Sugar Shortfall in Mexico Won't Squeeze Supplies

MEXICO CITY—Sugar output in Central America is expected to rise during the coming season and compensate for anticipated shortfalls in Mexico, which normally supplies more than half of U.S. sugar imports.

Combined, Central American countries in the season starting Oct. 1 are expected to produce 4.6 million metric tons of sugar, up 10% from the current season due to better weather conditions and improved agricultural practices, according to a survey of the region's main national sugar organizations.

In Mexico, sugar exports are likely to fall by about 200,000 metric tons next season after hitting a record high of about 1.4 million tons this year, said Juan Cortina, president of Mexico's National Sugar Industry Chamber. A drought early this year damaged sugarcane during a crucial period for its development.

Most of Mexico's exports go to the U.S., which has been experiencing a sugar shortage. Central American nations are covered by U.S. import quotas, so they can't increase their shipments to the U.S. unless Washington raises the quotas.

Earlier this month, the U.S. Department of Agriculture said it would allow imports of low-tariff or duty-free sugar one month early to deal with tight supplies. Mexico's sugar is exempt from the quota system, covered instead by the North American Free Trade Agreement.


"It's likely that [next year] the U.S. will need to import more than its traditional tariff-rate-quota minimums," said Jack Roney, director of economics and policy analysis at the American Sugar Alliance, a group that represents U.S. farmers, suppliers and workers.

Mr. Roney said Central America would share in any overall tariff-rate quota increase the USDA may announce next year, "if imports from Mexico don't fill our import needs."

Ron Lord, branch chief of the import and trade support programs division of the USDA's Foreign Agricultural Service, said, "There is always the possibility of the USDA taking action" if more sugar supplies are needed.

Mexico is also seeing an increase in domestic demand for sugar, leaving less of the sweetener for export. In recent years, consumers had chosen high fructose corn syrup instead of sugar, but last month, consumption of the syrup was down 20% from a year ago, at 127,823 metric tons.

"I don't think our consumption [of high fructose corn syrup] could get any larger," Mr. Cortina said.

What Central America can do is fill Mexico's sugar gap.

Nicaragua, which supplies one-tenth of Mexico's sugar import quota as part of a free trade deal, is expecting a 17% increase in sugar production next season to 590,000 metric tons, according to the country's National Committee of Sugar Producers.

Mario Amador, the committee's general manager, said moderate rainfall in June, July and August helped the sugarcane crop, and the country is expecting good yields as a result.

Nicaragua exports more than half of its sugar production, with about 50,000 metric tons going directly to the U.S.

Guatemala, the largest Central American sugar producer, exports nearly 75% of its harvest, and Mexico is the principal destination. According to the Guatemalan Association of Sugar Producers, or Asazgua, output will rise more than 12% to 2.34 million metric tons in the upcoming season.

source: online.wsj