Sugar Agro-industry at 29 June 2009
• 2008/2009 harvest draws to a close with huge losses
• 2009/2010 Preliminary and estimated balance
• High profitability for the field, CNDSCA program
• Final 2008/2009 harvest report
• Weekly market
The 2008/2009 harvest was finally wrapped up. The economic loss was vast. If we look at the production of the 2007/2008 harvest, the agro-industry chain lost or “failed to earn” more than 3 thousand million pesos, as we calculated last week. There was some recuperation with the sugar price increase; however to not crush almost 6 million tons of sugar cane and as a consequence not produce more than 550 thousand tons of sugar is no small thing. Increasing the production level from one year to the next is not going to be easy. A lot of effort, dedication, intelligence and resources will be needed to return profitability to the sugar cane field. In accordance with final production figures, and with our sugar consumption, export and import estimates, we present the preliminary sugar balance for this harvest and the estimate for the next cycle, both as at 29 June.
We have adapted the estimate in accordance with production figures obtained by the agro-industry and from export reports. From 31 May to 29 June, the percentage of inventory against use has not noticeably changed. We put our last estimate at 15%. This is a figure which would allow the sugar reserve to be taken into account sufficiently to get through the short harvest without supply problems or pressures. But we must underline the fact that we are forecasting that having inventories of 900 thousand tons means importing between 150 and 175 thousand tons. We have therefore placed exports for this cycle at close to 1.1 million tons including IMMEX sugar.
The method of the probable importation has not yet been decided, but it is clear that if at least 150 thousand tons are not brought into the country before the start of the 2009/2010 harvest, the country’s supply will be put into grave risk. It is crucial that it is done well, so that the market is not disrupted in the same way that has happened before. There is a lot at stake if interests outside of the industry are benefited. It is very doubtful whether mills will begin to crush cane in mid-October of 2009, as has been suggested by industrialists trying to convince authorities and themselves that it is not necessary to import sugar. Something unexpected always happens – every year there are challenges to get the harvest going – for which reason the sensitive issue of supply cannot be left to chance. Up to now it has been said that the mills which exported on a temporary basis would not qualify for import permits or quotas. The option is that the government, via FEESA, will do the importing; however this would hurt the sensibilities of private mills and raise suspicion. If quotas are awarded to sugar consumer firms, there would not be too much control over the destination of the sugar, aside from the fact that those who have the least problems with supply are also the largest and most important because of the economic weight they carry. There is no magic formula but hopefully the good of the industry as a whole will be taken into account and not just the good of a sparse few.
Profitability for the Field
The National Committee for the Sustainable Development of Sugar Cane (CNDSCA) and the College of Postgraduates (Chapingo) are the authors of an interesting project called “High Profitability Project for the Transformation of the Mexican Sugar Cane Field 2009”. Sugar cane producers in all of Mexico are being called upon to participate in high profitability compressed sugar cane producing units, using the latest technology for the development of sugar cane. The idea is to compress fields belonging to two or more producers, with a minimum area of 30 hectares. At the moment we do not know how many producers have applied to participate in this program, which will only take place from May to December 2009. Resources have been provided by the federal budget and must be reimbursed to the Finance Ministry if they are not used in their entirety. The CNDSCA is the coordinator of the project and the technical agent is the College of Postgraduates, which will also have the task of recruiting participants, granting resources, applying the technology and carrying out the evaluation.
Sugar Cane Production and Quality Committees will coordinate the producers. Mills will also participate. A training program for producers and other participants has been developed which will run parallel to the technology application. The program is based on the precepts of the National Program for the Sugar Cane Agro-industry (PRONAC) and the Law for Sustainable Development of the Sugar Cane Industry (LDSCA).
Final Report of the 2008/2009 Harvest
The 2008/2009 harvest finished on 18 June when the crushers of the Tamazula mill were switched off. We have reported on the harvest on a weekly basis and all that is left now is just to wait and see if there are any statistical adjustments which will modify the final report. For the time being we will issue the final numbers reported by Sagarpa. At 18 June a total area of 662,700 hectares had been harvested. The harvest registered a gross cane crushing of 42,526,838 tons and a sugar production of 4,962,818 tons.
