Lobbyists for sugar growers—already forced to rely on shady arguments to persuade Congress to keep giving handouts to their clients—are facing a new P.R. problem: Twinkie production may be moving to Mexico. Hostess, the maker of Twinkies, has blamed union troubles for its bankruptcy, but other experts have pointed to U.S. government-inflated sugar prices as a possible factor in the company’s decline.
Sugar output in Mexico, the world’s sixth-largest producer, fell 6.7 percent so far this season, according to industry committee Conadesuca.
Production in the 2011-12 season, which started in October, totaled 4.7 million metric tons through May 12, Conadesuca said yesterday in a report on its website. That compares with 5.06 million tons a year earlier.
Mexico will produce 5.04 million tons of sugar this season, down from a previous forecast of 5.1 million tons, Conadesuca estimated.
source: BW
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Sugar output in Mexico, the world’s sixth-largest producer, fell 13 percent so far this season, according to industry committee Conadesuca.
Production in the 2011-12 season, which started in October, totaled 3.17 million metric tons through March 17, Conadesuca said in a report on its website on March 21. That compares with 3.64 million tons in the same period in 2010-11.
Mexico will produce 5.1 million tons of sugar this season, down from a previous forecast of 5.3 million tons, Conadesuca said on Feb. 10.
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.
The sugar harvest in Mexico has begun this month at 17 of the country's 57 sugar mills, with forecasts for the 2010-2011 production still close to 5.3 million tons, up from 4.8 million the previous season, sugar officials said Wednesday.
Mexico, the world’s sixth-largest sugar producer, won’t extend a quota to import 250,000 tons of sugar, said the Economy Ministry.
Rising domestic sugar production makes it “unnecessary to extend the reassignment of the import quota,” the ministry said today in the Nation’s official gazette. The ministry didn’t say how many tons had been purchased for imports.
On Feb. 7, Mexico approved a quota to import 250,000 tons of sugar as dry weather hurt domestic output. Mexico created sugar import quotas in August 2009 after domestic prices reached a high of about 730 pesos ($57) per 50-kilogram bag on Sept. 14. Mexico’s sugar industry is regulated by the government, which sets import quotas.
White sugar for August delivery dropped $12.90, or 2.7 percent, to $459 a ton today on the Liffe Exchange in London.
--Editors: Robin Saponar, Jessica Brice
source: businessweek
Mexico plans to sell a sugar mill under government control in the hopes private owners can increase refining capacity as sugar prices hit record highs, sources at the agriculture ministry said on Friday.
The government recently published the terms of a tender to sell the La Joya refinery in the southern state of Campeche and is waiting for bids from buyers.
In 2001 the Mexican government took control of 27 of the country's 57 sugar refineries that were too heavily indebted to operate.
Since then, about half have been returned to their original owners or sold in a bidding process, but 11 are still held by the government. In the last harvest the government-controlled mills produced around 1.35 million tonnes of sugar.
The Mexican government has pledged to sell off the remaining refineries before the end of President Felipe Calderon's term in 2012, the sources said, asking not to be named.
The government set a base price for the sale of the small La Joya refinery at around 29 million pesos ($2.26 million), according to the tender announcement published by the branch of the finance ministry in charge of selling government assets.
La Joya produced 42,600 tonnes of sugar in the 2008/09 season.
Guatemalan, Brazilian and Colombian companies have expressed interest, as well as Mexican companies linked to the beverage industry, the Agriculture Ministry sources said.
Production from the group of government-controlled mills fell 5.3 percent in 2008/09 compared with the previous cycle and the hope is that private owners will be able to boost output.
Mexico's harvest is seen falling short of estimates on bad weather and aging cane fields.
"It's not justified for the government to maintain state control of refineries. They will not invest in new technologies or have a vision for how to expand the business," Rene Martinez from the National Sugar Industry Chamber told Reuters.
Sugar prices soared to a 29-year high earlier this year and are expected to stay strong on short global supplies, encouraging Mexico to try to increase production capacity.
In a good year, the country can produce more than 5 million tonnes of sugar, which covers local demand but last year the harvest slipped to 4.96 million tonnes and this season could fall to as low as 4.5 million tonnes, the Agriculture Minister Francisco Mayorga has said.
The shortfall forced Mexico to open a 250,000-tonne import quota this month and the food industry says the government needs to import more as the harvest -- which began in November -- progresses.
Nine of the government-controlled refineries, including one of the country's largest, which is known as San Cristobal, were formerly held by Consorcio Azucarero Escorpion, or Grupo CAZE, but have been tied up in legal battles and cannot yet be sold, said Martinez.
source: flex-news
* Central American sugar producers plan to export more
* Neighboring Mexico expecting big import needs
* Prices recovering after dipping from a 29-year peak
SANTA LUCIA COTZUMALGUAPA, Guatemala - Central American cane cutters are working overtime to increase output and sugar producers say they should have no problem covering increased demand from Mexico where the crop is expected to fall short.
Mexico announced its sugar harvest would be smaller than expected due to bad weather and aging cane fields, forcing the Economy Ministry to open a 250,000-tonne import. In addition, countries are scrambling to ramp up production to take advantage of sugar prices recently hitting a 29-year high.
"Everyone's looking to see how they can produce more to take advantage of the market opportunities generated by Mexico," said Jose Orive, the head of the Central American Sugar Association.
Workers in the fields of Guatemala, Central America's largest producer, are hauling nearly twice as much cane in an average shift to meet the booming demand.
"We're working as fast as we can because this year there's more activity and we're all earning more money," said Abednego Alonzo, one of a group of 55 men hacking away with machetes at cane stalks near the southern town of Santa Lucia Cotzumalguapa.
Alonzo said each worker is cutting 10 tonnes of cane a day, compared with around 6 tonnes in an average year in the fields near the Pantaleon sugar processing plant, one of Central America's largest.
