994/95,
allows the rebuilding of global stocks and puts downward pressure on world
prices.
 
The surplus in 1994/95 follows 2 years of large sugar deficits.  The drawdown
of world sugar stocks that resulted explains the strong world prices that
were at a 5-year high during the first quarter of 1995.  World sugar prices
are facing downward pressure because of record world sugar production
resulting in more exportable supplies forecast for 1995/96 (table 1).
 
The 1995/96 world sugar production forecast is up 580,000 metric tons from
the forecast published in the June Sugar and Sweetener Situation and Outlook
report, and 2.45 million tons above the revised estimate for the global
1994/95 crop (table 1). 2/ 
 
------------------------
 2/ Based on national marketing years in all countries.
------------------------
 
Since the June report, improved production prospects are foreseen for a
number of large producing countries in Latin America including Mexico,
Guatemala, Argentina, Brazil, and Colombia.  In Africa, improved crops are
foreseen in South Africa and Zimbabwe, both hard hit by drought in recent
years.  For Asia, large crops are again forecast for India and Thailand. 
These upward adjustments in forecasts for 1995/96 more than offset the
trimming of estimates for the United States, the European Union (EU)-15
(mainly due to lower forecasts for Spain, Italy, and the United Kingdom) and
the Russian Federation, Turkey, China, Pakistan and the Philippines.
 
The 2.1-percent expansion in global production forecast for 1995/96 can be
attributed to several developments.  Cuba's production is forecast to
increase to 4.0 million tons, up 700,000 tons from the disastrous 1994/95
crop, which was the lowest in 50 years.  USDA believes foreign investment to
purchase production inputs (i.e. fertilizer, pesticides, and equipment) and
some changes in the organizational structure of the rural economy such as the
dividing of large state farms into "Basic Units of Cooperative Production"
(Unidades Basicas de Produccion Cooperativa or UBPC) should help boost yields
and cane tonnage.  However, even the improvement to 4.0 million tons remains
well below the 7 to 8 million ton levels achieved under the era of subsidized
support for the Cuban economy by the former Soviet Bloc.
 
EU production is expected to rebound from a drought in 1994/95 to 17.11
million tons, up 3.7 percent or about 600,000 tons.  Sugarbeet yields are up
particularly in France, Germany, and the Netherlands.  In the big three beet
sugar producers in Central and Eastern Europe--Poland, the Russian
Federation, and Ukraine--production is up nearly 900,000 tons due largely to
improved sugarbeet yields caused by more normal weather in contrast to the
1994/95 season's drought-reduced yields.  Harvest conditions in these
countries will be pivotal to the realization of the current production
forecasts.
 
Global sugar consumption for 1995/96 is forecast at a record 117.06 million
tons, up 2.4 percent or 2.76 million tons from the revised estimate for
1994/95.  Sugar consumption continues to expand in Latin America largely
driven by trends in the most populous countries.  Brazil's consumption is
forecast to rise 3.8 percent, and Mexico's 1.4 percent.  Together the two
countries account for nearly two-thirds of the total consumption for Latin
America and the Caribbean.  Sugar use in other countries in the region is
also growing, such as the Central American countries which together are
forecast to consume 1.28 million tons, up 21 percent from 1990/91.  A similar
growth pattern is also seen in the Middle East (6.6 million tons, up 15.9
percent since 1990/91).  The estimates are even more impressive for the
countries of Asia which together are expected to consume 39.8 million tons,
up 16.5 percent since 1990/91 and accounting for one-third of global sugar
use.
 
In contrast, sugar consumption growth year-to-year continues to be 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 level 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.
 
World sugar trade for 1995/96 is forecast at 30.7 million tons, or about 26
percent of forecast world sugar production.  Among the world's leading sugar
exporters, prospects for improved crops in Cuba, Brazil, and Ukraine will
permit increased exports (table 2 and 3).  India's record crop and high
carry-in stocks are fostering a shift of India from net importer to net
exporter.  Although EU production is expected to be higher, exports will be
down to allow for rebuilding of stocks.
 
Among the world's major sugar importing countries, imports are expected to
remain strong for the Russian Federation, up 11 percent to 3.00 million tons,
while China will slacken to 2.50 million tons after an estimated 3.0 million
tons of imports registered for 1994/95, the highest since 1987/88.  Imports
by the other major importing countries--the EU-15, the United States, Japan,
and South Korea--are forecast to be relatively unchanged.  The Philippines, a
historical exporter, and Turkey, a recent exporter, will both shift to become
net importers in 1995/96.  The overall structure of world trade remains
relatively unchanged, with the top six exporting countries accounting for
about 70 percent of world exports and the top six importing countries only 40
percent of global imports (table 3).
 
World spot prices for raw sugar (f.o.b. Caribbean, Contract No. 11) averaged
12.80 cents a pound for the first 11 market days of September (through
September 18), compared with 13.46 and 13.75 cents a pound in July and
August.  This compares with prices a year ago of 12.54 cents for the first 11
days of September, and 11.73 and 12.05 cents for July and August 1994.  World
raw sugar prices remain strong compared to the early 1990's as do world
refined prices (Contract No. 5, London) (figures 1 and 2).
 
World raw sugar futures prices (March 1996) have been trading at 2 to 3 cents
below the spot price and are likely to remain weak into the fall.  Factors
holding the price down are the outlook for a increase in 1995/96 European
beet sugar production, prospects for a record 1995/96 global sugar crop,
indications India may export 700,000 tons of sugar, and improvement in global
stock levels.
 
USDA forecasts stocks at the end of 1995/96 at 21.3 million tons, the highest
since 1991/92.  The stocks-to-use ratio is forecast at 18.2 percent, up from
a low of 16.4 percent 2 years ago (table 1).  Prospects of larger crops this
year will facilitate the rebuilding of stocks in a number of countries,
including the EU-15 (particularly France, Germany, and 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.
 
Developments in Selected Countries Latin America
 
Argentina--Cane sugar production in 1995/96 is forecast at 1.50 million tons,
the highest in 5 years and up 27 percent from 1994/95.  The upturn is
attributed to an increase in area harvested, improved yields reflecting very
good growing conditions, more efficient processing because of investment in
new technology in many mills, and higher recovery rates due to an expansion
of harvest mechanization, which has shortened the time from cane cutting to
receipt at the mill.
 
Sugar consumption is forecast at 1.30 million tons, down slightly from last
year, reflecting the current slowdown in the Argentine economy.  Imports are
not expected to be needed in 1995/96 in contrast to the 2 preceding years. 
While there is expected to be some stock rebuilding, the bulk of the surplus
production is likely to go to the export market.  USDA forecasts exports at
100,000--the highest since 1992/93, but still well below export levels
achieved in the early 1990's.
 
Brazil--USDA forecasts 1995/96 production at 12.65 million tons, 2.0 percent
higher than last season.  Sugarcane crushing is already underway in Brazil's
Central-South where the production season runs from May through November. 
Reports to date indicate cane sugar production is comparable with last year
when the Central-South contributed about 72 percent of national production. 
Brazil's other producing region, the North-Northeast, grinds cane from
October through April and early reports are that the crop in the region will
be higher than in 1994/95.
 
Brazil's sugar consumption continues to expand and is forecast at a record
8.3 million tons for a population approaching 170 million, the 5th largest in
the world.  Demand has risen sharply since the introduction of Brazil's anti-
inflationary Plan Real in mid-1994, as consumers have experienced a rise in
their real disposable income.
 
Effective June 1, the export tax on sugar was raised from 2 percent to 40
percent by the government as a temporary measure following the demise of the
system which set export quotas as a way of ensuring sugar supply to the
internal market and sufficient sugarcane for the production of ethanol
(fuel-alcohol).  On July 13, the special 40 percent tax on sugar exports was
removed.  According to sugar traders, no export sales of Brazilian sugar were
made when the 40 percent tax was in effect.
 
Sugar exports for 1995/96 are estimated at 4.3 million tons, of which about
60 percent will be shipped from the Central-South and the remainder from the
North- Northeast.  Until several years ago the North-Northeast was the
dominant exporting region.  The expansion of exports from the Central-South
have been facilitated by a larger production base but also by the
deregulation of the domestic market that has encouraged greater flexibility
between domestic and export sales and between sugar and fuel-ethanol
production.
 
Mexico--Sugar production for 1995/96 is estimated at 4.20 million tons.  This
estimate is based on area forecasts and trend yields reflecting normal
weather conditions and the assumed ability of sugar mills to continue to work
despite financial problems.  The industry reports that because of the present
economic conditions there will be almost no growth in harvested area for
sugarcane in 1995/96.
 
Mexico's 1994/95 grinding season ended in June, and sugar production is
estimated at a record 4.55 million tons, up 21 percent from the poor 1993/94
crop.  This record outturn was caused by exceptional weather that led to
higher yields and a 3-percent increase in harvested area.  However, the
financial condition of the sugar industry continues to be poor.  With the
peso devaluation in December 1994, sugar mills have faced higher interest
rates on credit and higher financial costs.  To help the industry dispose of
sugar inventories for 1994/95, the Mexican government has allowed sugar
producers to export sugar under a special Temporary Export Program (TEP). 
This program establishes an export tax per ton and gives exporters an
exemption from the tax if they obtain a "certificate of exemption" issued by
the Ministry of Commerce.  Exporters will receive the exemption if they
pledge to import, if necessary an equivalent amount of sugar within the year. 
Taking into account these provisions, Mexico is likely to export more sugar
than it imports in both 1994/95 and 1995/96.
 
