Mexico Sugar Imports May Rise to Highest in 16 Years (Update2)
February 04, 2010, 12:49 PM EST(Updates sugar prices in sixth paragraph.)
By Carlos Manuel Rodriguez
Feb. 4 (Bloomberg) -- Mexico, the world’s sixth-largest sugar producer, may boost imports to the highest in at least 16 years as dry weather hurts domestic output, pressuring global supplies as prices hover near a three-decade high.
Imports may surge to as much as 600,000 metric tons this year, Alejandro Penaloza, chief financial officer of Mexico City-based Chocolates Turin and president of Mexico’s chocolate and candy makers association, said in an interview. That would be the most since at least 1994, he said. The country imported 390,000 tons last year, according to Mexico’s sugar association.
Sugar more than doubled in New York in the past year, reaching a 29-year high on Feb. 1, after rains in Brazil and a weak monsoon in India curbed output from the world’s two largest sugar producers. Global sugar demand is set to exceed supply by 13.5 million tons this season, according to London-based broker Czarnikow Group Ltd., and Mexican consumers are pressing the country to approve import quotas to help stem price rises.
“We want the government to approve the import quotas soon to stop the surge in sugar prices,” Cesar Buenrostro, chief commercial officer of Mexican candy maker La Coculense, based in El Salto, said in a Jan. 27 telephone interview. “Sugar is a staple food, and the government should consider the risk of having higher prices for this product to avoid more inflation.”
Government officials and candy makers will meet this week to discuss potential quota changes. Mexican sugar climbed 82 percent in 2009 as record exports to the U.S. created a domestic deficit, Penaloza said in a Jan. 26 telephone interview.
Future Prices
White sugar for May delivery dropped $7.7, or 1 percent, to $728.90 a ton on the Liffe Exchange in London as of 4:52 p.m. On Feb. 1, New York sugar futures reached 30.4 cents a pound, the highest level since January 1981.
Mexico’s central bank said in October that inflation was being pushed up by price rises for sugar and bottled sodas. In December, the bank boosted its inflation forecast for the end of 2010 by as much as 1.75 percentage points. Consumer prices will rise as much as 5.25 percent in the third and fourth quarters of this year, exceeding policy makers’ inflation target of 3 percent, according to the bank.
The retail price for a pound of white sugar in a Mexico City store is 140 percent lower than a pound of sugar in a Chicago grocery store.
In 2009, the Economy Ministry approved the sugar import quotas in September. By then, the 550,000 tons authorized were not fully purchased because rising international prices discouraged buying, according to Buenrostro.
Sugar Imports
This year, Mexico needs to import the most sugar in “at least a decade,” he said. “The government should have approved the import quotas by now.”
The promptness of the government to create import quotas “will be fundamental for the stability of sugar prices,” according to Penaloza. “Last year the economy ministry reacted very little and very late.”
Mexico created sugar import quotas in August 2009, after domestic prices reached a high of about 730 pesos ($56) per 50- kilogram bag on Sept. 14. Sugar prices in Mexico averaged 200 pesos a bag in 2008. Mexico’s sugar industry is regulated by the government, which sets import quotas. Sugar suppliers to the country include Nicaragua and other Central American nations.
Fernando Arias, an Economy Ministry spokesman, declined to comment on this year’s quotas.
Sugar Production
Sugar production from Mexico has been hurt by a lack of rain in the growing season and too much rain during the harvest season, said Patrick Henneberry, a senior vice president for commodities management at Sugar Land, Texas-based Imperial Sugar Co., the largest U.S. sugar refiner.
“There will be some sort of deficit due to the fact that the production is off and due to the fact that they will probably still export some quantity to the U.S. due to the higher price in the U.S,” said Michael McDougall, a senior vice president at brokerage Newedge USA in New York.
Mexican sugar output may fall to 4.9 million metric tons in the crop year ending Sept. 30, 2010, from an estimated 5 million tons last year, according to the country’s National Sugar Cane Growers’ Association.
“Once you add the sugar exports that have been already committed, the domestic deficit will be around 600,000 tons,” Penaloza said.
Other countries are also importing sugar to satisfy domestic demand.
Sugar Importers
Indonesia, Southeast Asia’s largest sugar buyer, this week agreed to import 85,500 tons of refined stock to fill a deficit. The Philippines, importing for the first time in eight years, will auction rights allowing private firms to buy as much as 150,000 tons. Pakistan, which stopped taxing imports, plans to buy 1.25 million tons by June.
“Many countries, including Japan, Russia and Pakistan are trying to buy as much sugar as they can,” said Antonio Ochoa, a vice president for Latin America at brokerage R.J. O’Brien & Associates LLC.
The Mexican government may try to deal with the sugar demand with a psychological effect by creating smaller quotas soon, Ochoa said in a telephone interview from Chicago.
The following is a list of events in Mexico this week:
*T Event Date Estimate Consumer Confidence Feb. 4 80.5 *T
Link to Company News: {BIMBOA MM <Equity> CN <GO>} Link to Company News: {GRUMAB MM <Equity> CN <GO>}
--With assistance from Elizabeth Campbell and Catatrina Saraiva in New York and Thomas Kutty Abraham in Mumbai. Editors: Robin Saponar, Dale Crofts
To contact the reporter on this story: Carlos M. Rodriguez in Mexico City at carlosmr@bloomberg.net.
To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net