Guatemala last year exported 277,000 tonnes of sugar to its northern neighbor compared with around 30,000 tonnes in an average year.
Total sugar exports from the seven-country Central American region are expected to increase to around 2.8 million tonnes in the 2009/10 season from an annual average of between 2.2 million to 2.6 million tonnes, Orive said.
Guatemala's sugar industry is more streamlined than Mexico's with a few powerful owners in charge of land, sugar factories, cane fields and ports.
In Mexico, hundreds of cane farmers often wrangle with myriad of processing plants over prices and contracts, hampering efficiency. But Guatemala, like many Central American producers, has a scarcity of land available to expand cane planting, capping the amount the sector can grow.
BULLISH ON PRICES
Soaring global prices are making the sugar business more attractive. Sugar prices hit a 29-year peak of 30.40 cents on Feb. 1, then retreated 15 percent, but recovered on Thursday on consumer buying. Many analysts are bullish on prices because smaller harvests in Thailand and Mexico have aggravated the the tight global supply situation.
"This spike in sugar prices is stimulating the industry to increase production, but we have to be careful not to increase volumes too much and end up depressing prices," Carlos Melara, the head of Honduras' sugar producers association.
He said Honduras will produce 413,000 tonnes of sugar this year and will boost exports by 30.5 percent compared with last year. The United States will receive 20,000 tonnes to fill U.S. quotas and 87,000 tonnes will hit the global market.
Nicaragua is also expecting a record 2009/10 crop at 544,000 tonnes, up 4.8 percent from the previous cycle, which will allow it to fill the 10 percent share of Mexico's import quotas it receives under a trade pact.
The country wants to ramp up production to 644,000 tonnes in the next three years by boosting planting.
source: forexyard
PARK CITY, Utah - The U.S. and Mexico must eliminate possible distortions in sweetener trade between them caused by a free trade pact, a senior U.S. sugar industry official said.
Under the terms of the North American Free Trade Agreement (NAFTA), the U.S. and Mexico can transport unlimited amounts of sugar to one another. It started in 2008.
"If either market is oversupplied, it would be disastrous for producers and government costs," Jack Roney, director of economics and policy analysis in industry group American Sugar Alliance, told Reuters at the start of the group's annual meeting.
He said there is a need for both nations to develop and share data so they can "anticipate each country's needs and avoid a disaster."
Last year, the United States relied heavily on Mexico to meet a shortage of the sweetener especially after a sugar refinery in Georgia reduced available supply by up to a month.
NAFTA led to the creation of the world's largest sweetener market, with total usage of over 15 million tons of sugar and around 10 million tons of corn sweetener.
Sugar merchant Czarnikow said in a monthly report released last month that U.S. and Mexican authorities would need to structure import programs to mitigate a shortfall in the combined regional market.
Roney said what happened last year is that Mexico sent to the U.S. around "1.3 million short tons of sugar...but are apparently shorting their market and will have to import world market sugar to balance their market."
He explained, "If they could have anticipated their needs better, they probably would not have sent excessive amounts to the U.S."
According to the U.S. Agriculture Department's monthly supply/demand report, Mexico's sugar exports in 2008/09 reached 1.18 million short tons.
Analysts said the Mexicans would prefer exporting sugar to its neighbor because it would fetch higher prices in the United States. They can then turn around and buy cheaper sugar on the world market.
On average, U.S. domestic sugar prices would range from 20 to 22 U.S. cents per lb while the world sugar market price is running at around 18 U.S. cents and has traded recently as low at 14 cents.
"The 'substitution' problem is the biggest flaw. Mexico could send all its production to us and backfill with world market imports. We could do the same to Mexico," said Roney.
The ASA official said that no free trade agreement the U.S. has with countries like Peru, Chile, Singapore, and Colombia among others allow such a substitution program.
Roney said governments in the U.S. and Mexico "appear to agree this is a flaw. That's a big first step."
The other challenges facing the U.S. sugar industry would be rising production costs and nearly flat prices.
source: reuters
U.S. sugar imports from Mexico may fall less in 2010 than the U.S. Department of Agriculture is forecasting after this year’s surge, Imperial Sugar Co. executives said.
Mexican imports in the coming marketing year may reach 350,000 short tons, more than twice the 165,000 tons the USDA forecast on June 10, said Patrick D. Henneberry, senior vice president of the Sugar Land, Texas-based maker of Imperial and Dixie Crystals sweeteners. Mexican millers may want to keep sugar flowing to the U.S. since tight credit markets have made it tough to finance warehouse space and inventories.
“The thing that might drive a little bit more than the USDA is currently forecasting is the financing,” Henneberry, 54, said in a Houston interview. “The Mexican sugar industry still heavily relies either on financing of stocks and warehouse or direct cash sales in order to generate cashflow during the crop to pay the farmers.”
U.S. imports from Mexico in the marketing year that starts Oct. 1 still will be a fraction of the amount that crossed the border this year after the two nations lifted trade restrictions on sugar on Jan. 1, 2008, as part of the North American Free Trade Agreement. The U.S. will purchase 1.26 million tons from its southern neighbor in the year ending Sept. 30, Henneberry said. The USDA projects imports of 1.15 million tons in the current marketing year.
‘Eliminating Their Stocks’
“Part of the imports that we received this year was de- inventorying of their supply,” John C. Sheptor, Imperial’s chief executive officer, said during the interview yesterday. “It wasn’t direct production as much as it was eliminating their stocks. The ability for the Mexican farmer through the millers to send to the U.S. will be challenged. They won’t have the sugar to ship to the U.S.”
Imperial formed a joint venture in 2007 with a Mexican producer to market the sweetener in the U.S. The company has sold about 55,000 tons of Mexican sugar in the U.S. this year.
