Mexican Sugar Update, May 2009

Imports of Mexican sugar are about to slow down substantially as Mexico 's sugar crop is coming in much lower than projected. At the beginning of the year, Mexico estimated production at 5.5 million metric tons (MMT), physical value. It now appears the crop could come in nearly 10 percent lower than this.

Cane yields are lower than anticipated, and weekly production figures are dropping quickly as we approach the end of the season. As of May 16, Mexico has produced 4.843 MMT versus 5.187 MMT last year—a 344,000 metric-ton (MT) difference. Production for the week ending May 16 was only 87,256 MT, down from 107,052 MT the week prior, with a majority of the mills in Mexico shutting down as they run out of cane to process.

The 2007/08 crop finished at 5.521 MMT. Based on the current production rate and the dwindling supply of cane, it appears that Mexico will reach a final production number of just around 5.0 MMT. If the rainy season allows mills to get all of their cane out of the field and processed, they may slightly exceed this number. Typically the last mill will cease producing sugar around the middle of June.

After exporting vast amounts of sugar to the United States this year, inventories in Mexico are expected to be eliminated, and there will very likely be a need to import sugar to cover their domestic consumption prior to the new crop beginning in December.

With tight stocks in both Mexico and the United States , it appears that prices are likely to remain strong in the United States , and prices in Mexico are rallying as well.

If you have any questions about how the U.S.-Mexican sugar trade may impact your business, please contact us.

McKEANY-FLAVELL COMPANY, INC.