Consumption is expected to grow marginally in 1994/95 and 1995/96.  However,
consumption growth will be constrained by generally poor economic conditions,
and expected increases in sugar prices.  Effective August 26, Mexico
announced sugar prices would be freed from government control.  The industry,
pledged to restrain price increases and plans to raise the price 30 percent,
in stages, through next February.  The Mexican sugar industry had been
pressing the government to free domestic sugar prices from current controls
to enable the country's mills to liquidate debt and avoid bankruptcy. 
Mexico's 61 sugar factories were privatized in the late 1980's and early
1990's.  However, the government, until now, has been reluctant to free sugar
prices because of its potential impact on inflation.
 
Western Europe
 
European Union--Sugar production in the 15 countries of the European Union
(excluding cane sugar production in the French overseas departments) is
forecast at 17.1 million tons, up 600,000 tons from last year's poor crop.  A
hot, dry summer in most of the major producing countries restrained sugarbeet
yields but promoted high sugar content in the beets.  Consumption is expected
to show no change from last season.  Sugar exports are likely to decline to
4.5 million tons, raw value, the lowest since 1984/85.  Last season EU sugar
stocks were drawn down as exporters took advantage of high world prices for
refined sugar.  This season, processors will rebuild their stocks (table 2). 
Supply-use tables for the major EU sugar producing countries are provided. 
 
Eastern Europe and the Former Soviet Union
 
Poland--Beet sugar production for 1995/96 is forecast at 1.74 million tons,
up 17 percent from the drought-reduced outturn in 1994/95.  Yields are
expected to be about 33.4 tons per hectare, in line with historical averages
and 15 percent above last year.  Late August rains helped sustain the yield
estimate that was threatened by a month-long dry spell.
 
The Polish government's economic committee (KERM) approved a 1.5-million ton
refined sugar production quota for the 1995/96 season.  Under the quota
system, factories would be allowed to produce a maximum of 1.5 million tons,
refined value for sale on the domestic market.  The quota aims to support
sugar prices and avoid last year's situation when factories were selling
sugar at prices they claim are below production costs.  The new minimum
wholesale price is 1.16 zlotys ($0.47) per kilogram.
 
Sugar consumption is forecast at 1.63 million tons, unchanged from 1994/95. 
However, Poland's sugar trade is expected to be realigned.  For 1994/95, in
response to the shortfall in production, an estimated 160,000 tons was
imported, mainly from the EU.  In contrast, for 1995/96 no imports are
likely, and about 100,000 tons of subsidized exports are expected.
 
Russian Federation--Beet sugar production for 1995/96 is forecast at 1.9
million tons, down 100,000 tons from earlier forecasts, but still over
200,000 tons above last season's drought-reduced crop.  While weather
conditions have remained generally good, area harvested has been revised
downward to 1.05 million hectares compared with 1.40 million hectares as
recently as 1992/93.  The fall-off in area sown to sugarbeets is explained by
a combination of factors, including reduced availability of production
inputs, poor state procurement payment practices, and the general weak
profitability of sugarbeets compared with alternative crops such as wheat and
sunflowers.
 
Sugar consumption is forecast at 4.9 million tons, down by a third from the
late 1980's due to higher sugar prices, tight family incomes, and the
contracting economy.  To fill the gap between domestic production and
consumption, Russia is expected to import about 3.0 million tons, about 2.0
million tons of refined sugar and 1.0 million tons of raw cane sugar.  The
bulk of the raw cane sugar is intended to come from Cuba under an
oil-for-sugar deal (1 million tons of raw sugar for 3 million tons of oil)
that will extend into 1996.
 
The mix between raw and refined sugar imports may be affected by recent tax
and tariff decisions.  The Russian government began enforcing a 20-percent
value added tax (VAT) on raw sugar imports beginning July 1, while the VAT
for refined sugar imports was set at 10 percent.  The tariff is also 25
percent on refined imports, but only 1 percent on raw imports.  Because of
the new VAT, refined sugar imports are now more profitable than the
production of refined sugar by Russian refineries from imported raws.
 
Ukraine--Although 1995/96 sugarbeet area is forecast at 1.4 million hectares,
comparable to last year, generally good growing conditions are expected to
improve yields about 16 percent above those of last year's drought-affected
crop.  Beet sugar production if forecast at 4.00 million tons, up 400,000
tons from 1994/95, but still below the over 5-million ton outturn achieved in
the late 1980's when area sown to sugarbeets was higher and production inputs
used more widely.  According to Ukrainian officials, the country's 194 sugar
factories will all be in operation in the 1995/96 processing campaign, giving
the Ukraine a combined daily beet processing capacity of 500,000 tons, and a
daily sugar production capacity of 50,000 tons.
 
While per capita sugar use levels remain high by world standards, Ukraine's
domestic sugar consumption continues to fall reflecting higher prices and the
contracting economy.  Sugar use is forecast at 2.25 million tons in 1995/96,
down by over 20 percent from the late 1980's and early 1990's.
 
With domestic consumption expected to utilize only 56 percent of production,
exports are forecast at 1.9 million tons, up 12 percent from 1994/95.  The
bulk of Ukraine's exports go to other former Soviet Union countries, mainly
Russia, and central European countries such as Romania.
 
Africa and the Middle East
 
South Africa--USDA forecasts 1995/96 cane sugar production at 1.79 million
tons, up 90,000 tons from the initial estimate due to good winter rains in
Natal that improved tonnage and a somewhat higher area harvested estimate. 
An estimated 16.2 million tons of cane are expected to be harvested this
season.  While this is an improvement over recent drought years, it is still
well below the "normal" pre-drought 20 million tons of the early 1990's that
yielded over 2 million tons of sugar annually.
 
Internal sugar demand will account for about three-fourths of new crop sugar. 
Exports are forecast at 500,000 tons, the highest since 1991/92.  Under
normal conditions, the South African sugar industry would expect to export
about 900,000 tons annually.  In recent years, South Africa's exports have
gone largely to Canada, the United States, and Korea, but if higher
production levels are achieved in the near future, the industry is expected
to pursue its long term goal of developing regional markets in east and
southern Africa.
 
United Arab Emirates--The first sugar refinery in the Gulf region started
operation in Dubai, United Arab Emirates, (UAE) at the beginning of July
1995.  Another plant is currently under construction in Jeddah, Saudi Arabia. 
The UAE plant has a 720,000-ton annual refining capacity, a bagging facility,
120,000 tons of storage for raw sugar, and ton silos for storing 35,000 of
refined sugar.  It is currently producing 500 tons per day, and is expected
to reach maximum production capacity within a year.
 
The refinery imports raw cane sugar for further processing into refined sugar
at EU number 2 specifications.  The plant will not only supply the UAE
market-- about 100,000 tons per year--but also other neighboring Gulf states,
including Iran and Iraq, as well as Asian and African markets in the future.
 
Turkey--The beet sugar production forecast for 1995/96 has been lowered 25
percent to 1.5 million tons, reflecting a sharp downturn in area sown to
sugarbeets this spring.  The downturn is attributed to the level of payments
for sugarbeets in 1994/95 set by the government that discouraged many farmers
from growing the crop this season.  After four excellent crops, yielding an
average of 2.1 million tons of sugar, warm and dry weather resulted in a
sharp decline in Turkish sugar production to 1.7 million tons in 1994/95. 
With the prospects of still lower production this season, burgeoning demand
approaching a record 2.0 million tons, and a run down in stocks, Turkey's
imports are expected to climb to 400,000 tons in 1995/96.
 
Turkey's sugar production policy has been to encourage self-sufficiency. 
However, because attractive returns to beet production have led to over
production in recent years, it appears that the government is in the process
of adjusting support prices to better balance production with consumption. 
In the future, Turkey is expected to be either a minor importer or a minor
exporter, depending largely on the weather related changes in production.
 
Asia and Oceania
 
India--Cane sugar production for 1995/96 is forecast at 16.0 million tons
(including 750,000 tons of khandsari), up 6 percent from the initial estimate
and only 2 percent below the record 1994/95 outturn.  While monsoon rains
were late across much of central and western India, rainfall has generally
improved since late July and the 1995 cane crop is progressing well.  The
crushing season in India extends through most of the year.
 
With domestic use of centrifugal sugar estimated at 15.0 million tons, and
large carry-in stocks from the record 1994/95 crop, India is expected to
shift to be a net exporter during the coming year.
 
Exports during 1995/96 are expected to reach 700,000 tons, up from 100,000
and 20,000 tons the 2 previous years.  No imports are expected.  The
government recently decided against the establishment of a sugar buffer stock
of as much as 500,000 tons to be used for market intervention.  Without a
buffer stock, the industry is expected to lobby for additional export
allocations during 1995/96.  Industry demands are likely to be tempered by
government concerns regarding the impact of exports on domestic sugar prices. 
Stocks are expected to remain very high.
 