U.S. output may increase 5.9 percent to 8.025 million tons in the next marketing year, the USDA said.
source: bloomberg
Despite two hurricanes that caused considerable flooding in Vermillion, St. Mary, and Iberia parishes, Louisiana’s 2008 sugarcane yields were good.
“The gross value of the crop paid to growers and landowners was right at $373 million,” says Ben Legendre, LSU AgCenter sugarcane specialist. “The amount that went to mills and marketing — about 38 to 40 percent for the total amount received for sugar — was around $250 million.”
The total value for the 2008 cane crop was about $621 million. That’s not bad, says Legendre, “especially considering the hurricanes and about 30,000 cane acres flooded. Sugarcane still ranks first in value amongst Louisiana row crops.”
Prior to the hurricanes, it was thought the crop would yield between 35 tons and 37 tons. The yield ended up averaging some 33 tons, seventh best yield in the state’s history; yield of sugar-per-acre ranked third highest; yield of recoverable sugar per ton of cane was second highest.
“Last October (Hurricanes bitter for Louisiana sugarcane growers), I thought we’d have much lower yields. After Hurricane Lily in 2002, the crop suffered lodging, rains fell almost the entire year and recoverable sugar averaged 179 pounds. Last year, though, recoverable sugar was 224 pounds.”
The 224 pound average may see an additional bump once warehouses liquidate supply from 2008. Typically, “mills have 2 to 5 percent in the warehouse because they don’t want to be caught short when selling to the refinery. So, after that sugar is calculated in, the overall yield may be as high as 225 or 226 pounds. That could be a state record.”
Sugar landscape
Even though growers had a decent crop, “we were hoping for a better one. And the price of sugar is much lower than we’d like to see. In fact, it’s very close to forfeiture levels. Several mills that have sugar under the loan program are now considering the fact that, with the price at such a low level, it might be more advantageous to forfeit it. However, that hasn’t taken place and everyone is hoping for a better sugar price as the season progresses.”
Attendees at a mid-spring meeting with Louisiana Rep. Charlie Melancon and Barbara Fecso -- a USDA-FAS official who administers the farm bill sugar program -- were told up to 1 million tons of sugar is being imported from Mexico without tariffs. The Mexican sugar industry is looking for hard currency as the peso is devalued against the U.S. dollar (which has gone from 10 pesos per dollar less than a year ago to about 15 pesos per dollar now).
“As a result, they’re moving more of their sugar northward to the United States to get dollars. Under the terms of NAFTA, they can export as much sugar as they want into the United States. Then, they’ll buy sugar from other countries to supply their own needs. That isn’t good…and is disrupting the U.S. sugar program. In effect, Mexico is an equal player with the U.S. producers. They’re competing for the sugar dollar. Even though the USTA can’t administer or do anything against Mexico, they can basically curtail U.S. sugarcane production to satisfy the WTO.”
Right now, the price of sugar on the raw market side is depressed. However, on the refined side, sugar is worth better than 30 cents per pound.
“The user groups are hollering because the refined sugar prices are so high. But a lot of that is tied in with the fact we lost a refinery a year ago. Imperial Sugar, which accounted for 1 million tons of refine sugar (annually), blew up and hasn’t yet been put back on-line. Raw prices are low because we don’t have the refining capacity to get it out of the way.”
2009
There has been a gradual trend towards reduced sugarcane acres in Louisiana. In 2001, the state had almost 500,000 acres. Last year, slightly over 400,000 acres were reported.
“New varieties helped the situation, offset a lot of the harm. Back in 2002, following a series of hurricanes, there was a lot of wet weather. The sugar recovery was only 179 pounds.”
In 2005, there were two hurricanes, but the weather after them was relatively dry. “So, we were able to harvest under more-or-less ideal conditions and the overall sugar recovery was 219 pounds — that’s quite good, about the 10-year average.”
In 2006, however, early December freezes — freezing temperatures four nights in a row — meant lost cane and the overall recovery was only 206 pounds, the second-lowest in the last decade.
In 2008, as previously noted, hurricanes Gustav and Ike hit and the crop still yielded 224 pounds.
“I looked at varieties, nitrogen fertilizer recommendations, at what the hurricanes did — in terms of the shock to the crop, stalk breakage, flooding, and the use of chemical ripeners. Last year, because we had dry weather following the hurricanes, we were able to harvest the crop with a minimal amount of mud and leafy trash. Even though the cane had been lodged dramatically by the storms, the dry weather allowed the cane to pick itself up enough that farmers were able to harvest without making a mess although they were not able to properly top the stalks. The fact we had unlimited sunlight for about 10 weeks didn’t hurt, either.”
In a study he conducted a few years ago, Legendre found that solar radiation is the single-most important factor in cane ripening. The second is lack of rainfall and the third is cooler temperatures that tend to reduce growth.
“Well, with new varieties, we’ve put a lot of emphasis on early maturation and high sucrose content. Those are basic selection criteria. All of the new varieties, with one exception, have better levels of sugar than previous releases.
“I just looked at the LCP 85-384 (more commonly called 384) outfield test for 2008. The 384 had about 285 pounds of sugar. For comparison, our number one variety, HoCP 96-540, also had 285 pounds. But a newer variety, L 97-128, was at 300 pounds; L 99-226 (currently being increased) was at about 305 pounds; HoCP 00-950 was at about 315 pounds. Only one other variety, L 99-233, was equal to 384.
“So, the new varieties have at least as much sugar as 384 and, in most cases, more. 384 is considered an early-maturing variety with good sugar content.”
