Not Everybody Thinks The US-Mexico Sugar Deal Is So Sweet

U.S. and Mexico sugar trade

In 2014, the US government slapped large duties on Mexican sugar but hammered out a deal with Mexico that suspended those levies.

But U.S. sugar producers, citing a "loophole", aren't buying it.

The deal, which was still coming together on Tuesday morning, will reduce the share of refined sugar that Mexico can export to the United States but maintain Mexico's overall access to the USA sugar market, Guajardo said on Mexican radio. "I am glad to say that Minister Guajardo (Mexican Economy Minister Ildefonso Guajardo) and his colleagues have been honest and collaborative partners in seeking a fair and sustainable solution - this bodes well for our long-term relationship". The dividing line between raw and refined additional need sugar is 99.5 polarity, but raw sugar must be shipped in bulk in an ocean-going vessel, increasing the likelihood it will enter a US refinery for further processing.

"This issue with the US sugar industry is not over", Juan Cortina, the head of Mexican sugar industry group (CNIAA), told reporters at an event in Mexico City where he said the group would keep pressing for a fructose probe in Mexico.

"Unfortunately, despite all of these gains, the U.S. sugar industry has said it is unable to support the new agreement, but we remain hopeful that further progress can be made during the drafting process", U.S. Secretary of Commerce Wilbur Ross said in a statement on June 6.

USA refiners have complained that high-quality Mexican raw sugar was going straight to sugar consumers, rather than passing through US refineries.

ASR and fellow cane refiner Imperial Sugar, owned by commodities firm Louis Dreyfus Company BV, have said they are being starved of raw supplies under the current deal. The U.S. threatened to impose the tariffs if an agreement more satisfactory to the U.S. growers and cane refiners was not achieved by Monday.

The deal between the two trading partners - reducing the amount of refined sugar Mexico exports to the United States, and increasing raw shipments of the sweetener - appears to provide clarity to a market that has struggled under growing uncertainty since 2014.

In 2014, the USA threatened to impose punitive tariffs, but the two countries achieved "suspension agreements" to limit Mexican imports and avoid the tariffs.

The pact reached between the two countries would require Mexico to reduce the share of refined sugar it exports to the US and increase raw sugar exports.

"The agreement prevented potentially significant and retaliatory actions by the Mexican sugar industry and sets an important tone of good faith leading up to the renegotiation of the North American Free Trade Agreement".

The USDA monitors the market and US production and allocates additional quota of imports as needed.

The agreement, if finalized, was expected to avert potential retaliation from Mexico on imports of USA high-fructose corn syrup which had anxious corn growers and refiners.

After protests from U.S. sugar companies and farmers, both governments agreed to Mexican sugar export quotas in 2014. "The agreement in principle does not address the fact that the price of sugar in this country is already 80% higher than the world price".

The U.S. refining industry was also seeking a lower sucrose content, or level of purity, in the raw sugar that arrives from Mexico. In fact, it will result in higher prices, costing US consumers an estimated $1 billion a year. A final draft of the agreement is expected in the next few days, Mr. Ross said.

The deal would mark the culmination of a multi-year dispute between the countries over sugar, after USA groups in 2014 asked the government for protection from subsidized exports from Mexico.

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