Thailand--Sugar production for 1995/96 is forecast at a record 5.50 million
tons, up 10 percent from the earlier forecast and slightly above last
season's record.  Area in sugarcane is estimated at a new high of 1.0 million
hectares, up slightly from 1994/95 as some producers have switched out of
tapioca.  The USDA forecast is based on an estimate of the cane crop to be
harvested for sugar of 50 million tons. Thai sugar consumption continues to
rise, and is now forecast at 1.5 million tons, a 25-percent increase since
1990.  However, domestic use still represents only about one-quarter of
annual production, allowing exports to expand.  For 1995/96, total exports
are forecast at 3.90 million tons, comparable to this season.  Seventy-two
percent of export are expected to be raw sugar and the remaining 1.1 million
tons refined.  Forward sales of Thai 3 quota raw sugar have been sold at
12.01 cents per pound, compared with 13.56 cents this season.
 
Philippines--USDA's production estimates for both 1994/95 and 1995/96 have
been revised downward.  For 1994/95 cane sugar production is estimated at
1.65 million tons, down 200,000 tons from the previous estimate and nearly
300,000 tons below the previous year.  Dry weather early in the crop year,
combined with a long-term downturn in productivity, cut yields to nearly 30
percent below the recent 5-year average.  With a reassessment of the general
deterioration of the industry's productive capacity, the forecast for 1995/96
has been lowered 100,000 tons to 1.90 million tons.
 
With consumption levels of between 1.8 and 1.9 million tons annually, these
production levels are barely keeping the Philippines self-sufficient. 
Imports for 1994/95 are estimated at 38,000 tons, the minimum tariff rate
quota the Philippines agreed to under the Uruguay Round.  Exports are
estimated at 170,000 tons, of which 168,000 tons will go to the United States
under the U.S. tariff rate quota.
 
Currently the combination of low production, low imports, and continued
exports has resulted in a very short supply and sharply rising prices.  Raw
sugar prices at wholesale are now over $0.63 a kilo compared with just under
$0.50 a year ago.  Because of the very high domestic prices, the exports to
fill the United States quota can only be done at a financial loss, but the
Government and industry fear losing their quota allocation and are willing to
take these losses.  They fell they can turn production around in the coming
years so as to once again make the quota shipments profitable.
 
The President of the Philippines has approved a plan to import 100,000 tons
of sugar to stabilize local prices and head off a severe supply shortage. 
The sugar will arrive in the Philippines in the next 3 months to address the
shortage until sufficient supplies of new crop sugar are available.
 
Australia--Cane sugar production is forecast at 4.90 million tons, down 4.7
percent from last season's record outturn.  Dry seasonal conditions in some
growing areas reduced the volume of sugarcane produced, while unseasonal
rain, which for a period closed more than half of Australia's mills, delayed
the season and reduced the sugar content of the harvested cane.  In early
September a strike at Queensland sugar mills has further delayed the harvest. 
The 1995 crushing season which began in June is expected to be completed in
December.
 
The Australian sugarcane industry has been partially deregulated in recent
years which has resulted in the first significant entry of new growers on new
sugar growing land since 1965.  Land assigned for sugar production has
increased from 317,000 hectares in 1988/89 to a forecast 373,000 hectares in
1995/96, an 18- percent increase.  The majority of this increase is in the
Burdekin area of Queensland and more northern growing regions.
 
Consumption of sugar in Australia is forecast at 950,000 tons, accounting for
about 19 percent of production.  Exports are forecast at 3.95 million tons of
which 150,000 tons is expected to be refined sugar.
 
The 1990 season saw the end of the administered price arrangements for
refined sugar.  The Australian domestic price is now determined by import
parity pricing which includes the Australian import tariff.  Thus, movements
in the Australian price closely reflect fluctuations in the world price.  The
Australian Bureau of Statistics reports that the average retail price for a 2
kilogram bag of refined sugar on the Sydney market (March, 1995) was A$2.06
or 34.6 US cents per pound.
 
U.S. Sugar
 
Production
 
Sugar Crops Forecast Lower
 
U.S. sugar production in fiscal 1995/96 is forecast at 7.65 million short
tons, 4.2 percent less than in 1994/95.  Beet sugar production is forecast at
4.40 million tons, 58 percent of U.S. sugar production and down 150,000 tons
from the record 1994/95 crop.  U.S. sugarbeet production is expected to total
29.1 million tons, a decrease of 9 percent from 1994.  Area for harvest, at
1.43 million acres, is virtually unchanged from USDA's "Acreage" report
published in June and 1 percent below last year.  The average yield, forecast
at 20.4 tons per acre, is 1.8 tons below last year's yield.  A cool, wet
spring delayed the completion of sugarbeet planting, leaving many northern
States 2 weeks behind normal.
 
Beet sugar production from the desugaring of molasses (included in the total
forecast) is expected to reach 310,000, more than double the 1990/91 total,
from seven facilities in operation nationwide (Ohio, Minnesota [two],
Nebraska, Texas, Idaho, and California).
 
Cane sugar production is forecast at 3.25 million short tons, down 187,000
tons from 1994/95.  Lower production is expected in the major cane sugar
production States: Florida (1.70 vs 1.73 million tons), Louisiana (920,000 vs
1.02 million tons), and Hawaii (460,000 vs 500,000 tons).  Sugarcane
production for sugar and seed in 1995 is expected to total 29.1 million tons,
a decrease of 6 percent from 1994.  Area for harvest for sugar and seed, at
922,200 acres, is virtually unchanged from the June "Acreage" report but is
1.6 percent below last year.  The forecasted yield, at 31.5 tons per acre, is
1.5 tons below last year's yield.
 
For fiscal 1994/95, USDA estimates sugar production at a record 7.99 million
tons, relatively unchanged from the June estimate.  Beet sugar production is
estimated at a record 4.55 million tons.  According to USDA's Sweetener
Market Data report, beet sugar production for the first 9 months
(October-June) of fiscal 1994/95 was 4.00 million tons or 88 percent of the
production estimate for the year.  This is up 15 percent from the first 3
quarters of fiscal 1993/94 when beet sugar production totaled 3.49 million
tons, 86 percent of the year's production.
 
Cane sugar production for fiscal 1994/95 is estimated at 3.44 million tons,
down 128,000 tons from the year before as contraction in the Hawaiian
industry more than offset a record crop in Louisiana.  For the October-June
period, cane sugar production totaled 3.24 million tons, 94 percent of the
estimate for the year.  U.S. cane sugar production for the last quarter of
fiscal 1994/95 is almost entirely dependent on production in Hawaii. 
Hawaii's production estimate for the year is 500,000 tons, down from 705,000
tons in 1993/94, of which 439,500 tons or 62 percent of the estimate had been
produced during the first 9 months of the fiscal year.  Hawaii will need a
strong July-September quarter, nearly 200,000 tons or 39 percent of the
estimate for the year, to achieve the 500,000 ton forecast.  During the last
3 seasons, Hawaii has produced between 34 and 38 percent of its total fiscal
year production during the July-September quarter.
 
Developments in the Beet Sugar Producing Regions:
 
Great Lakes--Sugarbeet acreage in Michigan and Ohio for 1995/96 was 204,700
acres, up marginally from last year due to increased acreage in Michigan that
offsets a decline in Ohio.  Sugarbeet acreage in Michigan is at record levels
and yields are forecast at 18.0 tons per acre compared with an average of
16.6 tons the last 4 seasons (table 5).  Ohio's yields are also expected to
be up, but recurring production problems in recent years, along with
attractive alternative crops in the growing area of north-central Ohio, have
resulted in a steady decline in acreage.  USDA's National Agricultural
Statistics Service (NASS) estimates 1995/96 sugarbeet production from the
region at 3.68 million tons, up 12 percent from last year.
 
Regional sugarbeet processing plants concentrated in the Saginaw Valley of
Michigan (five) and Fremont, Ohio (one) are expected to begin their slicing
campaigns in early October and run through the end of January in Michigan and
mid-December in Ohio.
 
ADSEP, a subsidiary of the Savannah Sugar Company, has operated a molasses
desugaring facility since 1989 in Fremont, Ohio.  The plant receives molasses
from the adjacent Great Lakes Sugar Company and four of Michigan Sugar
Company's factories.  The desugaring-of-molasses campaign begins after the
regular beet slicing season and this past season ran through August.  Great
Lakes and Michigan Sugar are owned by Savannah Sugar.
 
Red River Valley--Sugarbeet harvested area in Minnesota and North Dakota is
estimated at a record 623,000 acres for 1995/96, up 1.7 percent from last
year and equal to 44 percent of the national beet acreage.  Yields however
are expected to be down 16 percent reflecting a cold, wet spring which caused
late plantings followed by a hot, wet May--perfect conditions for root rot. 
Minnesota's yields are estimated by NASS at 17.5 tons per acre versus a
record 20.6 tons last year.  North Dakota's yields are expected to be 17.6
tons versus 21.2 tons last year.  Combined sugarbeet tonnage is forecast at
10.91 million tons, compared with 12.74 million in 1994/95. 
 
Reflecting the late development of the new crop, the early harvest is
expected to begin in mid-September and the full harvest the first week of
October.  The processing campaign is likely to end in mid-April.  This
contrasts sharply with last season's record harvest which began the last day
of August and ran into early May.
 
