Outline of size & structure of Mexico sugar sector
Mexico is one of the top 10 sugar producers in the world. For fiscal 2009/10 (October/September), USDA was forecasting (as of early April 2010) production at 4.9 million metric tons raw value, compared with an average of 5.6 million tons the previous four years and 5.3 million tons in 2008/09. The forecast production is made up of over 3.0 million tons of standard sugar, over 1.6 million tons of refined sugar produced at integrated mills, and a smaller volume of traditional mascabado/ direct white sugar.
Mexico is expected to harvest nearly 43 million (metric) tons of sugarcane from about 664,000 hectares in 2010, making it the second largest crop area in Mexico after corn. Nationally, yields are forecast to average 64.2 (metric) tons per hectare. That would be about 15% lower than the prior year, due to unusually cool, damp harvest conditions — especially in Veracruz.
Sugarcane is one of the most widely grown field crops, with cultivation in 15 of Mexico’s 23 states. Sugar mills and adjacent sugarcane growing areas form an arc across central Mexico. Sugarcane agriculture takes place in lowlands on both the Pacific and Gulf of Mexico coasts and in high mountain river valleys in central Mexico.
While soils are generally fertile throughout the growing regions, poor drainage is a problem in some areas. Periodic winter frosts are a problem in some mountain areas in the more northerly growing regions. The overriding weather problem in many locales is insufficient annual rainfall. Drought conditions can be a major problem, especially in the leading producing state of Veracruz, which has insufficient irrigation facilities. The level of use of production inputs is another important factor in sugarcane output.
Mexico’s land tenure system has a profound effect on its sugarcane production sector. The industry has about 150,000 growers possessing production units that average about four hectares (10 acres) in size. This structural condition inhibits the investment of modern technologies and hinders improvements in efficiency and cost savings through economies of scale.
Mexico’s milling sector currently consists of 57 sugar mills operating as of the 2009/10 season and seven additional mills that are closed. The milling sector is characterized by a dichotomy of very small to relatively large mills, with a preponderance of medium and small mills. The sector is also characterized by a dichotomy of mills possessing modern technologies and those with obsolete technologies.
The industry went through a period of financial crisis in the late 1990s and early 2000s, as growers were not being paid for their cane and a sizeable segment of the milling sector faced bankruptcy. In 2001 the Fox Administration deemed that in the “public interest” it had to intervene — and expropriated 27 mills. Since then, 14 mills have been sold back to the private sector or closed, leaving the government to operate, as of 2009/10, 13 expropriated mills.
This action and the passage of the Sugarcane Law of 2005 has let to greater stability to the industry. For example, Article 58 of the Sugarcane Law states that for 2009/10, approximately 57% of the reference price of standard sugar (6,579 pesos per metric ton, or US $495 per MT) is to be paid to sugarcane growers.
It is important to note that sugar is the primary agricultural industry in Mexico, directly and indirectly employing more than one million people. According to industry and grower groups, there are about 150,000 sugarcane growers, 100,000 seasonal sugarcane cutters, 20,000 cane transport workers, 30,000 factory workers, and 7,000 administrative, technical and management personnel. Of the growers, there are two groups — ejidatarios (communal landowners) and small private landowners.
Reflecting the historical communal land tenure system and the land distribution system implemented following the Mexican Revolution of 1917, cane field and production units are very small compared with the United States. About half of the cane fields are two hectares and under, the other half are two to 10 hectares. Only a small percentage are larger than 10 hectares, according to Mexico’s Secretariat of Agriculture.
Sugarcane growers are well organized, with the largest number of private land owners affiliated with the Union Nacional de Productores de Cana (CNC), i.e., the National Union of Cane Producers. The ejidatarios or communal land cane growers are largely represented by the Union Nacional de Caneros (CNPR) (National Union of Sugarcane Growers). Sugarcane workers are presented by two unions: Sindicato de Trabajadores de la Industria Azucarera y Similares de la Republica Mexicana (STIASRM) (Association of Industry Sugar Workers of Mexico) and the Confederacion Regional Obrero Mexicana (CROM) (the Regional Confederation of Mexican Workers). The salaried employees in the milling industry are represented by the Camara Nacional de las Industrias Azucarera (National Chamber of the Sugar and Alcohol Industry).
Mexico is expected to harvest nearly 43 million (metric) tons of sugarcane from about 664,000 hectares in 2010, making it the second largest crop area in Mexico after corn. Nationally, yields are forecast to average 64.2 (metric) tons per hectare. That would be about 15% lower than the prior year, due to unusually cool, damp harvest conditions — especially in Veracruz.
Sugarcane is one of the most widely grown field crops, with cultivation in 15 of Mexico’s 23 states. Sugar mills and adjacent sugarcane growing areas form an arc across central Mexico. Sugarcane agriculture takes place in lowlands on both the Pacific and Gulf of Mexico coasts and in high mountain river valleys in central Mexico.
While soils are generally fertile throughout the growing regions, poor drainage is a problem in some areas. Periodic winter frosts are a problem in some mountain areas in the more northerly growing regions. The overriding weather problem in many locales is insufficient annual rainfall. Drought conditions can be a major problem, especially in the leading producing state of Veracruz, which has insufficient irrigation facilities. The level of use of production inputs is another important factor in sugarcane output.
Mexico’s land tenure system has a profound effect on its sugarcane production sector. The industry has about 150,000 growers possessing production units that average about four hectares (10 acres) in size. This structural condition inhibits the investment of modern technologies and hinders improvements in efficiency and cost savings through economies of scale.
