Sugar Report at 14 December 2009
• Harvest results up to 5 December 2009.
• Weekly Report.
Harvest results up to 5 December 2009.
At 5 December 2009 the harvest results showed a production of 156 thousand 620 tons of sugar, a harvested area of 18 thousand 454 hectares and an industrialized volume of one million 772 thousand 228 tons of gross crushed cane in 20 mills in Mexico. At the end of the first week of December, the new figures show that sugar production on a national level has registered a 28 percent growth (equivalent to 34 thousand 441 tons) compared to the same week of the previous cycle. The information published by the Information System of the Sugar Agro-industry (SIAZUCAR-SAGARPA) indicates that the progress so far in the harvest is better than the same week of last year as the harvested area demonstrates a growth of one thousand 809 hectares compared to the 2008/2009 cycle and the amount of gross crushed cane is 463 thousand 524 tons more.
Information per State
The state of Veracruz once again stands out for producing the highest amount of sugar. It produced 38 thousand 462 tons or 24 percent of the national total with Jalisco in second place with a production of 26 thousand 831 tons and Tamauliplas in third place with 22 thousand 264 tons.
Table A.1 -PRODUCTION RESULTS PER STATE UP TO 5 DECEMBER 2009 (WEEK 10) Current Harvest vs Previous Harvest
The mills in Campeche, Michoacán, Nayarit, Quintana Roo, Sinaloa and Tabasco have not reported production figures as yet.
Participation by mills
The 20 factories in operation in the 2009/2010 harvest are: Aarón Sáenz, Adolfo López Mateos, Atencingo, La Abeja, Constancia, El Carmen, El Higo, El Mante, Emiliano Zapata, Huixtla, La Gloria, Melchor Ocampo, Pujiltic, Quesería, San Francisco Ameca, San Miguel del Naranjo, San Nicolás, Tamazula, Tres Valles and Zapoapita. The Tres Valles, Aarón Sáenz and Tamazula mills have jointly produced closed to 47 thousand tons of sugar, representing 30 percent of the national total.
Table A.2 -RESULTS PER MILL UP TO 5 DECEMBER 2009 (WEEK 10) Current Harvest vs Previous Harvest
We need to mention that this harvest is showing improved production figures on the last harvest. We need to remember that in the last cycle problems concerning high input costs and debts to cane producers caused a considerable delay in the starting process in mills in the whole country. If it is true that production figures of the present harvest are reported at the same date as the last harvest, then in this harvest starting conditions are more positive as from the start an agreement was reached as to the reference price of sugar for the payment of sugar cane. Also, work to modernize the collective work contract was carried out throughout the last period with an incentive toward the labor development in work processes.
The role of the ILO in terms of labor development was essential for the current harvest which is one month in the making, to show its first positive results in the quest for improving on the bad results of last year’s harvest. Therefore, in comparative terms, the figures showing better progress to date are a result of the higher number of mills in operation because in the previous harvest at the same date, only 13 mills had registered production compared to the 20 mills that are presently working.
Although things are looking good because of the number of mills in operation, the challenge this harvest will be to raise factory yield. In the week of 1 to 5 December, factory yield (which shows the conversion degree of the cane in sugar produced) is 8.83 percent, which means that 88.3 kilograms of sugar is produced from each ton of cane on a national level. In the same week of last year, close to 93 kilograms of sugar was produced for each ton of cane which means that in the present harvest almost 5 kilograms less sugar is being produced for every ton of cane. Although we are one month into the harvest and some mills have yet to begin production, the challenge will be to reach the historical national average of close to 110 kg of sugar per ton of cane. However, if mills have not adequately invested in better manufacturing processes, there could be obstacles to improving productivity.
Modernizing the sugar sector, the work of the ILO in Mexico
For the sugar agro-industry, 2009 was indicative for Mexican sugar mills. The International Labor Organization (ILO)¹ touched base with the Mexican Sugar industry in order to develop a series of projects, seminars and courses with the obective of stirring labor life in the sugar industry toward a new direction. In mid-May the ILO met with Felipe Calderon, the President of Mexico, Juan Cortina Gallardo, the President of the National Chamber of the Sugar and Alcohol Industry of Mexico, and Adrian Sanchez Vargas, the Head of the Union of the Sugar and Similar Industries (STIASRM), to sign a “National Productivity Agreement” and to pave the way to a series of seminars on “Social Dialogue, Decent Work and Competitivity Management” that was carried out one month later at the International Center of Formation of the ILO in Turin, Italy.
Eleven members of the National Union participated in this event, headed by Sanchez Vargas and Rene Martinez, the General Director of the CNIAA. Alvaro Castro, the Deputy Minister of the Labour Ministry attended on behalf of the Mexican government. The main objective of the reunion in Italy was to implement a modernization of the sugar industry and to reach concrete agreements in different aspects of labor life in the sugar mills (permanent jobs, productivity and compensations, health and job safety, environment, welfare and social commitment).
