Sugar Agro-industry Report at 1 June 2009
• Sugar export breaks records
• The concern is protecting local supply
• The bottling companies’ balance
• 2008/2009 Preliminary Harvest Report at 16 May
• Weekly market
In accordance with statistical figures of the US Department of Agriculture (USDA), in April this year the sugar industry had surpassed the total exports of the previous cycle. According to the same institution, from October 2007 to September 2008, Mexico exported 694 thousand tons of sugar to the USA. This figure is slightly inferior to the figure of 712 thousand tons published by both the Mexican Ministry of the Economy and the CNIAA.
The above table shows the most likely outcome for the sugar balance, which points to the fact that next year there will be no sugar for export purposes. Two weeks ago we said that the media had reported that sugar cane leader Carlos Blackaller had said that sugar production would reach 5.013 million tons. Now at the end of May, given the production rate that we have seen and the climatic conditions, it will be very difficult to reach the level predicted by Blackaller, even though it was not considered to be out of reach. In just two weeks we can observe the differences in the above table.
The most important consideration is the importation of sugar expected at the end of June and the beginning of July, which should come from the re-importation of temporary exported sugar by various sugar mills. This will add on to total demand, although final inventories will not reach the expected 800 thousand tons – they are way too meager.
At 31 May it seems quite difficult to reduce the rate of exports given the strong dynamics reached in this field. But in the sugar cane harvest cycle of 2009/2010 this export activity will be lost given that the expected difference between production and consumption will only be 94 thousand tons. This small amount should probably go toward strengthening domestic inventories. Depending on the price of sugar observed during these months in the domestic market, we might see high fructose becoming an important issue again. This is because a high sugar price could lead the bottling industry to consume more of the high fructose and in this way allow some sugar to be exported.
We have been commenting in some of our Spanish daily reports that strong political activity has started in sugar cane towns and municipalities, with the presence of heavyweight personalities supporting local candidates in the upcoming elections for the Lower House and other political positions. We have seen the presence of Beatriz Paredes, the President of the PRI, in Morelos, and Andres Manuel Lopez Obrador in Veracruz. The former was looking for the support of sugar cane workers for the PRI, while the latter was asking the workers for their vote in order to save the Labor and ‘Convergencia’ parties from losing their registration.
It must be said that candidates from all political parties had offered the same in past elections in the presidential periods of Echeverria, Lopez Portillo and De la Madrid, that is, to save the industry, support it with technology and primary inputs, provide money for farmers, promote productivity, etc., etc., etc.
2008/2009 Harvest results up through 24 May
Up through 23 May 2009, harvest results show a cultivated surface of 648,260 hectares, 27,406 more than the previous harvest, with an industrialized volume of 41,967,725 tons of gross crushed sugar cane. Sugar production reached 4,896,193 tons, with 1,475,110 tons of molasses and 14.5 million liters of alcohol. Within these figures, the La Gloria sugar mill produced around 26 million liters that were not reported to any institution that gathers weekly statistics pertaining to sugar and alcohol. During the week of May 16-23 only 56.8 thousands tons of sugar were produced, of which 22.2 thousand tons were refined and 34.6 thousand tons were standard grade sugar. Only 493,414 tons of sugar cane were crushed. Although the data differs, it is thought that at present 12 to 14 sugar mills continue to crush cane in the country.
This estimate is considered to be quite low. Currently the industry is fighting to reach at least five million tons. According to Zafranet’s calculations it will not be possible to reach this number. Our estimate is that it will not arrive at 4.99 million tons, which modifies the sugar balance as shown in the weekly report. This low sugar production threatens domestic supply and leaves no sugar in the country available for export.
The agro-industry will fall quite short from reaching at least the 48.3 million tons of crushed sugar cane that was produced in the previous harvest. The latest estimates show a number below 43 million tons, in a range of 42.5 to 42.8 million tons. During the week of 16 to 23 May only 493,414 tons of sugar cane was crushed and it is expected that during the time left of the harvest only around another additional 700 thousand tons will be crushed.
Only two states in the country, Chiapas and Tabasco, at this moment show positive numbers in the three variables shown: harvest surface, crushed sugar cane and produced sugar. The accumulated deficit in crushed sugar cane with respect to the previous harvest reached 4.5 million tons. With respect to sugar production the negative accumulation reached 432 million tons. In percentage terms, the largest decline in sugar cane production was observed in Oaxaca with -27.5%, followed by Michoacan with -23.2%, Sinaloa with 21.4% and San Luis Potosi with -20.4%. By comparison, Tabasco saw an increase of 9.0% and Chiapas produced 2.3% more.
The negative gap in production with respect to the previous harvest is still growing. Once the harvest concludes and the sugar mills report their final numbers, these will be reaching a tragic -10% with respect to the total production of the 2008/09 harvest. Up through 23 May this deficit reached -8.82%. The sugar mills that are the most responsible for the negative outcome in volume are: Alianza Popular with -47 thousand tons, Los Mochis with -32 thousand tons, La Margarita with -29 thousand tons, San Cristóbal with -27 thousand tons and Plan de Ayala with -26 thousand tons. In percentage terms the numbers are: Alianza Popular -63.7%, El Refugio -56.18%, Los Mochis -49%, Calipam -48.32% and La Margarita -40.42%.
We have commented on the decline in production of sugar and in the crushing of sugar cane. In this table, up through 23 May, the yield in the field has accumulated a catastrophic decline of -10.14 tons per hectare in the national average with respect to the previous harvest. This decline represents an average 4.5 million tons and in the case of sugar more than 400 thousand tons. This negative data applies to both the production of molasses as well as alcohol. The only favorable negative numbers, which we have already commented on, are those of oil consumption both in the fields and in the factories. To date there are sugar groups like Beta San Miguel that consume almost zero liters of oil for energy in their plants.
During the week of May 16 to 23 only 56,824 tons of sugar was produced, of which 22.2 thousand tons correspond to refined sugar and 34.6 thousand tons to standard sugar. The factory yield has remained at high levels and sugar cane quality is still very acceptable; nevertheless, it has not been the same for volume.
The sugar cane fields that need urgent attention are those in Campeche, Quintana Roo, Tabasco, Oaxaca and San Luis Potosí. The yield of 50 tons or less sugar cane per hectare in these states make the harvest unworthy and the resulting production non-profitable. The fact that Tabasco has shown positive numbers in this harvest with respect to the previous one is due more than anything to the fact that its fields were affected by floods last year, while this year it has made up what it lost. With the view of trying to be competitive, support for the sugar cane industry should be limited to productive regions, leaving behind political considerations.
We said at the beginning if this report that only around 85 thousand tons remain to be produced, resulting from a sugar cane crushing of near 770 thousand tons. But to be reached we must wait for nature’s co-operation and hope that the rain allows for a retrieval of up to the last stick of sugar cane from the field. We must understand that in order to close this chapter, the next harvest must start in October and not wait until November, so that consumption can be guaranteed during the fourth quarter of the year.