The region has two molasses desugaring facilities operating at American
Crystal's East Grand Forks, Minnesota, plant and at Southern Minnesota's
plant at Renville, Minnesota.  Also operational is the region's joint sugar
marketing cooperative, United Sugars, which includes the Southern Minnesota
Beet Sugar Cooperative, Minn-Dak Farmers Cooperative, and the American
Crystal Sugar Company.  These firms are expected to produce about one-third
of total 1995/96 U.S. beet sugar.
 
Great Plains--Sugarbeet production prospects in the Great Plains are mixed. 
Regional area harvested is down 2.3 percent to 250,800 acres, 18 percent of
the national total.  Sugarbeet acreage in Montana and Wyoming is up slightly,
but this was offset by declines in Colorado, Nebraska, and Texas.  Poor
spring weather including heavy rains and hail caused some acreage to be lost
in Colorado and Nebraska.  In Texas, good cotton prices have encouraged
expanded cotton acreage at the expense of sugarbeets, contributing to a
50-percent drop in beet acreage in the last 3 years (table 6).
 
Yields are expected to be normal for the region, averaging 20.6 tons per acre
with a high of 23.0 tons for Montana and a low of 17.5 tons for Nebraska. 
All production in the region is irrigated and NASS estimates total sugarbeet
tonnage at 5.26 million tons, down 3.6 percent from last year and accounting
for 18 percent of the national total.  The beet slicing campaign was expected
to begin by the third week of September at the region's 11 processing
facilities (Colorado, (2); Nebraska, (3); Wyoming, (3); Montana, (2); and
Texas, (1).  Beet sugar companies in the region have also invested in
desugaring facilities.  The Western Sugar Company operates a desugaring plant
at its Scottsbluff plant, drawing in molasses from other plants in Nebraska,
Colorado, Wyoming, and Montana.  The Holly Sugar Company has its desugaring
facility at Hereford, Texas, to which molasses is also shipped from its 2
plants in Wyoming.
 
Northwest--The Idaho and Oregon 1995/96 sugarbeet crops will be harvested
from 216,000 acres, marginally lower than 1994/95.  Yields are expected to be
about normal, averaging 27.0 tons per acre for growing areas in Oregon and
25.0 tons in Idaho, reflecting generally good growing conditions and adequate
irrigation water.  NASS forecasts 5.44 million tons of beets, of which Idaho
accounts for 91 percent, compared with 6.06 million in 1994/95.
 
The slicing campaigns are expected to start in mid-September in central Idaho
and late September or early October in western Idaho and eastern Oregon.  The
1995/96 processing campaign in the region is expected to be finished by early
February.  Molasses desugaring for the region takes place at the Amalgamated
Sugar Company's facility at Twin Falls, Idaho. In addition to the traditional
growing areas, the Northwest has a new growing area in the Moses Lake section
of central Washington.  Approximately 7,500 acres are expected to be
harvested in the Moses Lake area starting in mid-October.  Yields are
reported to be exceptional, over 30 tons per acre, reflecting the area's
highly fertile soil.  Since this growing area does not have a mill close- by,
beets will be shipped by rail to Nampa, Idaho, and Hamilton City, California,
for processing.
 
A development of major significance for the region is the prospective sale of
the Amalgamated Sugar Company and its three beet processing facilities in
Idaho and one in Oregon.  Valhi Inc., the parent company for Amalgamated,
agreed last summer to sell the company to the Snake River Sugar Company, an
agricultural cooperative comprised of sugarbeet growers in Idaho, Oregon, and
Washington.  According to recent press reports, negotiations are nearing
completion.  If successful, nearly 60 percent of the total U.S. sugarbeet
production would come from agricultural cooperatives.
 
California--The State's sugarbeet industry, which spreads from the Imperial
Valley on the border with Mexico to the Central Valley and the Klamath Basin
straddling the Oregon line, is again expected to have among the highest
yields in the nation.  NASS estimates 27.0 tons per acre, comparable to
Oregon's, but down from last season's record of 29.0 tons.  This, in part,
reflects generally cool weather which reduced yields for the Imperial
Valley's crop harvested from April through July.
 
Sugarbeet acreage harvested continues to decline in California and is
estimated at 118,000 this season, compared with annual averages of 151,000
for the first 5 years of the 1990's, 201,000 acres during the 1980's, and
271,000 during the 1970's.  The downturn this year is explained by heavy
rains last spring which delayed plantings and caused some plant loss,
especially in the Sacrament Valley, and the availability to growers of more
remunerative alternative crops.
 
NASS estimates sugarbeet production in California at 3.19 million tons, down
22 percent from last year.  The Central Valley's fall harvest, which started
in August, is expected to run through early November.  The crop, which
experienced generally good growing conditions, is expected to have
average-to-above-average yields and sucrose content, but total tonnage will
be down due to reduced acreage.
 
Sugarbeets in California are processed at 6 plants, one located in the
Imperial Valley and 5 others located in the Central Valley.  Two plants
closed in California in 1993.  California's beet sugar industry has one
molasses desugaring facility operated by the Spreckels Sugar Company at their
Mendota plant located in the Central Valley.  The facility opened in the
spring of 1995 and utilizes molasses from the Mendota plant and Spreckels'
plants in Manteca and Tracy, California. 
 
Developments in Selected Cane Sugar Producing States:
 
Florida--The State's cane sugar industry is expected to produce 1.70 million
tons, down slightly from 1994/95.  Total area is estimated at 445,000 acres,
of which 428,100 are expected to be harvested for sugar at the State's seven
cane mills during the campaign that begins in mid-to-late October and
normally runs through early April.  The sugar output forecast assumes an
average recovery rate of 12.4 percent, slightly above last year's and the
most recent 5-year average.  The yield forecast by NASS is 32.0 tons per
acre, yielding 13.70 million tons of sugarcane for sugar.  Yields are down an
estimated 4.8 percent, reflecting unfavorable growing conditions this summer.
 
The upcoming cane harvest for sugar will be fully mechanized for the first
time in the industry's history (the seed cane harvest will still be largely
hand- cut).  This compares with only 30 percent as recently as the
mid-1980's.  Moreover, this season, no H2-A seasonal workers will be brought
to Florida from Caribbean countries to hand-harvest the crop, versus around
10,000 a decade ago.  Dependence on imported labor has been virtually
eliminated because new machines can operate more effectively on Florida's
muck soils, improved sugarcane varieties stand more upright, and adaptations
have been made at factories to accommodate machine-cut cane without
significant sucrose loss.
 
Louisiana--Harvested acres for sugar in fiscal 1995/96 are forecast at a
near- record 353,000 acres, accounting for 40 percent of the national total. 
USDA expects the average yield to be 24.0 tons per acre, comparable to last
year with a recovery rate of 10.9 percent, down somewhat from last year. 
USDA's sugar production forecast is 920,000 tons, second only to last year's
record 1.02 million tons from the milling of an estimated 8.47 million tons
of cane.
 
Louisiana's harvest and milling season is set to start in early October and,
provided there are no delays forced by rain or an early freeze, should be
completed by the last week of December.  The start is little later than last
year due to generally dry conditions the last 2 months.  This season, the
crop will be processed at 20 cane mills, down from 30 a decade ago as the
industry continues to consolidate and reduce costs.  The industry will have
one less cane sugar refinery to which raw sugar can be marketed this season,
as the Supreme Sugar Refinery, at Supreme, Louisiana will close September 30,
1995.  Only three refineries will remain in the Gulf area:  Domino Sugar's
Chalmette, Louisiana facility; Savannah Food's Colonial Sugars at Gramercy,
Louisiana; and Imperial- Holly's plant at Sugarland, Texas.
 
Hawaii--Cane sugar production for fiscal 1995/96 is forecast at 460,000 tons,
down 8 percent from this season's expected outturn and less than 50 percent
of the production achieved in fiscal 1985/86.  The forecast takes into
account the planned closing of 2 more sugar factories in Hawaii--the Ka'u
factory on the island of Hawaii in June 1996 and the Waialua factory on Oahu
also in June 1996.  The closing of these plants and 3 others during 1993
resulted from high operating costs and sustained financial losses.
 
In addition, in June 1995, A&B Hawaiian Inc. (ABHI) announced the phase-out
of sugar production at its McBryde Sugar Company on the island of Kauai, due
to financial losses.  McBryde stopped planting new cane in June, but
harvesting will continue this year and next, with the completion of the
harvest expected to occur in September 1996.  ABHI will now shift its
agricultural focus on Kauai to McBryde's subsidiary Island Coffee Company,
Inc. with its approximately 4,000 acres of coffee, the single largest coffee
operation in Hawaii.  ABHI will devote all its sugar-growing resources and
efforts to its Hawaiian Commercial & Sugar Company (HC&S) division on Maui,
Hawaii's largest sugar plantation.
 
Consumption
 
Sugar Use Growth Slows
 
U.S. sugar consumption for fiscal 1995/96 is forecast at 9.42 million tons up
1 percent or 90,000 tons from the revised forecast for 1994/95.  For 1994/95
sugar consumption estimates were revised down 50,000 tons to 9.33 million
tons, comparable to the recorded use in 1993/94.  Between 1986 and 1994,
consumption grew about 2 percent a year, exceeding the annual population
growth rate of 0.8 percent.  The projected slowing of the demand growth is
attributed to continued encroachment of HFCS (high fructose corn syrup), weak
demand for confectionery and bakery products--major industrial users of
sugar-- and 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.
 
