- Mexico should produce 6mmt of sugar in 2021/22, up 270kmt year-on-year.
- Its cane has received plenty of rain following two drought-hit seasons.
- Farmer returns have also improved and encouraged wider planting.
Mexican Sugar Production to Rebound in 2021/22?
- With two drought-affected seasons behind them, we think Mexico will produce 55m tonnes of cane in 2021/22.
- From this, it should produce 6m tonnes of sugar, up 270kmt tonnes year-on-year.
- Mexico’s rainfall between January and August has been excellent, excluding a dip in July to 2020 levels.
- This has helped the cane recover from the drought and will continue to do so if it persists.
- Returns have also improved across the last two seasons, as farmers got paid more amid the COVID-induced labour shortages.
- This is perhaps another reason why Mexico’s cane and sugar production is now on the up.
- That said, Mexico’s cost of cane production climbed during the same period, and its cane quality remains poorer than it was before the drought, with fewer farmers able to invest in the necessary inputs to encourage better yields (e.g. fertilizer, higher yielding cane varieties).
What Does This Mean for the Wider Market?
- Mexico’s rebound should have a neutral impact on the market as it’ll remain balanced, with stocks low following the drought.
- Despite this, prices should remain at the current (elevated) levels as farmer returns have decreased in recent years; Mexico’s government often adjusts domestic prices with the farmers’ interests in mind.
- If returns fall any more, though, we could see industrial action once again.
We’ll continue to monitor the situation…
Other Opinions You Might Be Interested In…
Explainers You Might Be Interested In…