Looking at second-stubble yields, 384 was at 282 pounds; 540 was about 285 pounds; 128 was at 283 pounds; 226 was over 300 pounds; 233 was down because of its high tonnage at about 275 pounds; 950 was at 300 pounds; and L 01-283 was at about 287 pounds. Those results also show the newer varieties contain more sugar, says Legendre. In first-stubble and plant cane the same was shown.
Nitrogen
When Legendre first came to LSU, there were indications too much nitrogen was being applied to Louisiana’s sugarcane crop. Cane was lodging and sucrose content was being affected.
“We began several experiments and I worked with county agents in several parishes along with soil scientists. It turned out we were applying about 20 percent more nitrogen than was actually needed.”
Initially, there was some concern by growers that without enough nitrogen, cane tonnage wouldn’t be high enough. And if the sugar “isn’t there along with lower tonnage, the crop would provide less sugar per acre.
“Well, we’ve done these studies for about six years — and continue them — and every year, even after hurricanes, found that reducing nitrogen fertilization by 10 to 20 percent, we can maximize sugar-per-acre and also increase the amount of recoverable sugar per ton of cane. It’s true that tonnage may drop a little, but the increase in recoverable sugar overshadows that.”
Legendre and colleagues recommended growers go with lesser rates of nitrogen. “It didn’t take long to figure out reducing nitrogen can save a considerable amount of money. Most growers went with the lower rates last year. I think that had a lot to do with the increased sugar-per-acre tally.”
Hurricane Gustav caused broken stalks — tops were taken out and the bottom portions were left, which contain relatively high sugar amounts. With the hurricane damage, vegetative growth stopped. But all the subsequent sunlight allowed the cane to increase sucrose content at the expense of vegetative growth.
Glyphosate is used on cane as a chemical ripener. Even though the amount used in 2008 was probably less than in previous years, “we know that with ripeners you can increase recoverable sugar by 5 to 30 pounds per ton of cane. That, along with everything else, improved the sugar-per-ton count.”
All of this came with a price, though. In many cases, because of the hurricanes last August, growers couldn’t get cane planted until late September and October. This year, that will translate into as much as a 20 to 25 percent reduction in yield of the plant cane crop.
On top of that, the aforementioned dry weather that helped the harvest of the 2008 crop “was our worst enemy when planting late. In many instances, very crooked cane was planted because of the lodged conditions. Because of the crooked stalks, the cane had to be planted with less soil on top. As a result of the dry conditions after planting, much of the plant cane deteriorated and dehydrated.
“This spring, we have one of the poorest plant cane crops in years. Many fields are being plowed out. Of the plant cane acres — and there was probably 100,000 acres — there are concerns about at least half. The yields won’t be in the 40- to 50-ton range we were getting with the new varieties.”
The stubble crop looks good, however. Because growers harvested most of last year’s crop under dry conditions, the stubble wasn’t damaged and was followed by a mild winter.
“Even though we have about 30 percent plant cane, it’s about 40 percent of our yield. Right now, it may bring 25 percent of the overall yield, if that much.”
Financing is also becoming a problem for some farmers. Even though they had a good 2008 crop, the price for sugar “isn’t providing a lot of capital. With the cost of fertilizer, cultivating and other inputs, many growers are having problems with funds.
“And the expense of planting next year’s crop, which must be planted in August and September, still has to be figured in. Growers won’t get any money from the mills until after the first week of harvest. Right now, money is tight and farmers are being crunched, just trying to survive.”
source: deltafarmpress
With each American consuming an average of 120 pounds of sugar per year, the recent announcement that Mexico would send more sugar our way is noteworthy.
Everyone, from the grower to the consumer, paid attention when Mexico's Secretary of Economy Gerardo Ruiz Mateos told the U.S. to expect more Mexican sugar inside our borders than projected, as much as 229,000 tons more.
Lobbyists, large food manufacturers and candy companies in the United States want the imports to come. They have been pressuring the USDA to allow additional imports from other countries in a quest to drive down the price of U.S. sugar and raise their profits.
Americans eat and drink their way through an average 40 teaspoons of sugar a day. That helps account for the annual $10 billion sugar industry in this country and provides jobs from the farm to the manufacturer and beyond.
Currently the U.S. is the third largest importer of sugar in the world and a lot of countries want to send their sugar here. The Economic Research Service estimates that worldwide, the price for sugar in January averaged 15.67 cents per pound while the average price of refined sugar in the United States was 56.9 cents a pound.
Mexico is no exception. They want to cash in on our sugar cravings. Sugar is the most important crop in Mexico. Two and a half million Mexicans are involved in the sugar industry in some way.
At the start of this year, prices for sugar in Mexico City were historically low. In August, the USDA increased the amount of foreign sugar that could enter the United States duty free. With higher prices just over the border, the dollar much stronger than the peso and the North American Free Trade Agreement (NAFTA), most of Mexico's sugar producers have begun looking north to the U.S. to make a profit. For those reasons, Mexico estimates that almost all of their exported sugar will be shipped to the United States.
This news from south of the border comes on the heels of the recent announcement that the U.S. had a sugar surplus and that this year's crop would be larger than expected, raising the surplus even more.
That has U.S. producers concerned about importing even more.
Jack Roney, an economist with the American Sugar Alliance, is concerned about the effects a growing sugar surplus will have. He worries the surplus will drive sugar prices down, hurting American producers, jobs and, ultimately, the economy. He wants the USDA to hold off on allowing extra imports.
Russ Fullmer, agricultural manager with Sidney Sugars, is watching the market as well and agrees that proper importing of sugar is a matter of educating the USDA on quotas.
“Obviously, the better the market demand the better the price for the grower,” he said.
Though he is aware of Mexico's intent to ship more sugar, Fullmer also knows Mexican producers may have a hard time finding buyers for their product.
“American companies are very particular about sugar specs,” he explained.
