- The US Dept of Agriculture expects American sugar stocks remain high for 2020/21.
- The USDA increased the Mexican quota by 50kmt to offset worries of a TRQ shortfall.
- The US sugar market should be balanced in 2021/22 with a Mexican quota forecast at 1.1m short tons.
The May WASDE Release
- The 2020/21 WASDE has increased the quota allocation received by Mexico by 50kmt.
- This is to counteract the expected TRQ raw sugar import shortfall from the April forecast.
- We had wondered if TRQs might be reallocated to other quota holders, but this was not the case.
- This could help relieve some of the pressure on the No.16 futures market that has been trading at high levels recently.
- Mexican producers are sure to maximise their US allocation as they look to reduce their world market sales this year.
- Therefore, this should see more sellers hedging the No.16 contract (US delivered futures contract).
- Supply dynamics show no sign of being affected by the fire at the Baltimore refinery last month, as we reported earlier.
2021/22 WASDE Outlook
- The May release is also the first look forward to the next season.
2021/22 WASDE estimate
- The USDA expects a normal production year next season, with a strong beet crop and slightly reduce cane yields.
- The need for imports will reduce, and raws sugar quota (TRQ) will return to normal levels.
- They had been increased in 2019/20 and 2020/21 as a result of the disastrous beet crop in 2019.
- The impact of that crop shortfall looks to finally be over.
- At current estimates, Mexico will likely receive 1.1m short tons of access to the US market next season.
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