Sunday, March 4, 2012




MEXICO CITY—Central America's top sugar-growing countries are poised to fill a gap in production after drought damaged Mexico's sugar-cane fields.

The assist from Central America is likely to keep sugar futures prices stable in the near term until the crop outlook from the world's top grower, Brazil, becomes clearer.

"The [Central American nations] have increased production significantly, and that's contributed to some of the price weakness here," said Jack Scoville, vice president of Price Futures Group in Chicago. "What that increase will do is offset what the Mexicans have lost."

Sugar for March delivery slipped 0.14 cent, or 0.6%, to settle at 24.78 cents a pound on the ICE Futures U.S. exchange on Friday. The more actively traded contract, for May delivery, gained 0.11 cent, or 0.4%, to 24.96 cents.

Mexico consumed about four million metric tons of sugar in 2011, but it is also the largest supplier of U.S. sugar imports, sending 1.5 million tons last year, more than half of shipments to the U.S.

Unusually dry weather has shrunk Mexico's sugar production in the season ending Sept. 30, with the latest forecast at 5.1 million tons. As a result, Mexico will need to import more sugar from Central America.

Guatemala, Central America's top grower, could produce as much as 2.4 million tons of sugar by the end of the 2011-2012 season, up more than 12% from last season and slightly higher than a previous forecast, said Cengicana, the country's sugar-cane research center. Productivity per hectare has increased thanks to good weather and improved agricultural practices, the research center said.

In El Salvador, the second-largest Central American grower, output is expected to pick up toward the end of the season and reach between 600,000 and 625,000 metric tons, up from 564,000 in 2010-2011, said the Salvadoran Sugar Association's executive director, Julio César Arroyo.

"We expect to end the season with greater production," he said. Mr. Arroyo said yields of sugar cane per hectare have increased by about 13% from the same time a year ago.

In Nicaragua, where Mexico gets 10% of its imported sugar, production is expected to reach 607,800 metric tons, up from 550,000 metric tons last season and an initial forecast of 590,000 metric tons. Harvesting there started in November and ends the second week of May.

"It has been a lot better than we were expecting," said Mario Amador, general manager of Nicaragua's National Committee of Sugar Producers.

Mexico already had been struggling to meet domestic demand for sugar, setting an import quota of 150,000 tons in October, which was quickly filled. Officials plan to set another quota this week, this one for 250,000 tons.

The 250,000-ton quota would be the first under a new system to approve imports ahead of an actual shortage in supplies. In the past, Mexico would only set a quota after it was clear supplies were low. As a result, domestic sugar prices would rise and fall sharply. The new system is aimed at smoothing price volatility.

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