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Logo Central America Link

Region: sweet deal

Tuesday, April 17, 2012

Sugar prices have risen sharply in recent years, as part of the international boom in commodities.

By late 2009, prices had more than doubled to about 20 US cents a pound in New York. By late last summer they came close to 30 cents before dropping again to the current level of about 25 cents a pound.

That has been good news for Central America, not only for the 150,000 or so workers employed by the industry in the region but also because sugar is an export in all of the countries.

Encouraged by sustained higher prices, Central American producers have been boosting output. That in itself might have been expected to push prices lower. But, handily for Central America, Mexico's sugar industry is in trouble.

Mexico is facing the worst drought in its recent history. In recent years, has been consuming about 4 million metric tons a year, and has commitments of 1.5 million sales to the United States.

By the last reckoning, Mexico's output will be just over 5 million metric tons this year, leaving a shortfall of 400,000 to 500,000 metric tons, which Central America will be happy to supply.

Brazil, like Mexico, is facing a drought, but its impact on the industry is uncertain.

Meanwhile, Central America's leading producers, Guatemala, El Salvador and Nicaragua, have been increasing output but also investing in raising levels of productivity. And higher productivity, rather than mere output, is the best form of defense against any weakness in prices.