He mentioned an interesting turn of events that should give American producers confidence. “The first sugar coming in from Mexico did not have the quality the buyers wanted and so they went back to buying American sugar.”
That is good news for local growers, according to Fullmer, who says local growers are contracting more sugar beet production acres this year than last year.
“We're hoping to come out around 23,000 acres,” he said.
That is an increase over last year when higher crop prices and contract negotiations caused many farmers to shift to other crops. He's glad to see the increase and would like to contract even more acres.
“The big thing is for the government to keep watch on the supply so we're not over supplied,” he said. “They need to manage that carefully and still make sure there is adequate product. If you guess wrong, everything could go down. Right now the prices are remaining pretty good.”
source: The Prairie Star
The world has a sweet tooth. World consumption of sugar is 24 kilos per person - that's over 50 pounds of sugar for each man, woman and child on the planet. For something that has essentially no nutritional value, we sure do use a lot of it.
First, a quick review of some basic facts:
A crop year for sugar runs October to September. For example, the 2008-2009 season is October 1, 2008 to September 30, 2009. It's always good to get your crop seasons straight when you're talking about an agricultural commodity - you'll see why in a bit.
About 70% of sugar comes from sugar cane; the remaining 30% comes from sugar beets.
Countries such as Brazil, India, China, Thailand, Pakistan and Mexico grow sugar cane. France, Germany, the U.S., Russia, Ukraine and Turkey grow sugar beets. Once it is refined, sugar from cane and sugar from beets are very difficult to tell apart without a chemistry set far more complex than the ones behind the checkout stands at Wal-Mart. So rather than distinguish what it is made from, the commodity markets differentiate sugar by where it is delivered. Sugar #11 is traded on NYBOT and refers to sugar delivered to ports in the Caribbean. Sugar #5 is traded in London and refers to sugar at European ports.
For the 2007-2008 crop season, the top sugar producers looked something like this:
Brazil--35 M.ton
India--26 M.ton
European Union--16 M.ton
China--12 M.ton
Thailand--7 M.ton
Mexico--6 M.ton
Australia--5 M.ton
Pakistan--4 M.ton
Russia--3 M.ton
Cuba--2 M.ton
Total global production was 166.6 million tonnes in 2007-2008, well ahead of consumption at 157.1 million tonnes. Brazil was the clear leader, with India in second place. The European Union was thought to be oversupplied for domestic use, with 16.5 million tones produced. Of Thailand's 7 million tones, almost half was destined for export, as was almost a full three-fourths of Australia's crop.
And now for the current crop year - 2008-2009. India had fewer acres of sugar cane planted due to low prices coming off the high production in 2007-2008. Add to that some bad weather, and the picture for India changes dramatically. Production is forecast to drop 45% - with only 14.5 million tons forecasted for 2008-2009. A drop of that magnitude in the world's No. 2 sugar producer is bound to have some serious repercussions around the world, and global production is expected to drop 4.7% from the previous year down to 158.8 million tones, while consumption is expected to rise 3.2% to 162.1 million tonnes.
A classic commodities supply squeeze. By definition, that 3-million-tonne gap has to be closed, either through mysterious arrivals of new supply from storage or crop yields, or consumption has to fall. In either case, higher prices are the mediator.
First, At India
With India currently consuming around 22.5 million tones of sugar each year, a crop of 14.5 million tons means that India goes from being a net exporter to a net importer in one fell swoop.
There have been a couple of consequences from the small crop. Sugar mills that usually run at least into April closed in March this year due to a lack of cane to process. In response, the government instituted a program that allows cane mills to import raw sugar duty free, as long as they export a similar amount of refined sugar within the next two years.
There have even been suggestions that India may drop import tariffs on refined sugar, tariffs that currently stand at 60%. Of course, there are general elections coming in April and May, so it could be political positioning. But as of now, there has been no official action on the proposal, and according to the commerce secretary, G. K. Pillai, there won't be.
The sugar deficit in India has also affected Indian plans to increase ethanol use. An original goal of 10% ethanol blending was delayed because of the recent decline in fuel prices. In a time-honored tradition (not in India, everywhere), they made up for their immediate failure by doubling down: They announced the goal of having a 20% blending rate by 2017. Currently, India has the capacity to make around 2,200 million liters of ethanol. Of that, 750 million liters goes to the liquor industry, and 650 million liters goes to the chemical industry. The remainder is used for fuel blending. Those industries are paying 27 to 28 rupees per liter, while the fuel industry pays a fixed 21.50 rupees. If the Indian government wants to increase the amount blended for fuel, it will need to change the financial incentives.
Outside India
With India's production so low and global production forecast to be in deficit for the first time in four years, sugar prices have been remarkably steady, actually falling about 10% since October 1 (when the crop year started). Of course, back then, these deficits weren't expected, or more sugar cane would have been planted. On a year-to-date basis, prices have risen around 7%.
At the end of March, some analysts said the price increase was only the beginning, and analysts such as the Standard Chartered Group were forecasting sugar futures to rise as high as 15 cents a pound, with global demand exceeding production. Additionally, Bloomberg reported that Tom McNeil, a senior analyst with Kingsman SA, suggested that production may continue to be in deficit for 2009-2010.
"If that eventuates, a second year of deficit, certainly supply to the market will be tested and under those circumstances prices become very volatile," McNeill said. He declined to give a specific price forecast. "Sugar is probably one of the commodities with a slightly better story than most other commodities."
Additionally, on Friday, an Inside Futures article said that the Czarnikow Group is predicting that Brazil's producers will see a reduction in the amount of cane crushed from now through March 2011 because of halted mill expansions due to the financial crisis. Of course, ethanol demand in Brazil could be partially offset by low crude prices putting downward pressure on ethanol prices.
But either way, it sounds like sugar is set to rise, right?
Well, maybe.
