Mexico's next sugar harvest to drop on drought

Mexico's next sugar harvest, damaged by a harsh drought, will fall by up to 7.3 percent from the current cycle, which is also coming in below expectations, the head of the national cane union said. On Friday, Carlos Blackaller told Reuters that Mexico would-only produce between 4.8 and 4.9 million tonnes in the 2011/12 season, which begins in November, as lack of rain is hitting cane growing areas across the country.
The 2010/11 cycle, which draws to a close at the end of this month, would also come in lower-than-expected at 5.18 million tonnes, because of frost at the end of last year that ruined crops on some sugar plantations. "The entire country is dry and in areas where sugar cane is grown it stopped raining last September," Blackaller said. "This will definitely affect production." Despite the drop in output, 2010/11 exports to the United States will still reach around 1.3 million tonnes, a record for Mexico, as high US sugar prices make exporting more attractive than selling in the local market, Blackaller said.
How much Mexico will be able to ship abroad next season will depend on national demand for sugar, which has been shrinking somewhat as the country imports more high-fructose corn syrup. The US Department of Agriculture sees Mexico's 2011/12 sugar exports at 1.06 million tonnes.
"We are at historical highs (in exports). The real issue is how much sugar will be needed here. Fructose imports are key, because we don't know exactly how much is being used as a substitute," said one Mexico-based sugar trader. The trader said, it was too soon to tell if the fall in next year's harvest will decrease exports below targets. When output fell to less than 5 million tonnes in recent years, Mexico had to open several sugar import quotas to meet demand. The economy ministry opened a 150,000-tonne sugar import quota at the end of May to keep prices low in the local market and to ensure domestic supply until the end of this year.