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World Sugar Price May Face New Pressure From Mexico Stockpiles

Mexico’s move to draw down swollen inventories will add pressure to prices already burdened by oversupply.

World Sugar Price May Face New Pressure From Mexico Stockpiles
Raw cane sugar is piled inside a storehouse at a mill in Thibodaux, Louisiana, U.S. (Photographer: Luke Sharrett/Bloomberg)

(Bloomberg) -- Mexico, not usually a big player in the global sugar market, may be forced to boost its exports to countries other than the U.S. to draw down swollen inventories, adding pressure to prices already burdened by oversupply.

INTL FCStone and S&P Global Platts said this week at events in New York that they see world consumption surpassing production in the 2019-2020 season, a welcome shift with futures prices at half the level of 2 1/2 years ago. But that doesn’t account for stockpile growth in countries such as India, due to a bigger crop, and Mexico, as a result of the unattractive global pricing.

At the same time, the quota of sugar Mexico can ship to the U.S. has shrunk. That means it may need to export about 1 million metric tons to countries other than U.S. for the remainder of the 2018-2019 marketing year to draw down stocks, according to Rabobank.

“The key thing for global sugar is that Mexico wasn’t really a player,” said Pablo Sherwell, head of RaboResearch for Rabobank in North America, in an interview in New York. “To get to that global deficit, we have to clear a lot of sugar in this cycle. Now, we have another player."

Revised suspension agreements with the U.S. have limited the amount of sugar Mexico can send north across its border. Meanwhile, prices in the global market have been lower than in Mexico, curbing shipments until now, Sherwell said.

World Sugar Price May Face New Pressure From Mexico Stockpiles

To contact the reporter on this story: Shruti Date Singh in New York at ssingh28@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Reg Gale, Millie Munshi

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