Sugar deliveries for the first 9 months (October-June) of fiscal 1994/95
totaled 6.75 million tons, raw value, or 72 percent of the revised forecast
for the year.  October-June 1994/95 sugar deliveries to the baking/cereal and
confectionery sectors--accounting for 65 percent of industrial use and 37
percent of total use--were down marginally from the same period a year ago
(table 8).  Growth in sugar use by the bakery/cereal and confectionery
sectors had underpinned the growth in total sugar use in recent years. 
October-June deliveries in 1993/94 by the 2 categories were up 6.3 percent
from the year before.  The decline in growth in these 2 key use categories is
attributed to sluggish demand for cookies, sweet goods, and confectionery,
including lower confectionery exports.
 
Sugar use by the other industrial use categories were all relatively flat
with the exception of the canned, bottled, and frozen foods category which
experienced a 16-percent decline in October 1994-June 1995.  The contraction
in sugar use in this category reflects heightened substitution of
lower-priced HFCS-42 by food processors in such diverse products as cough
drops and barbecue sauce and crystalline fructose in leading dry beverage
mixes.
 
In contrast to industrial users, sugar deliveries to non-industrial users are
up 2.4 percent (October-June) million tons, refined (table 9).  Sugar
deliveries to wholesale grocers, jobbers and sugar dealers showed the
strongest growth at 4.2 percent above a year ago, accounting for 58 percent
of non-industrial use.  This growth can be explained by a number of factors,
including growth in food clubs, up a reported 10 percent over last year,
expansion in the number of Wal-Mart Super stores, and changed purchasing
patterns caused by the imposition of marketing allotments.
 
For the first three quarters of fiscal 1994/95, domestic beet sugar accounted
for 44 percent or 2.97 million tons of total deliveries, down from 45 percent
the year before.  The decline in beet sugar deliveries occurred despite a
500,000 ton increase in year-to-date beet sugar production.  Also for the
first 3 quarters of fiscal 1994/95, regional deliveries were as follows:  New
England (3 percent, 171,000 tons); Mid-Atlantic (16 percent, 1.01 million
tons); North- Central (32 percent, 2.03 million); South and Puerto Rico (33
percent, 2.05 million); and West (16 percent, 1.0 million).  The high
concentration of deliveries in the North-Central States is explained in large
part by the concentration of the manufacturers of cereal/bakery and
confectionery industries in the region.  The South experienced the highest
year-to-year regional growth of 5 percent while the other regions all
experienced declines (table 10).  Sugar deliveries to the South have been on
a steady upward trend reflecting expansion in food processing industries and
non-industrial outlets for sugar to service the region's growing population.
 
Trade
 
Fiscal 1996 Tariff Rate Import Quota Set
 
On July 28, USDA announced that the fiscal 1995/96 tariff rate import quota
(TRQ) for raw sugar is 1,117,195 metric tons or 1,231,496 short tons.  On
August 2, the United States Trade Representative (USTR) announced allocation
of the raw sugar TRQ among 40 quota-holding countries (table 11).  USDA also
announced a fiscal TRQ of 22,000 metric tons or 24,551 short tons for entry
of specialty sugar and sugar whose content of sucrose by weight (dry basis)
corresponds to a polarimeter reading of 99.5 degrees or more (i.e., refined
sugar).  Of the 24,551 short tons, 1,825 tons are reserved for imports of
specialty sugar.
 
On September 18, the USTR announced a US refined sugar import tariff quota of
22,000 tonnes for fiscal 1995/96, which begins October 1.  In keeping with US
commitments under the new world trade agreement the sugar can, for the first
time, come from any country on a first-come, first served basis.  Previously,
certain exporting countries were assigned an individual quota for refined
sugar.  This action removes that restriction.
 
USTR also announced that 1,656 tons of specialty sugar can be imported into
the US in fiscal 1995/96, unchanged from fiscal 1994/95.  Unlike refined
sugar, USTR split that quota allocation among 23 countries, assigning each 72
tonnes.  Those countries are:  Belgium, Burma, Cameroon, China, Denmark,
Germany, France, Hong Kong, Indonesia, Ireland, Italy, Japan, Kenya, South
Korea, Luxembourg, Netherlands, Netherlands Antilles, Suriname, Sweden,
Switzerland, UK, Venezuela and Yemen.
 
The United States has a commitment, under the Uruguay Round Agreement, to the
World Trade Organization (WTO) to import at least 1.256 million short tons,
raw value of sugar per year at the low tariff level of the TRQ.  The U.S.
Government is meeting its minimum access commitment to the WTO in 1995/96,
but several countries, at their request, are entering part of their 1995/96
allocations in September 1995.  Early entries are estimated at 80,000 tons. 
Also for fiscal 1995/96, imports under USDA's reexport programs are forecast
at 770,000 tons, and exports, 400,000 tons.
 
For fiscal 1994/95, total imports are estimated at 1.88 million tons,
consisting of 1.59 million tons of TRQ sugar; 230,000 tons of sugar for the
reexport programs; 49,000 tons from Canada; 1,000 tons at the high tariff
rate; and 10,000 tons for polyhydric alcohol.  The estimate for imports of
quota-exempt sugar for reexport is down from estimates earlier in the year as
refiners have delayed imports because of substantially lower futures market
prices in 1996.  Sugar exports for 1994/95 were lowered 50,000 tons to
420,000 tons (including 40,000 tons of beet sugar) due to the relatively slow
pace of exports during the first 9 months of the year.
 
On September 8, USDA announced that 43,569 short tons of sugar under the
1994/95 TRQ was available for a third reallocation, including 21,840 tons
from Haiti.  USDA now estimates the TRQ shortfall in 1994/95 will be only
5,000 tons--mainly specialty sugar--compared with 120,000 tons prior to the
reallocations.  USTR will not allow any quota amounts that remain undelivered
by September 30, 1995 to be carried over to the subsequent quota period. 
 
Stocks and Prices
 
Stocks Forecast Lower
 
U.S. sugar stocks at the end of fiscal 1995/96 (September 30, 1996) are
forecast at 1.24 million tons, down 209,000 tons or 14 percent from the
revised estimate for fiscal 1994/95.  Stocks reflect a projected total supply
of 11.06 million tons and total use of 9.82 million.  The fiscal 1995/96
stocks-to-use ratio is forecast at 12.6 percent, compared with 14.9 percent
for this season.  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 raw cane sugar.
 
For the year ending September 30, 1995, stocks are estimated at 1.45 million
tons (table 12 provides the distribution of stocks by primary distributors
through July 1, 1995).  This compares with 1.15 million tons estimated in
June.  The nearly 300,000- ton increase in the stock estimate can be
attributed to upward revisions in supply variables, such as TRQ arrivals
reflecting redistributions of expected shortfalls, early entry of 1995/96 TRQ
sugar, and downward adjustments to use variables such as the exports and
sugar consumption.
 
U.S. Raw Cane Sugar Prices Soften
 
U.S. raw sugar prices (nearby futures, c.i.f. duty-paid, contract No. 14, New
York) averaged 23.11 cents a pound for the first 11 market days of September
compared with 24.47 cents in July and 23.81 cents in August.  The downturn
reflects USDA's decisions to reallocate the 1994/95 TRQ shortfall, early
announcement of the fiscal 1995/96 TRQ, and early entry of fiscal 1995/96
quota sugar as requested by authorities in quota-holding countries.  Refined
beet sugar prices have averaged 25.50 cents a pound through the first 2 weeks
of September, up marginally from July and August.  Current beet sugar prices
reflect generally plentiful beet sugar supplies and the outlook that the
1995/96 beet sugar production, while lower than 1994/95, will be at
near-record levels (figure 4).  Price movements in the coming months will
pivot on development of the upcoming sugar crops, the level of current and
anticipated sugar consumption, and reaction to the discontinuation of
marketing allotments. 
 
Programs
 
Marketing Allotments Not Continued in Fiscal 1995/96
 
On September 13, 1995, USDA announced that sugar marketing allotments for
domestic sugar will not be established during the first quarter of fiscal
1995/96.  When implemented, sugar marketing allotments restrict the quantity
of domestically produced sugar that processing companies may market in the
United States.  The Agricultural Act of 1938, as amended, requires such a
determination be made and announced prior to or at the beginning of each
quarter of the fiscal year.
 
Determination as to whether marketing allotments are necessary is based on
current sugar supply, demand, and price estimates for fiscal year 1995/96. 
These data will be reviewed quarterly to determine if marketing allotments
are to be established later in the fiscal year.
 
The decision not to trigger the marketing allotments on October 1 was made
using the statutory marketing allotment import estimate (MAIE) formula.  The
MAIE is equal to Consumption (C) + Reasonable Ending Stocks (RES) - Beginning
Stocks (BS) - Production (P.)  If the MAIE is less than 1.250 million tons,
allotments would be triggered: allotments if C+RES-P-BS<1,250.  The key
program decision is the determination of RES.  By rearranging the MAIE
formula and initially setting the import estimate to 1,250, the question
becomes, is, RES<1,250+P+BS-C?
 
The following data were used (1,000 short tons, raw value): U.S. (including
Puerto Rico)
 
BS = 1,450  P = 7,650  C = 9,276 RES = To be determined.
 
RES <1,250+7,650+1,450-9,276=1,074?
 
