Category: Trade

The United States (U.S.) is the fifth largest sugar producing country in the world, but also the third largest sugar importer (U.S. Department of Agriculture (USDA) Foreign Agricultural Service (FAS), 2024). Last year, the U.S. imported sugar from more than 70 countries and met roughly 29% of demand through preferential-access imports and high-tier (also known as tier-2) imports. When domestic production rises, the U.S. will import less sugar and vice-versa. An important aspect of the U.S. trade in sugar are the Suspension Agreements^[1] on sugar with Mexico, which went into place in 2014 and were revised in 2017 (USDA Economic Research Service (ERS), 2024). 

As part of U.S. sugar supply, preferential access is granted to trading partners through the World Trade Organization (WTO) or through free trade agreements (FTAs). Sugar that enters under those agreements arrive under a tariff-rate quota (or TRQ), which effectively allows sugar to enter the U.S. duty-free (USDA ERS, 2024). Those who import sugar into the U.S. above the quota are required to pay a duty to the U.S. government (tier-2 duty), which was established in 1994 at the rate of 15.36 cents/pound for raw sugar and 16.21 cents per pound for refined sugar (USDA ERS, 2024). The U.S. is projected to import an average 425,000 tons of tier-2 sugar per year (USDA, 2024).

Administratively, the USDA Secretary announces the minimum quantity of sugar under its WTO commitments that may be imported at the in-quota tariff rate prior to the start of the fiscal year and may increase that amount of preferential-access sugar as the year progresses depending on the amount of sugar that Mexico (the largest U.S. trading partner for sugar) is anticipated to export to the U.S. and depending on the U.S. supply and demand situation. 

For fiscal year 2023/24, total sugar imports into the U.S. are estimated at 3.42 million short tons raw value (STRV), down from last year’s estimate of 3.61 million STRV (henceforth we will refer to STRV as tons) (Figure 1). The USDA recently increased the raw sugar TRQ by 137,789 STRV after determining that additional supplies of raw cane sugar were required in the U.S. market (announced March 7th, Federal Register, 2024).

While the overall amount of sugar imported into the U.S. has not changed dramatically from year to year, it is notable to consider the period post-free trade with Mexico as well as several anomalous years (Figure 1). Under NAFTA, Mexico had the ability to send unlimited amounts of sugar to the U.S. market if that sugar was not subsidized by the Mexican government or dumped on the U.S. market.  Following the more than 2 million tons of sugar exports to the U.S. in fiscal years 2012/13 and 2013/14, the U.S. sugar industry sued Mexico at the International Trade Commission, which found Mexico guilty of subsidizing and dumping sugar in the U.S and causing significant damage to American sugarbeet and sugarcane farmers.  The two countries negotiated Suspension Agreements to manage that trade (both with respect to quantity and price) following 2014 (U.S. International Trade Administration, 2024). More recently, Mexico has suffered drought, and thus the amount of sugar they supply to the U.S. market has been sharply constrained. As a result, the amount of tier-2 sugar entering the U.S. market has been increasing (Figure 1). 

Figure 1. Total U.S. sugar imports by source. USDA, 2024.

While Mexico is still the largest foreign supplier of sugar to the U.S., over the past few years the crop in Mexico has been limited due to drought conditions and high fertilizer costs.  As a result, and as mentioned above, there have been large amounts of sugar arriving, both under preferential access (e.g., WTO and FTA trade agreements) and through tier-2 imports. As reported by USDA (2024), in fiscal year 2022/23 Mexico was still the largest exporter to the U.S. with more than 1.1 million tons of sugar shipped to the U.S.  Other countries exporting more than 100,000 tons of sugar to the U.S for the period included Brazil, Guatemala, Dominican Republic, Columbia, El Salvador, Costa Rica, and Argentina (U.S. Census Bureau, 2024). Overall, in fiscal year 2022/23 the U.S. imported 3.61 million tons of sugar from more than 70 countries (USDA, 2024).

Given forecast sugar use in the U.S. of 12.56 million tons and exports of at least 197,000 tons, the carryover this year is expected to be 1.72 million tons of sugar, or roughly 3.44 billion pounds of sugar (Deliberto and DeLong, 2024; updated for April WASDE). That brings the forecast of stocks-to-use to 13.5%. Of course, throughout the remainder of this year, there will be adjustments to both supply and demand that will typically result in a stocks-to-use that will likely fall within the USDA target range of 13.5% to 15.5% by the end of the year.

Based on the production of 9.22 million tons relative to demand – plus total use of closer to 12.75 million tons – the U.S. will likely import about 3.42 million tons of sugar this year, or 26.8% of total use. That would keep the U.S. as the fifth largest sugar producer and the third largest sugar importer in the world.  

^[1] For more on the Suspension Agreements with Mexico, see this previous article in Southern Ag Today.