Mexico’s milling sector currently consists of 57 sugar mills operating as of the 2009/10 season and seven additional mills that are closed. The milling sector is characterized by a dichotomy of very small to relatively large mills, with a preponderance of medium and small mills. The sector is also characterized by a dichotomy of mills possessing modern technologies and those with obsolete technologies.
The industry went through a period of financial crisis in the late 1990s and early 2000s, as growers were not being paid for their cane and a sizeable segment of the milling sector faced bankruptcy. In 2001 the Fox Administration deemed that in the “public interest” it had to intervene — and expropriated 27 mills. Since then, 14 mills have been sold back to the private sector or closed, leaving the government to operate, as of 2009/10, 13 expropriated mills.
This action and the passage of the Sugarcane Law of 2005 has let to greater stability to the industry. For example, Article 58 of the Sugarcane Law states that for 2009/10, approximately 57% of the reference price of standard sugar (6,579 pesos per metric ton, or US $495 per MT) is to be paid to sugarcane growers.
It is important to note that sugar is the primary agricultural industry in Mexico, directly and indirectly employing more than one million people. According to industry and grower groups, there are about 150,000 sugarcane growers, 100,000 seasonal sugarcane cutters, 20,000 cane transport workers, 30,000 factory workers, and 7,000 administrative, technical and management personnel. Of the growers, there are two groups — ejidatarios (communal landowners) and small private landowners.
Reflecting the historical communal land tenure system and the land distribution system implemented following the Mexican Revolution of 1917, cane field and production units are very small compared with the United States. About half of the cane fields are two hectares and under, the other half are two to 10 hectares. Only a small percentage are larger than 10 hectares, according to Mexico’s Secretariat of Agriculture.
Sugarcane growers are well organized, with the largest number of private land owners affiliated with the Union Nacional de Productores de Cana (CNC), i.e., the National Union of Cane Producers. The ejidatarios or communal land cane growers are largely represented by the Union Nacional de Caneros (CNPR) (National Union of Sugarcane Growers). Sugarcane workers are presented by two unions: Sindicato de Trabajadores de la Industria Azucarera y Similares de la Republica Mexicana (STIASRM) (Association of Industry Sugar Workers of Mexico) and the Confederacion Regional Obrero Mexicana (CROM) (the Regional Confederation of Mexican Workers). The salaried employees in the milling industry are represented by the Camara Nacional de las Industrias Azucarera (National Chamber of the Sugar and Alcohol Industry).
Mexican consumption of sugar for domestic food and beverage use for 2009/10 is forecast at 5.0 million (metric) tons, compared with 5.4 million tons the previous four years. Mexico’s population of about 100 million uses about 450,000 tons of sugar per month, with the largest demand coming from the soft drink industry. Lower expected consumption this season can be attributed to less consumer purchasing power and escalating domestic prices fueled by speculation and supply shortages.
To supplement domestic production, Mexico is expected to import 970,000 tons of sugar in 2009/10 — mainly from the U.S. — compared with 160,000 tons in 2008/09, reflecting lower carry in stocks and aggressive export marketing to the U.S. market. For 2009/10, exports are expected to total 490,000 tons, mainly to the U.S.
High fructose corn syrup (HFCS) is an increasing part of total Mexican sweetener use. Mexico imports HFCS directly from the U.S., as well as producing it domestically (largely from imported yellow corn). Since trade has been fully liberalized under NAFTA, corn can be imported at any time.
Mexico has two plants producing HFCS — Arancia and AlMEX, both located in Guadalajara in the state of Jalisco. These plants use an estimated 2.0 million tons of yellow corn annually. Mexican farmers overwhelmingly plant white corn for human consumption and are resistant to change due to lower yields of yellow corn compared to white and difficulty in accessing quality seed.
HFCS production for 2008/09 is estimated at 400,000 tons, dry basis. Imports of HFCS for the same period were 254,000 tons. Therefore, consumption is estimated at about 650,000 tons, dry basis, and mainly went to the beverage industry. For 2009/10, the level of HFCS use is projected to be up sharply, meaning a substantially greater import level.
To supplement domestic production, Mexico is expected to import 970,000 tons of sugar in 2009/10 — mainly from the U.S. — compared with 160,000 tons in 2008/09, reflecting lower carry in stocks and aggressive export marketing to the U.S. market. For 2009/10, exports are expected to total 490,000 tons, mainly to the U.S.
High fructose corn syrup (HFCS) is an increasing part of total Mexican sweetener use. Mexico imports HFCS directly from the U.S., as well as producing it domestically (largely from imported yellow corn). Since trade has been fully liberalized under NAFTA, corn can be imported at any time.
Mexico has two plants producing HFCS — Arancia and AlMEX, both located in Guadalajara in the state of Jalisco. These plants use an estimated 2.0 million tons of yellow corn annually. Mexican farmers overwhelmingly plant white corn for human consumption and are resistant to change due to lower yields of yellow corn compared to white and difficulty in accessing quality seed.
HFCS production for 2008/09 is estimated at 400,000 tons, dry basis. Imports of HFCS for the same period were 254,000 tons. Therefore, consumption is estimated at about 650,000 tons, dry basis, and mainly went to the beverage industry. For 2009/10, the level of HFCS use is projected to be up sharply, meaning a substantially greater import level.
Peter Buzzanell, formerly head of the Sweetener Analysis Unit at the USDA Economic Research Service, is senior analyst at the Reston, Va., consulting firm of Buzzanell & Associates. This article is based on one found in the new
2009/10 U.S. Sugar Industry Directory.
2009/10 U.S. Sugar Industry Directory.
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