Frank Jenkins: Mexico Sugar Outlook

Noted sugar industry analyst Frank Jenkins of The Jenkins Sugar Group writes:

In recent weeks, Mexico has announced a series of import tenders totaling 600,000 tons. The first of these tenders was held on September 2nd, when Mexico purchased 100,000 tons from an array of counterparties. Mexico is working to fill a deficit created as the country shipped nearly 1.2 million tons to the United States between October 1, 2008 and July 31, 2009. A collapsing Mexican peso was the main driver in encouraging the exports as opposed to a genuine exportable surplus.

The USDA estimates that Mexico will have stocks on hand of 420,000 tons as of September 30, 2009 prior to the recently announced import tenders. As Mexico consumes over 460,000 tons per month, the country would have run out of sugar prior to the end of October if not for the current round of imports. On average for the past two years, Mexico has produced 434,000 tons of sugar from the new crop prior to December 31st – again, less than one month’s consumption.

In simple terms, with normal weather Mexico’s carried-in inventories and new crop production should total roughly 854,000 tons while consumption in the October-December period should total 1.38 million tons. Thus the 600,000 ton import effort will barely bridge to the new crop. Mexico will have negligible stocks on January 1st, 2010 and any disruption to the new crop will create genuine shortages in the Mexican internal market.

As a result, we feel that it will be late in the first quarter before Mexico has rebuilt its inventory pipeline to an extent that will allow Mexican millers to even contemplate exports to the US market.

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