References

Deliberto, M. and K.L. DeLong. 2024. “The 2024 Sugar Market Domestic Supply and Outlook.” Southern Ag Today. https://southernagtoday.org/2024/04/01/the-2024-sugar-market-domestic-supply-and-outlook/

Office of the U.S. Trade Representative. 2024. USTR Announces FY 2024 Allocation of Additional TRW Volume for Raw Cane Sugar. Retrieved from: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2024/march/ustr-announces-fiscal-year-2024-allocation-additional-tariff-rate-quota-volume-raw-cane-sugar

U.S. Census Bureau. 2024. USA Trade Online. Retrieved from: https://usatrade.census.gov/

USDA. 2024. World Agricultural Supply and Demand Estimates. Retrieved from: 

https://www.usda.gov/oce/commodity/wasde/wasde0424.pdf

USDA, ERS. 2024. Sugar and Sweetener Policy. Retrieved from: https://www.ers.usda.gov/topics/crops/sugar-and-sweeteners/policy/

USDA, FAS. 2024. Sugar: World Markets and Trade. Retrieved from: https://apps.fas.usda.gov/psdonline/circulars/sugar.pdf

U.S. International Trade Administration. 2024. Enforcement and Compliance. Retrieved from: https://enforcement.trade.gov/agreements/sugar-mexico/#:~:text=Suspension%20Agreement%20on%20Sugar%20from,845%2C%20C%2D201%2D846&text=Description%3A,investigation%20on%20sugar%20from%20Mexico

Federal Register. 2024. Fiscal Year 2024 Raw Cane Sugar Tariff-Rate Quota Increase. 89, Fed. Reg. 16524.  March 7, 2024. Retrieved from:  https://www.federalregister.gov/documents/2024/03/07/2024-04903/fiscal-year-2024-raw-cane-sugar-tariff-rate-quota-increase

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Deliberto, Michael, Karen DeLong, and Bart L. Fischer. “Navigating U.S. Sugar Imports From 70 Countries.” Southern Ag Today 4(16.4). April 18, 2024. Permalink

Introduction

Increased attention among consumers to the healthfulness and environmental footprint of their diet has expanded opportunities for organic products both in the U.S. and abroad. These developments have major implications for international trade. In just a little over a decade, the total value of imported organic products has nearly tripled from $667 million in 2011 to about $2 billion 2023 (Figure 1). Over this same time period, U.S. exports have increased from $412 million to $582 million. 

Figure 1. The US Organic Trade from 2011 to 2023

What are the most highly traded products? 

On the export side (Figure 2.a), the majority of organic trade is in fruits and vegetables. These products accounted for about 60% and 30% of exports in 2023, respectively. Things have evolved differently on the import side (Figure 2.b). In 2011, U.S. organic imports were dominated by coffee and tea. These products accounted for about 84% of imports at that time. Today, coffee and tea represent only 34% of U.S. organic imports. This is not to say that these imports have disappeared. In fact, the value of coffee and tea imports has increased from $563 to $673 million over the time period. So, the decline in the import share of coffee and tea is actually due to the rapid expansion in the import of other organic products—namely fruit, which accounted for about 50% of organic imports in 2023. 

Figure 2. Product Composition of U.S. Organic Trade

(a) U.S. Organic Exports

(b) U.S. Organic Imports

Who do we trade with? 

Canada is the largest market for U.S. organic products (annually importing $7 million), followed by Mexico ($4 million), Japan ($0.9 million), Taiwan ($0.7 million), and South Korea ($0.4 million). In terms of organic imports, Mexico is our largest trade partner (sending $11 million worth of organic products to the U.S. per year). Peru, Colombia, and Honduras are the second, third, and fourth largest players, annually sending about $9 million, $7 million, and $7 million worth of organic products to the U.S. per year, respectively. 

One major driver of organic trade is the negotiation and implementation of Organic Equivalency Agreements (OEAs) with many of our trade partners. These OEAs are essentially “two-for-the-price-of-one” agreements from the perspective of organic producers. OEAs allow producers who are certified to produce organic products in their home country to label their products as organic in the U.S. (or vice versa) without going through the extra hassle and cost of the additional certification process. As of March 2024, the U.S. has OEAs with Canada, European Union, Japan, South Korea, Switzerland, Taiwan, United Kingdom, New Zealand, and Israel.

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Choi, Jungman and K. Aleks Schaefer. “What’s the Lay of the Land in U.S. Organics Trade?” Southern Ag Today 4(12.4). March 21, 2024. Permalink

The United States had a total supply of 105.51 billion pounds of fresh produce in 2022. Fruit availability in the United States totaled 42.26 billion pounds in 2022, or 40.1 percent of fresh produce. The total supply of fresh fruit can be split into U.S. production and imports which are, respectively, 19.11 and 23.15 billion pounds.  Fresh vegetables are also broken into production and imports, some products also include beginning stocks which contributed an additional 1.30 billion pounds in 2022. Vegetable production totaled 42.92 billion pounds with imports at 20.32 billion.

