Uncertainty will continue to plague the North American sugar market through the first quarter of 2015 if there is no deal to end a trade battle between the United States and Mexico, the head of JSG Commodities said on Thursday.
Uncertainty and the risk to importers of being hit with large duties on sugar from Mexico could "linger" into 2015 and send US domestic prices back above 27 cents a lb, Frank Jenkins, president of the largest raw sugar physical and futures broker in the United States, said in an industry presentation in New York.
That would be a jump of 9 percent from current levels. The front-month US domestic raw sugar contract on ICE Futures US traded at about 24.75 cents a lb this week. The United States needs about 1.7 million short tons of imports for the US Department of Agriculture (USDA) to manage the country's supply-demand balance at the 13.5 percent stocks-to-use ratio that has been targeted through a trade pact signed in late October.
It will be very challenging to reach that target without imports from Mexico. The USDA will be forced to increase quotas allotted to other countries if the investigation lasts until April, Jenkins said. The US and Mexican industries have been arguing over the scale of imports into the United States since late March, although the countries' governments have drafted an agreement to suspend large duties that the US Department of Commerce levied on Mexican sugar.
However, US petitioners, which largely represent sugar farmers and processors, and other companies have requested changes. There is "pressure all around" for a deal, but the timeline favours the US side, Jenkins said. Harvesting in Mexico is ramping up, domestic prices are falling, and the country's struggling mills need to sell sugar to cover their finances.
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