USDA determined that ending stocks above 1.074 million tons were reasonable,
and thus the MAIE was above 1.250 million tons, and therefore allotments were
not activated.
 
Marketing allotments have been in place for each quarter of fiscal year
1994/95.  On June 30, 1995, USDA announced the third quarter revision of
sugar marketing allotments and allocations for fiscal 1995/96.  In accordance
with provisions of the Agricultural Adjustment Act of 1938, as amended, the
Secretary re-estimated U.S. sugar consumption, stocks, production, and
imports, and determined that sugar marketing allotments should continue for
fiscal 1995/96.
 
Based on the current supply-demand-price situation, reasonable ending stocks
were estimated to total 1.242 million tons, up 20,000 tons from the March
estimate.  The level of "reasonable ending stocks" is not comparable to
forecast ending stocks, since "reasonable ending stocks" are part of a
program formula which does not include all supply and use variables.  With
reasonable ending stocks determined to be 1.242 million tons, the overall
allotment quantity continued unchanged at 7.889 million tons.  Based on the
most recent estimates of 1994-crop beet and cane sugar production, the beet
sugar percentage share of the overall allotment quantity was determined to be
55.15 percent--down 1 tenth of a percent from the March level.  This resulted
in the beet allotment totalling 4.351 million tons, down 8,100 tons from the
previously announced level.  The raw cane sugar percentage share and
allotment levels increased a like amount, equal to 44.85 percent and 3.538
million tons, respectively.  The marginal change in beet/cane shares results
from changes in 1994-crop cane and beet sugar production forecasts.
 
The weights assigned to the three-factor criteria, past marketings, 25
percent; processing capacity, 25 percent; and ability to market, 50 percent;
remained unchanged.  Marketing allotments for the cane States and allocations
for cane and beet processors were also re-estimated based on new data
submitted by processors.  Proportionate shares relative to the acreage of
sugarcane that may be harvested in Louisiana for sugar or seed was
re-estimated at 118.19 percent of each farm's sugarcane acreage base, up from
117.72 percent earlier.  The marketing allotment for crystalline fructose was
unchanged 159,757 short tons.
 
USDA must also make periodic adjustments in allotments.  On September 8, USDA
announced a reassignment of 36,424 tons of Hawaii's allotment to cane sugar
processors in Florida, Louisiana, and Texas.  The reassignment was limited to
those processors whose expected supply exceeded their previous allocation. 
Hawaii is not expected to fill its full allotment because of a reduction in
the State's sugar production.  A total of 240 tons of raw cane sugar was also
reassigned from Louisiana processors with surplus allocation to Louisiana
processors with available supply.  A total of 1,200 tons of raw cane sugar
was reassigned from Florida processors with surplus allocation to Florida
processors with available supply.  On September 14, USDA announced a further
reassignment of 4,700 tons of Florida's allotment to processors in Louisiana
and Texas.
 
Sugar Loan Rates Announced
 
On August 29, USDA announced the national (weighted average) price-support
loan rates for the 1995 crop.  For domestically grown sugarcane, the loan
rate is 18 cents per pound for raw cane sugar, and for sugarbeets the
weighted average loan rate is 22.90 cents per pound for refined beet sugar.
Processors may obtain loans at these rates from USDA's Commodity Credit
Corporation by pledging a quantity of their sugar as collateral, and may
choose to forfeit the sugar rather than repay the loan.
 
The new loan rate for cane sugar is unchanged from last year, while the beet
sugar rate is down 2.3 percent (table 13).  Regional loan rates for
sugarbeets and by State for sugarcane are provided in table 14.  The 1990
farm act requires the beet loan rate to be set at a level that reflects an
amount that bears the same relation to the support level for sugarcane as the
weighted average of producer returns for sugarbeets bears to the weighted
average of producer returns for sugarcane, expressed on a cents per pound
basis for refined beet sugar and raw cane sugar.  The most recent 5-year
period for which data are available is used in the calculation, plus an
amount that covers sugarbeet processor fixed marketing expenses.  USDA's
calculation of the 1995/96 beet sugar loan rate was as follows:
 
1994 national average raw sugar loan rate:   18.00
 
o  1989-93 weighted-average returns to beet growers: 14.81 o  1989-93
weighted-average returns to cane growers: 12.41 o  1994 fixed marketing
expenses for beet sugar: 1.41
 
Therefore: 18.00 X (14.81ö12.41) + 1.41 = 22.90
 
U.S. Corn Sweeteners
 
Production
 
U.S. Corn Crop Lower; Corn Sweetener Output Continues To Grow
 
The 1995/96 (September/August) U.S. corn crop is forecast at 7.83 billion
bushels, down 22 percent from the record high 1994 corn crop, due to reduced
acres and lower-than-expected yields.  According to USDA's September Crop
Production and World Agriculture Supply-Demand Estimates (WASDE) reports,
1995/96 corn harvested acreage is forecast at 64.7 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 September 1, the average corn yield is forecast at 121.1
bushels per acre compared with a record 138.6 bushels in 1994/95.
 
Domestic corn use for 1995/96 is forecast at 6.80 billion bushels, with feed
and residual use taking 74 percent or 5.02 billion bushels, and food, seed,
and industrial (FSI) use the remainder, 1.78 billion bushels.  Within the FSI
use sector, the corn grind for corn sweeteners is forecast at a record 715
million bushels, or 20.0 million short tons, up 2.9 percent from 1994/95. 
Corn sweeteners represent about 10 percent of the forecast domestic use of
the 1995/96 crop, and 40 percent of FSI use.
 
U.S. corn sweetener production in fiscal 1995/96 (October/September) is
forecast to total 12.2 million tons, dry basis, up 4.3 percent from the
current year.  This forecast reflects expanded industry capacity and is based
on recent growth trends (table 16).3/
 
------------------
 3/ In this report, U.S. corn sweetener estimates are given in short tons,
dry basis, unless otherwise specified. It is assumed HFCS-42 contains 71
percent solids; HFCS-55, 77 percent solids; glucose corn syrup, 80.3 percent
solids; and dextrose is assumed to be monohydrate, 92 percent solids.
------------------
 
High fructose corn syrup (HFCS) production is forecast at 8.15 million tons,
dry basis, up 4.5 percent from 1994/95 and accounting or about 66 percent of
expected total corn sweetener production for the coming year.
 
For fiscal 1994/95, production for the first 9 months (October-June) totaled
5.65 million tons, up 5.0 percent from the corresponding period in 1993/94. 
To achieve the production estimate of 7.80 million tons for the year, the
corn sweetener industry will need to produce about 2.15 million tons in the
July- September quarter or 28 percent of the estimate for the year.  Normally
the July-September quarter is the second largest production and consumption
quarter of the year for HFCS, next to April-June (table 17).
 
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 4.05 million tons.  This is up 150,000 tons
from the fiscal 1994/95 estimate and accounts for about a third of total
expected corn sweetener production during fiscal 1995/96.
 
Consumption
 
HFCS Use Higher
 
Total U.S. corn sweetener use is expected to reach 11.6 million tons of which
U.S. production is expected to supply 98 percent.  USDA forecasts fiscal
1995/96 HFCS consumption at 8.2 million tons, up 4.7 percent from the current
year.  The consumption forecast for HFCS is based on projections of
deliveries from domestic production and imports.  On a per capita basis and
using a U.S. population of 269.2 million (including Puerto Rico), domestic
HFCS use is forecast at 61.4 pounds in fiscal 1995/96, up from 58.7 pounds
for the current year, and 49.8 pounds in fiscal 1990/91.  Glucose syrup and
dextrose deliveries are forecast at 3.4 million tons, up 4.1 percent from the
current year.
 
For fiscal 1994/95, U.S. corn sweetener use is expected to total 10.95
million tons, up 3.9 percent from the previous year.4/  The composition of
estimated corn sweetener use by the domestic food and beverage industry is
HFCS-55, 4.6 million tons; HFCS-42, 3.1 million tons; glucose syrup 2.7
million tons; and dextrose, 0.5 million tons.
 
--------------------
 4/Domestic deliveries of corn sweeteners in "consumption" are limited to
those for domestic food beverage use only, and do not include nonfood use.
--------------------
 
HFCS deliveries for the first 9 months of fiscal 1994/95 totaled 5.55 million
tons, up 4.5 percent from the corresponding period a year earlier (table 18). 
HFCS-55 use is driven largely by demand by the nonalcoholic beverage sector
which normally accounts for 90 percent of total use.  Table 19 provides a
break- out of HFCS-55 use by major food use categories and beverages.  While
there appears to be growth in food categories such as processed foods,
beverages remain the leading category of use.  In contrast, 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.  Other food use
categories are more important and expanding, especially use in processed
foods, and the cereal and bakery category (table 20).
 
Trade
 
U.S. Net Exporter of Corn Sweeteners
 
U.S. corn sweetener trade remains only a fraction of total annual domestic
supply and use of HFCS-42, HFCS-55, glucose syrup, dextrose, and crystalline
fructose.  For the first 9 months of fiscal 1994/95 exports of corn
sweeteners totaled 146,081 short tons, dry basis, down 2.2 percent from the
same period in 1993/94 and less than 5 percent of total domestic use.  For
the same period this year, U.S. imports of corn sweeteners were down 22
percent to 59,211 tons, largely reflecting a decline in HFCS-55 imports.
 