The main fruits produced domestically were apples, oranges, strawberries, grapes, and lemons while the main fruits imported were bananas, avocados, pineapples, grapes, and limes.  The main vegetables produced domestically were potatoes, onions, leaf and romaine, head lettuce and sweet potatoes, while the main imported vegetables were tomatoes, cucumbers, bell peppers, potatoes, and onions. While production values are still unavailable for 2023, information on trade indicates that U.S. imports for fresh fruits increased by 2.13 percent from 2022. Fresh vegetables decreased by a third of a percent from one year to the next.

Moreover, during 2023, Mexico was the largest exporter of fresh produce to the United States totaling an estimated 25.1 billion pounds, worth an estimated $17.96 billion. Of that 10.25 billion pounds, or 40.9 percent, was fresh fruit and the other 14.84 billion pounds were fresh vegetables. Mexico is the largest source of U.S. imports for a large variety of products. Mexican exports are dominated by tomatoes with 4.29 billion pounds of exports followed by avocados (2.48 billion pounds) and peppers (1.85 billion pounds). U.S. import volume for each of these three products from Mexico is larger than the total volume of fresh produce imported from any market outside of the top five.

Guatemala and Costa Rica followed Mexico as the two next largest exporters of fresh produce to the United States. Guatemala was the source of 6.17 billion pounds of fresh produce with 4.44 billion pounds from Costa Rica. Over 90 percent of the total fresh produce exported to the United States for both countries was fresh fruit with the volume heavily concentrated to a few products. Of the 6.17 billion pounds of produce exported from Guatemala 4.38 billion pounds were bananas. Similarly, Costa Rica leads exports of pineapples to the United States with 2.46 billion pounds of the 4.44 billion.

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The Panama Canal, a linchpin of global maritime trade, faces its most severe drought in history, resulting in unprecedented restrictions on vessel transits. Currently, hundreds of cargo vessels and tankers are stuck in front of the channel, with average wait times exceeding three weeks. This crisis is a major engineering challenge and a stark reminder of how vulnerable the global trade system is to weather shifts. At the heart of the Panama Canal drought lies the El Niño weather phenomenon, exacerbated by the broader issue of climate change. El Niño induces substantial weather anomalies, including reduced rainfall in Central America, directly affecting the water levels crucial for the canal’s operation. Climate change amplifies these effects further, resulting in more frequent and severe drought conditions.

Under normal circumstances, the Panama Canal can accommodate about 35 ship crossings daily. However, the drought has caused a more than 30 percent reduction in vessel transits, limiting daily crossings to around 24 ships, as shown in Figure 1. This reduction is not just a logistical challenge but a substantial economic setback for Panama. Canal administrators anticipate a staggering loss of $500 million to $700 million in revenue for fiscal year 2024. The first quarter of fiscal year 2024 alone witnessed a 20 percent decrease in cargo volume, leading to 791 fewer ships than the previous year.

Figure 1: Daily vessel transit through the Panama Canal plummets by 30 percent.

The United States heavily relies on the Panama Canal for its agricultural exports, especially to Asian markets, facing profound repercussions due to this crisis. Figure 2 shows that grains and oilseeds are the major agricultural transit goods in volume. Last year, about 26 percent of U.S. soybean and 17 percent of corn exports passed through the Panama Canal. Due to the disruptions, U.S. agricultural exporters grapple with rising shipping costs and extended transit times. These additional expenses will translate into higher prices for agricultural products in Asian markets. For some perishable goods, shipping delays can impact market value due to compromised quality.

Figure 2: Panama Canal handles over 26 percent of U.S. soybean and 17 percent of corn exports.

The trajectory of the Panama Canal’s operational capacity in 2024 hinges mainly on environmental factors that are out of human control. While the impending rainy season might offer temporary relief, broader concerns surrounding climate change and the persistence of El Niño suggest the possibility of recurring droughts. In response, the Panama Canal Authority started to explore different water management techniques and new water sources to sustain both the canal’s functionality and Panama’s domestic needs.

Looking into the future, U.S. agricultural exporters may need to reassess their logistical strategies, including exploring alternative shipping routes, adjusting shipping schedules, and potentially diversifying export markets to mitigate risks associated with the canal’s reduced capacity. The situation unfolding in the Panama Canal shows the vulnerability of global trade to environmental changes. It underscores the necessity for resilience and adaptability in international trade practices in the face of climatic challenges. This challenge calls for collaboration among global trade stakeholders to alleviate the impacts of these disruptions and strengthen the resilience of the international trading system.

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Lim, Sunghun, Sandro Steinbach, and Xiting Zhuang . “Panama Canal Traffic Delays Threaten Southern Ag Global Supply Chains.” Southern Ag Today 4(8.4). February 22, 2024. Permalink