Here's the crazy thing - the market may already be looking ahead to the 2009-2010 crop year; remember, the crop year starts October 1 when planting begins. But according to Bloomberg's headline from Friday, "Sugar Drops Most in Month on Concern Indian Output May Rebound," the market is already prepared for Indian farmers to plant like crazy.
So if the market is already looking ahead to next year, can the analysts be right that sugar will reach 15 cents a pound? Or has that ship already sailed, with the year's comparatively stellar 7% growth being the full extent of the bull market in tooth decay. In other words, maybe next year's crop is already priced in even before the first plant is in the ground.
On a more local level, April 1 marked the statutory date under the Farm Bill that the U.S. could start mucking with import quotas on sugar. This has caused a flurry of lobbying by food manufacturers who could profit from access to even-cheaper foreign sugar (right now, sugar imports are capped at 1.3 million tonnes for 2009). On the other side of the equation is the American Cane Sugar Refiners' Association and American Sugar Alliance, which state that an increase in imports of foreign sugar would be detrimental for the domestic sugar refiners and beet processors, and that the domestic market is well-supplied, with prices on the low side and that manufacturers able to get the sugar they need.
I don't believe that the government will decide to import more sugar, if for no other reason that any activity on sugar draws attention to what are fundamentally protectionist policies - but I've been known to be wrong before.
Mexico’s government will postpone the sale of 13 sugar mills after rejecting offers that were as much as 70 percent below estimates, said Agriculture Minister Alberto Cardenas.
Bids for four of the mills were below the price the government wanted, Cardenas, 49, said. He declined to say who offered to buy the mills and how much they bid. The 13 mills accounted for about 18 percent of the 5.5 million metric tons produced in Mexico last year.
“I wish we could sell at least these four” said Cardenas, in his Mexico City office yesterday. The current economy makes the divestitures more difficult, he said.
Mexico, which had decided against investing in the mills, wants to sell them to fuel spending in the industry as it seeks to boost production by 13 percent by 2012. Domestic sugar producers want to take advantage of selling sugar to the U.S. after the two countries lifted trade restrictions on the commodity last year.
“These mills require large investments to make the most of them, and of course, we don’t have a large enough budget to invest,” he said. Each plant may need as much as 800 million pesos ($57.5 million) for upgrades, he said.
Since 2001, the government has sold 14 mills. Mexico, the sixth-largest producer of the sweetener in 2007, wants to raise output to 6.23 million metric tons in three years and exports to 840,000 tons, according to government estimates. Not selling the mills may make that goal harder to reach.
Less Profitable
“It seems that the mills that the government still owns are the least profitable, the least productive,” said Cardenas, a former governor of Jalisco state, whose family still owns peach orchards there. “We don’t want the government to own any sugar mills, it’s not our activity, that should be a private-sector activity.”
The government expropriated 27 mills in 2001 after talks fell apart with producers on providing loans for upgrades. Grupo Azucarero Mexico SA, owner of six mills at the time, went bankrupt, and protests by sugar-cane cutters for $500 million in back pay led to mill closures. Today, Mexico has 57 mills.
Mexican producers may increase exports to the U.S. by 50 percent to 750,000 tons in the year that began Oct. 1, Cardenas said. Imperial Sugar Co. Chief Executive Officer John Charles Sheptor said exports may rise 44 percent in an interview last month.
Raw sugar for May delivery rose 0.06 cent, or 0.5 percent, to 12.73 cents a pound on ICE Futures U.S. in New York yesterday. The price has gained 7.8 percent this year.
Doha Revival?
Talks between members of the Group of 20 nations in London today may spark a renewal of discussions to revive the Doha trade talks, said Cardenas.
“The main obstacles for a global trade agreement are the subsidies, which are especially large in Europe and the U.S.,” said Cardenas, a former candidate for the National Action Party’s presidential nomination. He lost to President Felipe Calderon.
“Countries need to reduce subsidies to its production and to the transportation,” Cardenas said. “The G-20 leaders may be able to get us closer to revitalize the Doha talks.”
Mexican consumers are paying as much as 12 pesos per kilo (0.39 cents a pound) for sugar, Cardenas said. Mills are selling the sweetener for half that price, or as much as 6 pesos, he said. There may be room for prices to drop for consumers, he said.
Farmer Payments
Farmers are paid based on the amount of raw sugar produced per ton of cane. Payments are made after the crop year ends. The harvest runs from October to May.
Sugar-cane workers halted shipments to mills during the last two seasons demanding mill owners pay 2 billion pesos in back pay. The government stepped in last September and offered to pay subsidy of 145 pesos per ton to sugar- cane producers. The government also agreed to set up a pricing system that will be adopted by 2011.
source: bloomberg
Mexican cane growers will block domestic sugar supplies from Monday to fight for a 15percent increase in prices from mill owners, the National Cane Growers Union said.
Growers will only allow sugar bound for export to leave warehouses until they win a local price of 300 pesos ($21.20) per 110-pound (50-kg) bag, the union said on Sunday.
The union said sugar currently sells for up to 260 pesos a bag in Mexico.
"The low sugar price has negative repercussions in the price of sugar cane," said the union, which represents more than 165,000 cane growers.
Mexico's sugar industry chamber was not immediately available for comment.
Mexican production has outpaced demand this season and warehouses have more sugar than national consumption, meaning Mexico aims to export more to the United States.
The chamber told Reuters this month that Mexico expects to harvest 5.3 million tonnes of sugar in 2008/09.
Mexico could export up to 1 million tonnes of sugar to the United States in the 2008/09 season, nearly double the amount sent in the previous cycle.
source: reuters
MEXICO CITY, (Dow Jones Commodities News via Comtex) -- Mexican sugar growers have blocked local market access of the new 2008-09 sugar harvest from warehouses belonging to all 54 mills currently active, the National Sugar Cane Growers Union said Friday.