U.S. border trade with Mexico and Canada dominates export flows while the
small volume of imports come almost entirely from Canada.  For example,
HFCS-42 exports for the first 9 months of 1994/95 totaled 13,512 short tons
of which 61 percent went to Mexico and 27 percent went to Canada.  HFCS-55
exports for the same period totaled 36,263 tons, 77 percent to Mexico and 19
percent to Canada.  For imports, Canada supplied almost all of the HFCS
imported into the United States.  These same trading patterns are evident for
glucose syrup and dextrose.  The exception is U.S. exports of crystalline
fructose which are shipped mainly to Japan.
 
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 August 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 summer, while
demand was strong due to the extremely hot summer temperatures in many parts
of the country, prices did not move up.  This apparently reflects added corn
sweetener processing capacity, as much as 25 percent according to some
estimates, that has come on line in the last year (corn-sweetener monthly
prices for HFCS 55, 42, and glucose syrup, and dextrose are in tables 27-30).
 
In the United States, HFCS-55 and 42 consistently sells at a discount to
wholesale refined beet sugar.  The average discount over the last 5 fiscal
years has been 4.2 cents a pound for HFCS-55 and 6.4 cents for HFCS-42.  For
June to August 1995, the discount has been 6.4 cents for HFCS-55 and 8.3
cents for HFCS- 42.  These price differences continue to encourage the
substitution of corn sweeteners for sugar where technically feasible.
 
Net Corn Costs Expected To Increase
 
Fundamental 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 generate 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 that 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.
 
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 this season reflect the record corn crop in 1994/95.  But corn prices
have been rising in recent months--$2.65 in June, $2.79 in July, $2.68 in
August, and $2.78 per bushel in mid-September reflecting the forecast
downturn in corn production in 1995/96.  USDA forecasts the farm price of
corn to average $2.55 to $2.95 a bushel in 1995/96, up about 22 percent from
1994/95.
 
Prices for the three major byproducts (corn oil, corn gluten feed, and meal)
for October 1994 to June 1995, were all lower.  For example, Midwest corn oil
prices averaged 26.4 cents a pound, compared with 27.2 cents for the
corresponding period the year before.  Midwest corn gluten feed prices
averaged $82.4 per short ton, down 7 percent, and corn gluten meal prices
averaged $219.7 per short ton, down 24 percent.
 
The net corn cost (corn price less byproduct credits) to Midwestern corn
refiners averaged $1.03 a bushel during the first 9 months of fiscal 1994/95,
down from $1.26 a bushel a year earlier.  Net corn sweetener costs for the
first 9 months of 1994/95 averaged 3.08 cents a pound, dry weight of
sweetener, versus 3.79 cents per pound for 1993/94.  Indicative of an upturn
in costs for the last quarter of 1994/95 and into 1995/96, are the net corn
and sweetener costs in July which were higher, averaging  $1.52 a bushel and
4.57 cents a pound, respectively.
 
Special Article
 
U.S. Sugarbeet and Sugarcane Per-Acre Costs of Production: Revisions to 1992,
and New 1993 and 1994 Crop Estimates 5/ by Robert G. McElroy and Mir Ali 6/
 
---------------------
 5/ The Sugar and Sweetener Situation and Outlook report traditionally has
published both grower and processor costs of production. Processors were
surveyed this past winter for the 1992 processing year to collect their
costs. The response by processors was excellent and these data are now being
analyzed. The data are not ready for release at this time, but will be made
available later in the year in this publication.
 
 6/ Agricultural Economists, Rural Economy Division, ERS.
---------------------
 
Abstract:  Sugarbeet and sugarcane growers were surveyed in 1992 to collect
cost-of-production information.  Previously published cost estimates based on
the 1992 surveys used different estimation methods from those USDA uses for
other commodities.  To bring the sugarbeet and sugarcane cost estimates into
conformance with the standard methods used for major field crops, ERS has
reestimated the costs, starting with the latest survey year, 1992.  Based on
these revisions, costs for 1994 are up from 1993.
 
Keywords: Costs of production, sugarbeets, sugarcane, Farm Costs and Returns
Survey.
 
USDA's Economic Research Service (ERS) began its current program of
estimating costs of production for major crops, livestock, and milk in 1975
under mandate from the 1973 Farm Act.  Sugarbeets and sugarcane were added to
the program in 1981.
 
In 1984, ERS began using the Farm Costs and Returns Survey as the primary
data source for costs of production (COP).  This survey is conducted annually
to collect whole-farm financial information.  Special versions of the
questionnaire are used each year for commodity-specific information relating
to inputs required to produce a commodity like sugarbeets or sugarcane. 
Specific COP survey versions are conducted on a 5-year rotation.  In the case
of sugar, the most recent survey was for the 1992 crop year.
 
Until last year, three different work areas of ERS were responsible for
developing estimates of costs of production.  Production costs for the major
field crops (including the program crops of feed grains, wheat, rice, and
upland cotton), livestock and milk, and sugar and tobacco, were estimated
using slightly different methodologies. ERS has decided to bring COP data
collection and estimation procedures for all commodities into methodological
conformity.  For livestock and milk this has already been done.  Burley and
flue-cured tobacco are being surveyed for the 1995 and 1997 production years
and will be updated then.  Sugarbeet and sugarcane growers, however, were
just surveyed 2 years ago and will not be resurveyed for 3 years, so ERS has
decided to reestimate sugar COP from the 1992 survey.
 
How Do Methodologies Differ?
 
The 1981 Farm Act established the National Agricultural Cost of Production
Standards Review Board to examine and review ERS' methodologies for
estimating costs of production.  This advisory board was made up of farmers,
ranchers, academics, and others with a professional interest in methods and
procedures used to estimate costs of production.  Over a 12-year period, the
Board reviewed in detail how ERS collects data and how these data are used to
develop COP estimates.  From this review, the Board made recommendations as
to what concepts and methods best described cost situations from their
vantage point.
 
Most recently, the American Agricultural Economics Association established a
task force to examine, review, and make recommendations on how to standardize
COP methods.  ERS is attempting to bring all COP methods into compliance with
recommendations as discussed by the task force.  Once this is done, analysts
and policy makers will be better able to compare COP estimates among
commodities and across analysts who may have used a wide variety of disparate
procedures.
 
In the case of sugarbeets and sugarcane, there are several areas of
inconsistency between previously published estimates and the new revisions. 
These inconsistencies can be divided into 1) factors accounting for better
representation of the target population and 2) factors relating to estimation
methodologies.
 
With respect to the target population, the Farm Costs and Returns Survey
(FCRS) is a probability-based stratified random sample from a list of
sugarbeet and sugarcane growers.  Being a sample, the FCRS does not
necessarily account for 100 percent of farms, although it comes close.  To
ensure maximum coverage of the population, the survey expansion factors were
revised using secondary data.  Procedures for this "undercoverage adjustment"
were implemented in the 1992 FCRS.  These procedures were applied to the 1992
sugarbeet and sugarcane survey.  No undercoverage adjustments had been done
earlier in published sugar COP budgets.  Although this changed costs for all
inputs, it had little impact on total-dollar production costs relative to
other adjustments.  (For a fuller description of FCRS sampling methodologies
and their use in costs of production, see Economic Indicators of the Farm
Sector: Costs of Production -- Major Field Crops & Livestock and Dairy,
1993.)
 
With respect to methodology, the FCRS tends to ask growers what they actually
spent for certain inputs (e.g., total fertilizer expenses) and application
rates (e.g., fertilizer mixes applied and to how many acres).  Estimates for
the survey year use total expense, while quantities are used with annual
secondary data on prices to update costs between survey years.  The previous
estimates for fertilizer and chemical costs used the direct costs, as do the
revised estimates.
 
The major dollar differences between previous and revised estimates lie in
those costs that are dependent on machinery use (such as repairs, fuel costs,
capital replacement, and economic returns to nonland capital).  In previously
published estimates, repair and fuel expenses were based on direct costing;
capital costs were estimated from growers' responses to questions on
depreciation and the market value of machinery and equipment.  The revised
estimates use the growers' responses to questions on machinery inventories
and actual field operations performed in growing sugarbeets or sugarcane. 
These responses are used with standard engineering equations to develop
estimates of machinery use costs.
 
In some cases, such as with irrigation, detailed data were not collected on
the systems, only the depreciation of irrigation equipment.  The standard
methodology for estimating irrigation costs is similar to that for machinery
(description of systems, amount of use, and engineering relationships). 
Without these data for sugarbeets and sugarcane, costs had to be estimated
from the depreciation accounts, approximating the standard methodology as
much as possible.
 
For sugarcane, much of the seed cane planted is grown on the operation (in
the case of sugarbeets, all seed is purchased).  Standard COP methodology
calculates this home-grown seed at the crop's prior-year price and adds this
cost to any cost of purchased seed.  Earlier sugarcane costs of production
included only purchased seed cane, while the revised costs include both
purchased and home- grown seed cane.
 
