Weather Forecast

Close

opinion

Mexico and U.S. reach sugar deal

In a huge case that will have ramifications and implications for the upcoming negotiations on the North American Free Trade Agreement, the governments of Mexico and the U.S. came to a deal regarding the sugar Suspension Agreement.

Back in 2013, sugar prices got incredibly low as supplies flooded across the border from Mexico. U.S. producers cried "foul" and through a Department of Commerce ruling it was determined that subsidized sugar was dumped into the U.S. and deflated the market. The resulting action was a limit on imports of sugar from Mexico to keep domestic prices high enough for U.S. growers to make money.

But this led to two key issues. The first, Mexico is the biggest buyer of corn sweeteners from the U.S., and the restricted sugar export business led to concern of a smaller appetite for U.S. sweeteners flowing south. The second was a crunch on U.S. sugar refiners: The sugar coming from Mexico was mostly refined already so U.S. processors did not have any feed stock available.

So the Mexican and U.S. governments had been negotiating for some time and came to an agreement this week that makes everyone somewhat satisfied ... but not too satisfied (the usual outcome of a good negotiation). Mexico has to ship a higher ratio of raw sugar versus refined sugar into the country and will be responsible for enforcing and accepting penalties for violations of the agreement. The U.S. must give Mexico first right of refusal for sugar needs identified by the U.S. Department of Agriculture after April 1 of each crop year.

The implications of this agreement are huge. Primarily, it creates a sugar industry that is more acceptable for both growers (traditionally a very strong lobbying group), processors and end users. Cane supplies should be more available for usage, which is critical in an environment where non-GMO foods are in demand. But more broadly, ahead of negotiations on NAFTA, these governments proved that they can work together for mutual benefit. This notion has been questioned under the new administration and will continue to be, but many see this as a good sign for solid continued trade relationships with Canada and Mexico.

Wheat

Wheat prices have been firmer, with hot and dry weather in North Dakota and Montana stressing the spring crop. Though rains are expected to provide some relief in the coming week, the high temperatures and lack of rain have many fearing the wheat crop will be damaged. Spring wheat conditions were shown to be well below a year ago, at 55 percent good/excellent compared to 62 percent in 2016. Winter wheat harvest is getting started in the U.S., with 10 percent done compared to seven percent for the five-year average.

Durum

The aforementioned heat and dryness is clearly impacting crop ratings in North Dakota. The USDA reported just 27 percent of the crop rated good/excellent in its weekly release. The market is taking notice, too. Prices rose 40 cents from last week, finally coming off lows that had been in place for several months. If rains come and help the crop get back on track, look for ongoing strength in the market to be limited. But a disappointing rain would keep the market in a rallying trend.

Canola

Canola prices have been a little firmer to start June, coming off of the pressure from May's decline in the broader oils markets. Planting is basically done in Canada, with Saskatchewan reporting 94 percent completion. Some concerns over lost acreage from spring intentions are overshadowing the market. Additionally, weather conditions have been a challenge. Many areas were too wet during early planting, but now there are pockets that are too dry. Look for the market to continue to follow weather forecasts and actuals, as well as the direction of the soybean oil market in Chicago.

Peas & Lentils

Pulse markets were a little softer this week. Lentil exports from Canada through the end of April were a new record, with 2.12 million metric tons shipped. Another 71,000 metric tons were shipped out in May.

Mustard

Mustard seed prices have firmed modestly in the last week. Demand has been steady, but a lack of farmer market activity and willingness to sell is propping up the price.

Barley

The U.S. barley crop was rated 69 percent good/excellent from 70 percent a week ago. This rating is behind last year's remarkable 78 percent rating.

Advertisement
randomness