The USDA is facing a challenge unlike any they’ve encountered in more than two decades of operating America’s sugar policy. They have almost no idea of how much sugar to expect from Mexico, which under the NAFTA has had unfettered access to the U.S. market since January 1, 2008.
The USDA reviewed the best data available on the Mexican sugar market last year and projected that the country would send America 550,000 short tons of sugar between October 2008 and September 2009. These assumptions dictated the agency’s early U.S. sugar policy management decisions.
But Mexican sugar started showing up at a faster rate than expected and the 550,000-ton mark was quickly eclipsed. Officials routinely raised projections throughout the year based on new data, but those targets came and went, too.
When the final numbers were tallied, 1.4 million tons of sugar had arrived from south of the border—more than double what initial Mexican market data justified.
Agriculture officials admit it was a hard year, and things aren’t getting better as they begin making projections for the upcoming 12 months.
This kind of uncertainty makes it nearly impossible for the USDA to accurately manage U.S. sugar policy as Congress has directed them to do, according to Jack Roney, a sugar policy expert with the American Sugar Alliance.
“Without having a clear picture of what’s going on in Mexico, it’s very hard to project with any certainty what U.S. supplies will be,” said Roney.
“The USDA is asked to maintain adequate supplies for sugar users without oversupplying the market, which would harm U.S. farmers and could lead to taxpayer cost,” he explained. “The current situation makes it hard for the USDA to do their jobs, and it makes it hard for sugar producers and food manufacturers to make proper business plans.”
Mexico is also worried. As America’s biggest foreign sugar supplier, Mexican producers want a strong, steady U.S. market and want to avoid shortages at home caused by sending too much sugar northward.
That’s why U.S. and Mexican sugar producers have been hard at work to find a way to make NAFTA work better without having to re-open the trade agreement and without affecting any other farm commodities.
After lengthy discussions, producers from the two countries unveiled this week a list of joint recommendations to their governments to help things run smoother. The plan is currently being discussed with government leaders in both countries, said Roney.
The cornerstone of these suggested improvements is better data collection to enhance the quality of numbers received by the USDA and their Mexican counterparts.
The industries are also urging regular interaction between the two governments so that officials can discuss conditions in the open North American sugar market and determine how to help both countries’ sugar policies operate more efficiently.
Another recommendation is meant to help alleviate the pressure caused by third-country sugar seeping into the North American sugar market and artificially affecting price and supply situations.
In particular, government-run re-export programs that have been used as the conduit for sugar substitution would be altered so that excess sugar from Brazil, Guatemala, and other non-NAFTA countries wouldn’t continue to find its way into the North American marketplace.
Roney, who was involved in the development of the joint-industry recommendations, said great care was taken to make sure the final product was designed to avoid possible political hurdles to implementation, noting that time is of the essence.
For example, both sugar industries knew that recommendations would need to be easy to implement without any legislative changes or alterations to the NAFTA agreement.
The plan was also structured to avoid affecting other segments of US agriculture that view Mexico as a major potential market, including corn sweeteners.
“Clearly there is a sugar-specific problem, and it can be largely fixed with some simple cooperation,” Roney said. “If two fierce competitors like Mexican and U.S. sugar producers can come together to find a solution, surely our governments can work together to make sure NAFTA operates like they intended.”
