Note: All the numbers in this Opinion are in short tons. To convert into metric tonnes, divide by 1.1.
- The US should produce a record 9.37m short tons of sugar this season.
- If it does, it’ll only need to import 937k short tons from Mexico to satisfy domestic consumption.
- Mexico’s 6.78m short ton cane crop means it will now have to export 827k short tons of sugar onto the world market.
Record Sugar Production for the US
- The US thinks it will produce a record 9.37m short tons of sugar this season and has reduced Mexico’s access as a result.
- Mexico’s export quota now sits at 931k short tons, down from 1.16m short tons in February; this is the minimum allowed by the Suspension Agreement (80% of the December WASDE).
- The US is therefore set to have closing stocks above the desired 13.5% stock-to-use ratio.
- We subsequently think the beet farmers will delay the start of the 2021/22 crop in an effort to rebalance the 2020/21 closing stocks.
Mexico Needs to Export Onto the World Market
- We think Mexico will produce 6.78m short tons of sugar this season.
- With consumption set to total 4.91m short tons, it will have 1.9m short tons more than it needs to satisfy domestic demand.
- It therefore needs to export more than 10% of this year’s production if it’s going to achieve manageable closing stocks.
- Mexico’s hefty sugar surplus is already being reflected in its domestic price.
- The price in Veracruz, the hub of Mexican sugar production, has been falling ever since the start of the crop.
- The fall in the domestic price has already led to farmer discontent and industrial action and, if exports are delayed, the price could drop even further and lead to more strike action.
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