According to the analysis, the big challenge for the sugar industry will be to find a better balance between supply and demand, and the key to this is exports. its analysis of the sugar industry to 2014, which reviews production, consumption and export forecasts for this year.
In this report, Rabobank revises down its estimate of the global surplus for the 2013/14 cycle, placing it at 2.5 million tonnes – compared to 5.4 million estimated in the 3Q 2013 report – due to lower estimated output to Pakistan and Australia; an upward adjustment in its estimate in Mexico, the United States, Thailand and the European Union, as well as a slight upward revision in its estimate of global consumption for 2013/14.
In the case of Mexico, Rabobank has revised its latest estimate upwards to forecast production of 6.5 million tonnes sugar for the 2013/14 harvest, a figure higher than the historical average. According to Pablo Sherwell, senior analyst at Rabobank International, “while there is potential for higher production than our current estimate, we believe there are various risks to cane development and quality, such as weather conditions and the presence of orange rust. . which leads us to maintain a conservative estimate.”
In the case of consumption, Rabobank estimated a 2% drop in sugar consumption in Mexico. For this cycle, consumption was estimated at 4.21 million tons compared to 4.29 million tons in the previous cycle. This as a result:
1. High fructose corn syrup remains very competitive with sugar.
2. New taxes on sugary drinks and food.
3. Changes in the consumption habits of Mexicans.
In this way, Pablo Sherwell stated that “it is a big challenge industry It will be Mexican to find a better balance between supply and demand in the Mexican sugar industry. This can only be achieved by exporting. However, faced with a relatively saturated sugar market, the Mexican sugar industry must continue on a competitive path. For this cycle 2013/14. Mexico needs to export at least 2.5 million tons. This amount will allow for a reduction in end-of-cycle inventories, which would provide greater support and stability to domestic prices.”
According to an analysis conducted by Rabobank, with this export volume, domestic sugar prices would have the potential to begin an upward trend towards the 2014/15 harvest; However, achieving this level of commercialization will mean a major challenge: the United States maintains high inventories and its production for this cycle will be relatively high, while at the same time the global sugar market maintains high supply.
However, Sherwell believes the Mexican industry continues to increase its competitiveness. Given current conditions, Rabobank predicts that the US could absorb about 1.7 million tons of Mexican sugar, leaving the industry tasked with placing about 750,000 tons on the rest of the global market. If so, Mexico could become the fourth largest exporter of sugar in the world, after Brazil, Thailand and Australia.