Union President Carlos Blackaller said in a statement the growers would block all access for 24 hours to protest lower domestic purchasing prices in the current harvest cycle.
Blackaller said that local bulk prices so far - at about 300 pesos per 50-kilogram bag - have been 13.5% below the level paid in the last harvest, for 2007-08 season.
He said the union called on mills across the country to intervene over the low prices. He also accused mills under the government-administered Feesa group of causing part of the current "distortion of the local market," which Blackaller said was at the root of the problem.
The union, however, did not offer an explanation of how the Feesa mills were to blame for the current lower prices. The union also did not suggest how the mills were supposed to intervene.
The union frequently goes on strikes either in the last month leading up to the harvest start in mid-November or at the peak of harvest activity in February and March. In the latter period, mills and growers are negotiating cane prices for the crop.
Mexico's sugar industry includes 270,000 cane growers, in addition to employing 130,000 workers including cane cutters. Indirectly, an estimated 3.5 million people - many of the most isolated parts of the country - rely on sugar for their livelihood.
source: marketwatch
Mexico could export up to 1 million tonnes of sugar to the United States in the 2008/09 season, nearly double the amount sent in the previous cycle, the head of sugar industry chamber said on Thursday.
Juan Cortina told Reuters in an interview Mexico would export between 700,000 and 1 million tonnes of sugar compared to just over 500,000 tonnes in 2007/08, as the country takes advantage of high inventories, a free trade deal and tightening U.S. supplies.
The U.S. sugar situation tightened last month as production in the top cane growing area of Florida fell, meaning the United States will likely have a shortfall that Mexican producers can fill, Cortina said.
"There is a huge need for sugar in the United States," Cortina said.
Mexican production outpaced demand and warehouses have more sugar than national consumption, meaning more sugar available to send north.
Just in the first three months of the harvest year, which began in October, Mexico exported 10 times more sugar than in the same period in 2007, Cortina said.
Trade rules between Mexico, the United States and Canada were loosened last year when the 1994 North American Free Trade Agreement came into full effect. Also helping exports, Mexico's peso has lost about a third of its value since last August, hit by the global financial crisis, making Mexican goods sold abroad more attractive.
Cortina also said Mexico would harvest 5.3 million tonnes of sugar in 2008/09, slightly lowering the chamber's previous crop estimate.
source: reuters
It's most well-known for being the main ingredient in the production of the Mexican spirit tequila, but a drought-resistant succulent plant is being touted as the next generation in biofuels.
Central Americans have used the sap of the agave plant to distil their potent brew for centuries, but an Australian company wants to harness its high sugar content to make ethanol for energy.
Sugar cane is already used in Australia to make sugar for ethanol production, especially in Queensland where there is a long-established cane industry and 10 per cent ethanol petrol is widespread.
Proponents of agave say they are not trying to replace sugar cane as a source of ethanol, but their plant is an ideal fit for climates where cane does not flourish.
Australian company Ausagave says it has 10,000 agave plants in pots that are ready to be trial planted.
Ausagave's Don Chambers says he has been researching the cultivation of agave for the past four years, and he believes crops could produce between 10,000 and 16,000 litres of ethanol per hectare per annum.
His forecasts project an estimated cost of less than 40 cents per litre. This compares with 34c/L for molasses and 44c/L for sugar cane. He says sugar cane averages a yield of 9,500L per hectare per annum.
Mr Chambers says the plant is tough enough to survive temperatures of up to 50 degrees Celsius, making it ideal for Australia.
"It can grow basically in the desert," he said.
" We've been doing trials here in South Australia, and it doesn't die without water, it can withstand extremes of temperature, it wouldn't be as subject to storms like some of the crops like cane are.
"If you compare it with [sugar] cane and corn, it does have less operational costs and it can grow in very marginal land."
Cool of the night
Agave is a CAM plant, meaning the pores on its leaves open at night rather than during the day. This means it retains a lot more water than plants that grow during the day.
"It's one of the most water-efficient plants in the world," Mr Chambers said.
"It's very robust and very resilient, in fact the place I've got it growing in South Australia is one of the coldest places in the state and yet we've got some in some of the hottest places and it's still surviving."
The resilience of agave is its main selling point for use in Australia. Supporters say its performance in marginal soils and dry conditions means it could add to the biofuel sector without displacing existing crops.
Because agave is not used as a food crop, it would not have to displace any existing food or biofuel crops, says Professor Nanjappa Ashwath from Central Queensland University.
"It doesn't compete with the other sources of biofuel, such as sorghum or soy beans, which are also used as food crops," he said.
Professor Ashwath says Australia provides a perfect setting for agave production, because of the large areas and harsh climatic conditions.
"I just came back from a three-month trip to India and Rajasthan and they have very large dry zones and agave is being grown there in Rajasthan and they've got a lot of other places where agave can grow well," he said.
"Sugar cane is really suited to high-rainfall regions and the coastal areas and we are talking about the drier zones where we don't have much irrigation.
"For example the mining lands and some of the lower-lying areas where we can plant and get the bio-ethanol."
'Qld furthest advanced'
Mr Chambers says he has approached the Queensland Department if Primary Industries (DPI) and Townsville's James Cook University about finding a place to start trial planting.
"We've got a lot of interest and support from Queensland. Putting it all in perspective, there's no use growing it where there's no support from government with mandated fuels.
"If you look at the supply chain, you've got to have demand for it, so it's got to go into the fuel and to go into the fuel you've got to have processing facilities and you need crops,
"Queensland is the furthest advanced in this area with the sugar already having a capacity to produce ethanol."
Professor Ashwath sees the logic in the choice of Queensland. He says biofuels are an important part of sustainable power generation, and government policies are essential to growing the industry.
