New Forecast Sees Less Sugar, Making U.S.-Mexico Deal More Urgent - And Likely Where has all the sugar gone? The basis of any anti-dumping action is that foreigners are flooding the United States with a product, causing supply to outstrip demand and prices to fall. But yesterday, in an update of the World Agricultural Supply Demand Estimates (WASDE), the U.S. Department of Agriculture indicated that - rather than a glut of sugar - the United States is heading in the opposite direction. There's now an impending threat to the US's ample supply of sugar at reasonable prices. The new forecast will undoubtedly increase pressure for an early negotiated settlement of the anti-dumping action filed by U.S. producers against Mexico. The bottom line is this: The USDA has forecast that closing U.S. inventories on Sept. 30, 2015, will be the lowest in nine years - just 6.9% of consumption. That is far from the 14% to 15% zone in which the USDA, charged with managing the U.S. sugar supply, likes to operate. Since full implementation of NAFTA in 2008, the USDA has come to rely on Mexico to supply the bulk of the U.S. shortfall. Yesterday's WASDE estimate indicates that the U.S. will need more than 2 million short tons of Mexican imports just to keep inventory levels unchanged, but the forecast is now just 1.2 million short tons from Mexico. The estimate of Mexican sugar exports to the U.S was reduced by a whopping 672,000 tons. Why? Because Mexico has sold 575,000 tons recently to non-U.S. buyers. And the reason for this diversion from the U.S. is the American Sugar Coalition's March 28 petition for the government to impose antidumping and countervailing duties on Mexican sugar. So, to put it simply, the United States needs all the sugar Mexico can spare, but U.S. sugar producers want to keep it out. If the American Sugar Coalition is successful, the consequences will not be sustainable for U.S. consumers, food manufacturers, or the USDA. As a report by Frank Jenkins of JSG Commodities put it, "USDA has voiced its preference for a negotiated settlement that puts definition on Mexico's access to the U.S. market, and today's report sends a message, intended or not: Mexico is cooperating, exporting to the world market from a much smaller (roughly two-thirds) exportable surplus." The American producers, in filing their trade action this spring, took advantage of an uncanny coincidence. A combination of record sugar crops in Mexico and the U.S. plus falling world sugar prices created an unusual surplus of sugar in the United States. The U.S. sugar producers have tried to leverage that coincidence to cement their control of the highly regulated and protected domestic sugar market. The truth is that the 2012-13 period on which the American Sugar Coalition based its antidumping action was an anomaly that won't recur soon. There are indications that all three parties - the U.S. and Mexican sugar producers and the U.S. government - want a negotiated settlement. Let's hope so.