WASHINGTON — The U.S. Department of Agriculture on Nov. 25 announced that the U.S. Department of Commerce, at the U.S.D.A.’s request, approved an additional 100,000 short tons, raw value, of refined sugar imports from Mexico during 2019-20 (October-September marketing year).

“In recent weeks, prospects for U.S. sugar production have declined significantly due to adverse weather in both sugar beet and sugarcane regions,” the U.S.D.A. said. “In the November 2019 World Agricultural Supply and Demand Estimates report, the U.S. sugar production projection declined by 572,000 short tons, raw value, from the previous month, while ongoing weather concerns threaten further reductions.”

The American Bakers Association (A.B.A.), along with the Sweetener Users Association (S.U.A.), had requested that the government boost the U.S. sugar supply due to the U.S. production losses. The U.S.D.A. requested the 100,000-ton increase in a Nov. 22 letter to the D.O.C.

The A.B.A., in a letter to U.S.D.A. Secretary of Agriculture Sonny Perdue, outlined the “crucial need for a consistent source of refined sugar for production and market demand following abysmal sugar beet and sugar cane crop yields.” The A.B.A. confirmed the amount of sugar was adequate for the industry while the U.S.D.A. continued to monitor the market.

“Large and especially smaller family bakers need immediate access to refined sugar,” said Lee Sanders, senior vice-president at the A.B.A. “They do not have the ability to freely seek out alternative supplies abroad.”

The S.U.A. commended the U.S.D.A. and the D.O.C. for the action.

“Bolstering the supply of refined sugar in the United States will help support U.S. food and beverage manufacturers in producing sugar-containing products that American consumers enjoy,” the S.U.A. said. “While the increase by 100,000 short tons is a step in the right direction, we know both departments understand that the U.S. sugar market requires a significantly larger boost in supplies. According to the U.S.-Mexico suspension agreements, that further increase will take place in December, when Mexico will receive additional U.S. sugar market access. Today’s decision will allow for a greater percentage of refined sugar imports than would otherwise be the case — a decision we feel is appropriate given the circumstances.”

Vincent O’Rourke, an analyst with Czarnikow Group Ltd., said the import increase will accelerate the supply of refined sugar into the U.S. market because it bypasses the refining process, but “more imports will definitely be required this season.”

Under the U.S. sugar program in the Agricultural Act of 2018, U.S. sugar may make up no more than 85% of estimated total U.S. sugar needs as projected by the U.S.D.A. The remainder comes from imports that are controlled by tariff-rate quotas, free trade agreements and a trade agreement with Mexico, the latter of which accounts for about 8% of total U.S. sugar supply and about 35% of total imports.

Changes in sugar imports from Mexico must come from the D.O.C. under the Agreement Suspending the Countervailing Duty Investigation on Sugar from Mexico, which was signed by both countries in 2014 and amended in 2017. Under the agreements, the D.O.C. sets the total export limit for Mexico based on U.S. needs as calculated in the U.S.D.A.’s WASDE report. Among other requirements, the amended agreements set the import limit at 30% for refined sugar (99.2 polarity and above) and 70% for “other” sugar, which is basically raw sugar that goes to U.S. cane refiners. The shipping pattern restrictions on sugar imports from Mexico, which define dates that specific percentages of imports may be shipped, do not apply to the additional refined sugar imports, the U.S.D.A. said.

The D.O.C. on Sept. 20 set Mexico’s export limit at 782,530 short tons, raw value, consisting of 30% refined sugar (234,759 tons) and 70% “other” sugar (547,771 tons), effective Oct. 1, 2019, through Sept. 30, 2020. The additional sugar boosts Mexico’s export limit to 882,530 short tons, the D.O.C. said. Refined sugar may account for no more than 334,759 tons of the total export limit (original 30% of 235,750 tons plus the 100,000 tons additional) with the “other” sugar imports unchanged at 547,771 tons. Of course those amounts will change if the U.S.D.A. adjusts Mexico’s export limit in the December WASDE.

Trade sources said they fully expect the U.S.D.A. will further increase Mexico’s total export limit in December to bring the 2019-20 U.S. ending stocks-to-use ratio up to 13.5%, as required in the U.S.-Mexico suspension agreements, from 10.5% in November. The ratio was 14.5% in 2018-19 and 16.1% in 2017-18. Some also expect further increases in refined sugar imports to be announced before the March 2020 WASDE. Although Mexico’s sugar production is forecast lower this year due to drought, there is consensus that it will be adequate to meet the additional U.S. needs. The U.S.D.A. also has the option to increase tariff-rate quotas if Mexico says it cannot meet the additional needs request.

Part of the issue is U.S. refining capacity and the short-term need for refined sugar. It’s doubtful that U.S. cane refining capacity is sufficient to handle a significant increase in raw sugar imports, depending on timing of the imports. By increasing refined sugar imports, the sugar goes to distributors and/or directly to end users.

Two major U.S. beet sugar sellers declared force majeure on Nov. 15 after the U.S.D.A. confirmed the drastic reduction in beet sugar production. United Sugars Corp. said it would reduce deliveries by 18%, and the Western Sugar Cooperative said it would cut deliveries by 15%, both from January through September 2020. In both cases, full deliveries were available during the current quarter, so the greatest beet sugar supply tightness can be expected after Jan. 1, 2020. Imports from Mexico typically peak in the March-May period after Mexico’s cane harvest gains momentum after the first of the year.

The U.S.D.A. on Nov. 8 forecast U.S. 2019-20 sugar production at 8,612,000 tons, down 6% from October, including beet sugar at 4,588,000 tons, down 9%, and cane sugar at 4,024,000 tons, down 2.5%. Total production was forecast down 4.2% from 2018-19, with beet down 7% and cane down 0.8%. The worst losses for beet sugar were in the top producing Red River Valley, where about 145,000 acres of sugar beets went unharvested. In its Nov. 8 Crop Production report, the U.S.D.A. lowered sugar beet production in top-producing Minnesota by 22% from October and 15% from 2018 and in No. 3 North Dakota by 29% from October and 27% from last year. U.S beet sugar production would be the lowest since 2009, with total production the lowest since 2013, although further reductions are expected.