How does the ILO work in the industrial sugar scenario?
Representatives of this organization visited the sugar mills in the country to carry out an evaluation and impart the guidelines on auto-trainig and competitiveness evaluation (GAECs) for Security and Health in the Work Ambience and Preservation of the Environment. These tools interact in an environment of participation, integration, flexibility and inclusion, as well as their basic principles of measuring: reflection and proposals for improvement. The ILO says that “these activities suggested by the workers represent very important elements and can have an interesting impact that favors both the firm and the workers”. The result has been considered a success for the social-labor aspect of firms dedicated to sugar production given that all parts become integrated (workers, administrative staff, executives and upper management) in a favorable relationship in the working areas within the mills.
The ILO terms it “decent work”. The words of Juan Cortina Gallardo put into perspective the reality that sugar workers at the mills which participated in the ILO training are living at this time: “without dialogue it is not possible to listen, nor know, nor understand the difficulties, challenges or solutions in the context that the sector is dealing with”. The meeting which echoed the philosophy of the modernization of the ILO has shown up in the smaller presence of labor strikes throughout the 2008-09 harvest and has shown a positive outlook for the new crushing that is just beginning. The constant communication with the unions and the will to reach agreements has built up the social capital for the economic and social sustainability of the sugar industry.
Moving forward from dialogue to concrete actions has involved reaching integral incentives for all parts. The following stand out: the health program with more than 250 thousand appointments, the permanent training for competitiveness geared toward more than 500 certified workers by the end of 2009, the program of household integration that includes a program against addictions, and finally, projects an increase in productivity parameters, workplace hygiene and correct machine operating. The bottom line of the training, evaluation and certification course given by the ILO has resulted in 715 trained workers, 622 competent syndicated workers and 83 non-union workers. In each mill an average of 35 hours of training was invested with at least two groups per shift. On applying the GAECs SST and environmenal courses, there was a total of 773 proposals from workers for improvments obtained (one proposal per worker), of which 199 are being processed and 574 are pending. However, the important point is that the ILO has shown its commitment in the coming months to follow up in all improvements in the sugar mills and with workers.
¹The ILO is geared toward labor related matted and labor relations on a global level. It is a part of the specialized groups within the United Nations and is headed by a three-party system made up of representatives from government, unions and employers.
The weekly market.
Week of price dips in sugar markets. Same as in previous days, we want to comment that the importing of the remainder of the sugar authorized by the Ministry of the Economy and the harvest that is one month into production seriously affected the prices in supply centers in the country. The markets are suffering the consequences of the urgency of traders in placing imported sugar in the markets, a situation which has not allowed for price stability in supply centers. Because of refined sugar prices being more competitive than the prices of new domestic production, Mexican mills which have already started harvesting are selling new sugar at import prices.
In the survey we carried out directly to intermediaries, wholesale prices of refined sugar were between 560 and 565 pesos per bulk. On comparing them to historical data, we can see that they have dropped close to 22.5 percent or 163 pesos since mid-September. The year is coming to a close and so is the limit for sugar imports resulting from the established quotas. The original amount authorized by the Ministry of the Economy was 550 thousand tons, but logistic barriers only allowed around 300 thousand tons. As a result, it is likely that the deadline will be extended to the end of January 2010.
The combination of more sugar imports and the beginning of the sugar harvest is leading to lower prices in different Mexican cities. Only from September 2009 to date, the price of standard grade sugar has fallen on average up to 110 pesos per bulk, from 650 pesos to 545 pesos that exist today for wholesale transactions. This is around 20% in a little more than two months.
Floor and Wholesale Prices
STANDARD SUGAR: The average fell 2.50 pesos and is now at 575 pesos retail per 50 kg bulk. STANDARD WHOLESALE. The wholesale price in the Federal District is 545 pesos and 520 pesos FOB at the mill. In Guadalajara the wholesale price is 555 pesos (541 pesos FOB at the mill).
REFINED SUGAR: The average of the four cities is 620 pesos per bulk. WHOLESALE REFINED: In the Federal District, the wholesale price is 560 pesos, 569 pesos FOB at the mill. The wholesale refined price in Guadalajara is 565 pesos, 587 pesos FOB at the mill.
The graph shows the evolution of floor, wholesale and FOB at the mill prices in the supply center of the Federal District. We can see how wholesale prices of refined sugar have fallen to levels below those of FOB at the mill since mid September. The FOB prices are theoretical calculations that zafranet.com makes with the aim of giving the user an idea of the price that is used to calculate the reference price of sugar for payments to sugar cane producers. Normally these theoretical prices are less than the wholesale prices, but given the higher sugar imports that have not yet reached the market and the harvest that is already generating an expectation of a sugar over-supply, the actual prices have fallen below those of FOB at the mill prices.