"Any new initiative needs an input from the government because there are so many unknowns," he said.
"What type of agave can we use and what are the cultivation practices? How do we harvest and what kind of plant, who's going to provide the raw materials to the industry?
"The Government needs to be involved because otherwise it would not be viable to start with."
source:abc.net
U.S.-Mexican sugar trade has been an ongoing issue under NAFTA and warnings about more problems were raised when trade became free on January 1, 2008. Economic factors inside and outside the industries have helped to avoid some of the problems and will again in 2009, but conditions may be less favorable in 2010.
According to the late-January USDA Economic Research Service “Sugar and Sweeteners Outlook”, U.S. sugar production for fiscal year (FY) 2009 (October 1, 2008-September 30, 2009) is estimated at 7.8 million short tons raw value (STRV), down 4.3 percent from FY 2008, with cane sugar at 3.6 million STRV, up 4.2 percent, and beet sugar at 4.2 million STRV, down 10.5 percent. The February World Agricultural Supply and Demand Estimates from USDA made minor changes, but did not change the supply/demand balance in the U.S. Record high per acre beet yields, attributed partly to better weed control with glyphosate-tolerant beets, could not offset the lowest beet acreage since 1961, down 14.0 percent from FY 2008, as more profitable crops squeezed sugar beet acreage. Acreage planted this spring may be higher with refined beet sugar currently at $0.35 per pound and price expectations for other crops much lower than a year earlier.
Sugar imports in FY 2009 are projected by USDA at 2.496 million STRV. Tariff rate quota (TRQ) imports are estimated by USDA at 1.511 million STRV with refined sugar imports of 286,418 STRV. Sugar imports from Mexico are projected at 630,000 STRV, and sugar imports for re-export are expected to be 345,000 STRV. Total imports will be lower than FY 2008, but larger than FY 2007. U.S. sugar exports are projected at 170,000 STRV, mostly re-exports of imported sugar.
Projected U.S. sugar deliveries for domestic food and beverage use for FY 2009 are 10.5 million STRV, down slightly from FY 2008, with the actual level to be influenced by relative prices for refined sugar and high fructose corn syrup (HFCS). HFCS deliveries in FY 2008 were 8.15 million tons, down from an average of 8.8 million tons in 2003-2005 as HFCS prices were high relative to refined sugar prices. Implied end of year U.S. sugar stocks are projected at 1.1 million STRV, a low end-of-year stocks-to-use ratio of 9.9 percent. USDA is committed to making adjustments in sugar program operations to maintain adequate supplies of sugar.
USDA projections of Mexican sugar production for FY 2009 are 5.9 million metric ton raw value (MTRV), unchanged from FY 2008. Food and beverage consumption is estimated at 5.4 million MTRV, and exports, almost all to the U.S., are estimated at 575,000 MTRV, about 64,000 MTRV less than in FY 2008. Consumption of HFCS is expected to be 820,000 metric tons, dry weight, 2.5 percent higher than FY 2008. About half the HFCS is produced in Mexico and the other half is imported from the U.S. Ending stocks are expected to be 1.03 million MTRV, a 19.1 percent yearly-consumption-to-stocks ratio, also a historically low level.
Mid-January wholesale prices for refined sugar in Mexico City were relatively low at $0.214 per pound. The value of the Mexican peso has declined from 10.1 pesos per U.S. dollar in August 2008 to 14.0 pesos in mid-January and 14.8 pesos recently. Those two factors should encourage movement of sugar to the U.S. That movement will be tempered by expectations of limited carryover supplies at the end of the FY 2009 marketing year. USDA may have to provide additional TRQ supplies from other countries later this year to meet consumer demand.
According to the U.S. Agricultural Attaché in Mexico City, the Mexican government continues to work on increasing efficiencies and output with the sugar industry. The strategy focuses on cane production, mill yields, investment, employment and trade policy. The government sets a price for sugar cane and the percentage that goes to growers. The mills have disagreed with the price for FY 2009 and have been promised money from the federal government to offset the higher payments to growers. While the industry continues to improve, production is not expected to move significantly higher unless good weather adds to yields.
As FY 2009 progresses some factors may point toward larger supplies of sugar in the U.S. and Mexico relative to demand for 2010. Slowing economic activity in the U.S. and Mexico may take a slight edge off demand. Sugar beet area in the U.S. could expand because alternative crop prices are less favorable than a year earlier. If glyphosate-tolerant sugar beets do lower production costs and improve yields that would be an added incentive to switch back to sugar beets. Yields per acre for sugar beets were record large in FY 2009 and a return to more normal yields may limit production. Sugar cane has a sideways yield trend which is not expected to change and acreage will likely continue its slow decline.
Lower corn prices could lead to lower HFCS prices in both the U.S. and Mexico and increase usage in both countries. Corn acreage planted in the U.S. in April and May is expected to be down from last year which could support corn prices and limit production of HFCS. Weather stress on the corn crop this summer could also limit yields to below trend and result in stronger corn prices than now expected.
The U.S. and Mexican sugar markets could also be helped by demand in the rest of the world. According to the January ERS analysis, India may import sugar for the first time in three years. Indian sugar production follows a 6-8 year cycle and for the past couple of years has been on the production downside. Recent media reports indicate that India will import sugar. India is also increasing ethanol production from sugar. Chinese sugar production is projected to be down modestly this year and Chinese traders have purchased 500,000 metric tons of sugar from Brazil for the first time since 2006.
While sugar production and trade are heavily controlled by the federal government in the U.S. and in Mexico, production, consumption and trade in sugar and sugar substitutes respond to market forces. Market participants are well aware that the supply/demand balance could easily shift from the low carryovers at the end this fiscal year to larger supplies in FY 2010 which will encourage them to help keep supply and demand in balance.
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