Hawaii is a special case.  Hawaii was not included in the 1992 sugarcane
survey.  Due to the integration of producers and processors in Hawaiian
sugarcane plantations, growers do not have the production information
requested in the producer survey.  ERS has traditionally collected Hawaiian
production costs by auditing the processors' books.  These processors were
last audited in 1988.  The Hawaiian costs and returns that have been
published since then have been updated from this base year.  With no 1992
base-year survey for the State, the estimates prior to and including 1992
have been kept as they were.  For 1993 and 1994, the same methodologies used
for the other States have been applied to the 1992 Hawaii estimates, in
essence considering 1992 as a base from which to update.
 
ERS' standard COP budgets are considered "sector" accounts, that is, they
present costs for the average acre regardless of ownership.  In reality, many
farms are made up of fields that are owned, cash rented, and/or share rented. 
The published cash expenses are total costs of the inputs, regardless of who
paid for them.  Rental costs are accounted for in the allocated return to the
land.  This "net land return" is a composite of the rental costs less any
landlords' contribution to purchased inputs.  The earlier cost estimates did
not subtract the landlords' costs, thereby double counting these costs in the
total economic costs.
 
Finally, beet acreage is frequently planted in a rotation with fallow land,
especially in Texas.  Standard COP methodology requires that the cost of
fallow land be included with the net land return.  In essence, this means
that the land charge must be doubled on those farms with fallow land. 
Previously, this fallow land was not included.
 
Differences Between Previously Published and Revised 1992 Cost Estimates
 
Sugarbeets -- Sugarbeet total economic costs for 1992 were revised downward
by $55.64 per planted acre (table A-1).  The adjustment for undercount of
small farms played a small role, as it did with sugarcane.  This adjustment
probably accounts for the largest number of changes in variable cash expenses
although only for a small portion of the total change in costs.  Using the
engineering approach to estimate machinery operation costs made the most
change in total input costs.  Fuel and repair costs both were reduced 5-8
percent.
 
Fixed expenses changed more than total variable expenses, both in dollar
differences and percentages.  Two major factors account for these changes. 
Prior estimates excluded landlords' contributions to expenses.  The standard
sectoral definition of costs of production, however,  includes landlords'
expenses.  This would tend to raise the revised estimates, and it did for
taxes and insurance where it is common for landlords to pay taxes on the
rented land.  Overhead and interest expenses declined.  The difference is
explained by how these whole-farm expenses are distributed among the farm's
different enterprises.
 
The standard methodology is to allocate whole-farm expenses on the basis of
the commodity's (in this case sugarbeets or sugarcane) value of production in
relation to the whole farm's total value of production.  Prior estimates
allocated whole-farm costs on the basis of cash sales as measured by the
grower's responses to his or her total payments received from the mill by a
certain date.  Cash sales do not necessarily represent the given year's
production, particularly for grains, which are sold throughout a marketing
year.  This makes it particularly difficult to estimate the farm's total
value of production in a manner consistent with the value of production of
the sugar crop.  Both have to be in consistent units to allocate the
whole-farm expenses.
 
Capital replacement, or economic depreciation, expenses were reduced $16.52
per acre.  Prior estimates used actual depreciation reported by growers while
revised estimates use the engineering approach as with all other COP
commodities.  The engineering approach is the preferred method since a farm
that may have depreciated all its machinery still has a value in this
machinery.  The COP budgets are not cash accounting measures like an income
statement.  Instead, they are developed to identify costs associated with
each input and production activity utilized in growing a specific crop or
livestock commodity.
 
The other major change in expenses is with land charges.  In COP methodology
this is a composite cash/share rental rate net of landlord costs and real
estate taxes (both already included in cash expenses).  With sugarbeets, the
addition of the fallow charge raised net land rent.
 
Sugarcane -- For the 1992 crop, the revised total economic costs for
producing U.S. sugarcane are $1,043.23 per harvested acre, up from the
previous estimate of $1,000.64.  Many of the individual cost items showed
little change.
 
Including the cost of home-grown seed cane raised the U.S. average seed cost
$34.01 per acre.  By estimating machinery costs with the engineering
approach, machinery operating costs tended to fall.  For example, energy
costs were reduced about $5 per acre and repair costs were reduced about $8. 
On the other hand, capital replacement costs (economic depreciation) rose
$10.
 
The survey asked sugar crop growers to report their actual cash interest
expenses for the year.  Because farmers do not, as a rule, keep records on
their fixed cash expenses by commodity, ERS allocates the whole-farm expense
among commodities based on each commodity's contribution to the operation's
total value of production.  Applying this methodology to cash interest
expenses resulted in a decrease in interest costs of $19 per acre.  Other
fixed cash expense items showed little change.  Total returns to owned
inputs, the imputed ownership costs of the factors of production, increased
$17.
 
In revising the 1992 data, ERS also redefined regions from previous
publications.
 
In the case of sugarbeets, the previous eight regions have been collapsed
into the five regions more commonly used by other sugar analysts.  All
producers within any region still have similar production practices.  For
example, the three previous Plains State regions tend to irrigate their beets
and use similar production and harvesting machinery.  From a cost estimating
perspective, each State's costs are still estimated separately.  They are
aggregated into regions weighted by the percent of acreage in each State.
 
In the case of sugarcane, Louisiana and Texas have been combined into one
region, although production practices, unlike those for sugarbeets, are not
similar in the two States.  The reason for combining the States is
statistical.  Because the FCRS is a sample, any population estimates
necessarily have an associated distribution around the means.  ERS' policies
state that the Agency will not publish estimates that are based on fewer than
30 actual observations.  Previous sugarcane COP regional estimates in some
cases violated this policy, while the revised estimates adhere to the policy. 
Only 11 Texas cane growers responded to the 1992 survey, so the State was
combined with Louisiana for publication.
 
Costs for 1993 and 1994 Calculated Using New Revisions
 
Based on these new revisions to the 1992 base year survey data, it is
possible to estimate regional and U.S. sugarbeet and sugarcane costs of
production for 1993 and 1994 (tables A-2 though A-5).  The costs and regional
relationships discussed are on a per-planted-acre (for sugarbeet) and
per-harvested-acre (for sugarcane) basis.  Relationships can change when
costs and returns are based on a per-ton basis.  For the reader desiring
per-ton costs and returns, average yields are included with each budget. 
When the analysis of processing costs is completed in December, full per-ton
and per-pound-of-sugar costs of production and processing will be published.
 
U.S. Beet Cash Costs Up 1.2 Percent in 1994
 
Average U.S. sugarbeet cash costs of production rose from $545.53 per planted
acre in 1993 to $552.12 in 1994, an increase of 1.2 percent.  Average yields
were up 18 percent after falling 10 percent in 1993.
 
At the regional level, changes were more pronounced in the Red River Valley,
where average cash costs rose 4.0 percent and yields rose nearly 42 percent
(after falling 20 percent in 1993).  Red River Valley growers typically
produce over 25 percent of U.S. sugarbeets and heavily influence the U.S.
average.  In terms of absolute value, the region has the lowest per-acre
costs and the highest yields outside the West Coast.  Hired labor and
chemicals each accounted for over 15 percent of cash costs.  Wage rates fell
slightly in the region, offsetting the increased production.  Hired labor
costs fell for both 1993 and 1994.  Chemical costs have been more stable for
1992-94.
 
The Southwest (California/southern Oregon) and the Northwest (Idaho and the
rest of Oregon) are the regions with the highest 1994 per-acre cash
production costs, averaging $931 and $776, respectively.  Labor costs are
very high in these two regions and wage rates rose slightly from 1993 to
1994, but rates for both 1993 and 1994 were down from 1992.  Custom
operations in the Southwest averaged $200.69 in 1994, or 21.5 percent of
total cash costs.
 
Total economic costs for 1994 are difficult to analyze, as are net returns. 
Both of these financial indicators depend on 1994 season-average sugar prices
that are not yet available.  The price of sugar is half of the equation for
estimating the gross value of production and also plays a major part in
estimating the imputed cost of land.  In the latter case, land costs are
estimated as a weighted-average cash/share rental rate.  The share rent
component of total land costs depends on the value of production of the crop,
which depends on the price of the crop.  For this analysis, 1994 prices have
been held at their published 1993 levels.  If 1994 prices turn out higher
than in 1993, the value of production will rise as will the cost of land,
depending on the proportion of share rent in each State. When sugarbeet and
sugarcane production costs are published next year, the 1994 costs and
returns will be revised.
 
Cane Costs Up 3.8 Percent Last Year
 
At the U.S. level, total per-acre cash costs for growing sugarcane rose an
average 3.8 percent from 1993 to 1994.  According to USDA's Prices Paid
Index, prices for production inputs rose an average 2.7 percent for the year. 
Cane production costs rose by more than this amount because of the mix of
inputs and the fact that yields were up an average 3.6 percent.  Higher
yields mean that more machinery time and labor are required, adding to the
basic price increases for the inputs.
 
Cost increases varied across the regions.  They rose 4.9 percent in Hawaii,
the highest-cost State, but only 3.0 percent in Louisiana/Texas.  Again, much
is explained by 1994 yields.  Cane yields in Hawaii were up 5.3 percent, the
highest of the three regions, but fell nearly 10 percent in Louisiana/Texas.
 
Labor plays the biggest part in sugarcane production costs, averaging nearly
half of all cash expenses, regardless of region.  Although wage rates varied
across States, they rose an average 2.1 percent in 1994.  The yield changes
add to this (or subtract in the case of Louisiana/Texas).
 
                               END-END-END