MEXICO: Sugar prices fall due to expected surplus

Published: 04/12/2012, 7:22:20 AM

Mexico's sugar prices are sliding, in spite of lower domestic output, due to a foreseen surplus supply as domestic consumption slows, according to Dow Jones.

Since the start of the season in October, wholesale sugar prices have fallen nearly 27% to roughly MXN10,200 (US$785) per metric tonne, Carlos Blackaller, the president of the National Union of Sugarcane Growers, said in a telephone interview. The decline has caused the Economy Ministry to put the brakes on a planned government import quota for 250,000 metric tonnes.

The U.S., which is the main foreign buyer of Mexican sugar, is meanwhile considering opening a tariff rate quota that would allow for increased sugar imports from non-Nafta countries.
According to the latest U.S. Department of Agriculture report on agricultural supply and demand, sugar imports from Mexico were reduced to 385,000 tonnes amid lower Mexican production.

"That's the curious thing," Blackaller said. "The U.S. is talking about opening up a new quota for imports and on the other hand, Mexico has the sugar."

The Mexican government drew up plans for the import quota, which it has held off publishing, because authorities were concerned that domestic prices weren't falling as fast as international sugar prices.

Blackaller said it's becoming more attractive to export because the differential between the U.S. raw sugar contract and Mexican prices has narrowed to US$100 per tonne, when usually it averages at around US$200 per tonne in favor of Mexico.

Exports of the sweetener in 2011-2012 are expected to reach 900,000 metric tonnes based on the pace of sales this season, Blackaller said, adding that it would leave Mexico with 200,000 tonnes from the 5 million produced. Domestic sugar consumption is sliding and isn't likely to surpass 3.9 million tonnes, he added.

Juan Cortina, president of the National Sugar Industry Chamber, agreed that Mexico has enough sugar left over to export 1.1 million tonnes. He said domestic high fructose corn syrup consumption increased 10% on the year during the first six months of the season.

Recent rains have delayed the processing of sugar at mills the past few weeks and yields are lower year-on-year, but Mexican sugar officials said there's more than enough sugar to go around.