September 20, 2014

U.S. Government To Impose Tariff On Mexican Sugar

The U.S. government, through the Commerce Department, on Tuesday announced that they will be looking to tax Mexican sugar imports at a rate as high as 17.01% as soon as next week. The move follows a host of rhetoric and litigation that began in March as U.S. sugar producers lodged a complaint with the Commerce Department alleging that Mexican sugar was flooding the U.S. market.  The tariff could attach as soon as next week, although duties won’t be final until early winter after the Commerce Department has time to fully investigate the dumping claims.

The news has already served to widen the gap between U.S. and world sugar contracts.  U.S. ICE futures finished at an almost two year high of 26.35 cents while world prices extended losses to 15.71 cents on the same ICE exchange.  The U.S. typically produces around 70% of its total annual consumption with the rest filled by imports primarily from Mexico.  Under NAFTA rules, Mexico is one of the few countries with unlimited access to U.S. sugar markets and is projected to ship a whopping 1.9 mmt of sugar into the U.S for the crop year which ends in September.  The shipments came at the same time that U.S. prices plunged, sparking sugar processor loan defaults of more than $250 million.

U.S. and Mexican authorities have been in talks to resolve this issue and reach some sort of compromise.  The Mexican Sugar Chamber on Tuesday appeared set to accept an export cap instead of an all encompassing tariff.  American Sugar Alliance spokesman Phillip Hayes was quoted as saying the Commerce Departments decision “validates our claim that the flood of Mexican sugar, which is harming America’s sugar producers and workers, is subsidized by the Mexican government”.  Many Mexican sugar mills are ultimately state owned following economic issues in the 1990′s that forced the Mexican government to bail them out by assuming at least partial ownership.


WTO Rumored To Have Ruled Against U.S. COOL Rule

Reports are surfacing that the World Trade Organization has sided with Canada and Mexico in regards to U.S. Country of Origin Labeling rules. Canada and Mexico have asked for the World Trade Organization’s help against new U.S. COOL rules, which they say are more restrictive and harmful to beef cattle and pigs imported into the U.S. than an earlier version of the legislation that was found to violate WTO rules. In July, the WTO decision was provided to the governments, but will not be made public until it’s translated which could be weeks or months. WTO rules give the United States 60 days to appeal from the date the report is published.

Supporters of COOL say U.S consumers have a right to know where their food originates from. Opponents say the rule would be costly and burdensome. Last month, a U.S. Appeals court in D.C. upheld COOL rules. The nine judges who ruled in favor of USDA’s rules stated the government has a “substantial” interest in requiring meat processors to label where livestock was born, raised and slaughtered, including food safety concerns.



Russia Food Ban To Have Global Effect

After banning food and agriculture imports from the U.S, Canada, The E.U., Austraila and Norway, Russia is seeking alternate markets for the country that imports 40 percent of its food.  According to the Pig Site, over the last week the Russian veterinary and food safety authority has approved several food processing operations in Chile and Brazil for export to the Russian Federation.  The move could be a boon for exporters in those countries, but not good for Europe, where the Russian embargo is starting to hit home.  The European Commission has introduced support measures for certain perishable fruits and vegetables this week.  The market situation for all products will be discussed in another meeting with E.U. experts and experts from the European Parliament in Brussels on Friday.

The European Commission said it will continue following markets development for all sectors affected by the Russian ban on agriculture and food products and will not hesitate to support further sectors heavily dependent on exports to Russia or to adapt the measures already announced, if necessary.

Reports on how the ban will effect U.S. ag markets have been mixed.  Previously, Russia had purchased substantial amount of poultry from the U.S. but those numbers had come down and poultry suppliers had said they would be accessing other markets.  Russia had already placed a ban on U.S. pork in the months prior to the agricultural embargo, limiting the effect on that industry.