This is the final graph showing real versus estimated production. It is worth mentioning that none of the institutions that compile and release information related to the harvest make official adjustments to their proposed production estimates at the beginning of the cycle, in relation with production development. This would seem to indicate that the forecasts are magical and infallible, and on not reaching them they would appear to have been badly thought out. Only in isolated commentaries, as much from the Ministry of Agriculture, the President of the CNIAA and the leaders of sugar cane organizations, are off the record figures released, calling into question such estimates. The forecast in the graph was only published for one week on the official site of the CNPR, and it was later removed and replaced by the original which referred to a production of 5.4 million tons.
The same applies to this estimate. If it is not modified in accordance with the progressing of the harvest, totally incongruent figures will result – a difference between harvests of almost 6 million tons of sugar cane. And not one institution exists which adjusts its figures to reflect the actual outcome. That is the nature of estimates – they are just a guide and not definitive figures.
These are the final sugar production figures for each state. The fall in average domestic production compared to the previous harvest was 11.24%. Veracruz was in line with this fall by falling 11.78% with -218,782 tons of sugar and -2.6 million tons of sugar cane. With Veracruz being the biggest producer state, these absolute numbers represent around 40% of the national total. But there are worse falls in sugar production compared to one year ago, with those of Oaxaca at -33.46%, San Luis Potosi -27% and Michoacan -24.26%. Tabasco demonstrated the best performance with a 14.31% growth in sugar production compared to the previous harvest. Chiapas also showed positive production with a growth of 2.75% compared to the 2007/2008 cycle.
Which was the best mill? In terms of factory yield, El Potrero led the field with 13.17%, followed by El Molino with 13.12% and Casasano with 12.94%. The mills that surpassed their production estimate were Santa Rosalía with +26.27%, San Pedro with +22% and El Mante with +15.61%. In terms of best sugar cane crushing with respect to their estimates, Santa Rosalía, San Francisco Ameca and El Mante were the leaders.
The best news of this harvest were the advances made in the use of cane bagasse, with the installation of more efficient boilers as a substitute for fuel oil as an energy generator for the industrialization of cane in the mills. According to the final figures, there was a saving of 90 million liters of fuel oil, which means an oil consumption of 4 liters of oil per ton of cane, and of 34.5 liters per ton of sugar. In both parameters there were major strides made compared to the previous harvest.
On finishing the last week of the harvest, week 32, in accordance with information issued by Sagarpa, 104 thousand tons of sugar cane was crushed, and 9 thousand tons of sugar was produced, of which 8,877 thousand tons was refined and only 217 thousand tons was standard grade.
The final figures show that the best sugar cane fields are in the center of the country – in Puebla and Morelos. Average field yield was 64.12 tons of sugar cane per hectare, the worst in at least the last 11 years. Last year the average was 70.72. The best yield was in the 2004-2005 harvest with 77.45 tons per hectare. The states of Campeche, Quintana Roo, Tabasco, San Luis Potosi, Oaxaca and Veracruz were below the national average.
Other news from this harvest was that after a number of assertions that none of the mills were going to stop operating, we came to the conclusion that the San Gabriel, Independencia and La Concepcion mills in Veracruz did not manage to get started with their respective harvests. The positions of the parties involved will have to be followed up to see if they do crush cane in the following harvest. It also remains to be seen whether the mills of the Santos group will successfully conclude their negotiations, as much with the Federal Government as with sugar cane associations, in order to timeously begin the 2009/2010 harvest.
Refined sugar production did not finish as badly as expected. Tamazula was only 3,700 tons under production compared to its previous production, managing to overcome the accident suffered at its plant in April this year. For the rest, the group of refining mills produced 31,556 tons, a lesser total than that of the previous cycle, which in the face of the standard grade sugar production debacle, is negligible. Refined Mexican sugar continued to win over a market in the USA and for this reason it is essential to up its production and improve its quality.
Weekly market
In the week of 22 to 26 June, sugar prices in the different centers of the country were stable, and even the Domestic Average Weighted Price (PPN) in the four biggest centers in the country in terms of sugar movement dropped a few pesos per 50 kg bulk compared to the week before. Refined grade sugar is badly distributed in Mexico and transport costs and logistics have made it more expensive on arrival at destination points although it seems that the price will not drop because this year, if there is going to be a lack of anything, it will be of refined grade sugar.
