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OUTLOOK FOR MEXICO AS A SUPPLIER OF SUGAR TO THE U.S.

OUTLOOK FOR MEXICO AS A SUPPLIER OF SUGAR TO THE U.S. . FEBRERO, 2012. INDEX. Sugar Outlook Mexico leading sugar producer with a large Sweetener Market North American Regional Market a Reality : Mexican Sweetener Market U.S . Sweetener Market U.S . and Mexico Sweetener Market

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OUTLOOK FOR MEXICO AS A SUPPLIER OF SUGAR TO THE U.S.

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  1. OUTLOOK FOR MEXICO AS A SUPPLIER OF SUGAR TO THE U.S. FEBRERO, 2012

  2. INDEX • Sugar Outlook • Mexicoleading sugar producer with a large SweetenerMarket • North American Regional Market a Reality: • MexicanSweetener Market • U.S. SweetenerMarket • U.S. and Mexico SweetenerMarket • Mexico: Sugar Balance 2010/11 marketing year, and Projection 2011/12 • Striving for Competitiveness, changes in the Mexican Sugar Industry • A sugar policy for México

  3. I. Sugar Outlook

  4. I. Sugar Outlook

  5. II. Mexicoleadingsugarproducerwith a largeSweetenerMarket

  6. II. Mexicoleadingsugarproducerwith a largeSweetenerMarket Source: CNIAA

  7. III. North American Regional Market a Reality US SWEETENER INDUSTRY • North American Sweetener market fully integrated. • Since the market opened: • Mexico has exported more than 2,9 millions sugar tons to U.S. • Mexico has imported around 2,6 millions tons dry of HFCS from U.S. • Good Coordination and cooperation between Mexican and U.S. Governments regarding sweeteners: • The Administration in each country sugar program consistent with NAFTA obligations. • Mexico is a reliable supplier in the integrated North American Regional Market. MEXICAN SUGAR INDUSTRY

  8. III. North American Regional Market a Reality a) Mexican Sweetener Market Mexico: Production, imports and national consumption of HFCS, Marketing years 1991/92 to 2011/12 (projected) (Metric Tons, dry weight) Source: CNIAA

  9. III. North American Regional Market a Reality a) Mexican Sweetener Market In thecycle 2010/2011 Mexicoimported 1,192,261 metrictonsdryweight, 22% up that in thesameperiodlastcycle. In thiscycle 2011/2012 willremainthesamelevels of imports. The production estimated of HFCS in cycle 2011/2012, will increase less 1%.

  10. III. North American Regional Market a Reality a) Mexican Sweetener Market Source: CNIAA

  11. III. North American Regional Market a Reality b) USA Sweetener Market Source: USDA, 2010/2011 forecast

  12. III. North American Regional Market a Reality b) USA Sweetener Market Source: USDA

  13. III. North American Regional Market a Reality c) U.S. and Mexico Sweetener Market 13

  14. IV. Mexico: Sweeteners Balance 14 Source: CNIAA

  15. V Striving for Competitiveness, changes in the Mexican Sugar Industry Before Now Prices • High volatility • NAFTA market opened since January 2008 • Sugar prices in line with US prices • Effective price floor based on the US Farm Bill • Expected stability in prices going forward Demand • Internal demand and insignificant exports to the U.S. • Exports to the world market • Limited use of HSCF • Unlimited access to US market • Increased usage of HSCF • Investments in higher production capacity in mills and fields Sugarcane price • Annual negotiations to determine price • Based on past price differential • Governmental “referee” between parties • Price based on current year sugar market prices • Aligned interests between growers & producers • Well defined and transparent formula Land • No agreements to incentivize vertical integration into sugarcane land • Ambiguity in land ownership/leasing • Agreement with government and sugarcane growers creates incentives to invest in land • Sugarcane land projects increase mills capacity utilization • Land operation clearly stated in agreements with sugarcane growers Energy • No alternative energy generation allowed for sale to third parties • Sugarcane considered renewal and intermittent source • Alternative energy allowed through cogeneration • For auto consumption and sale to third parties through CFE grid Clear rules for transmission costs • Ethanol Bio Energy Law in place; mid to long term reality Labor • Inflexible labor contracts • 70 strikes in 80 years • Flexible labor contract • New labor relationship in place

  16. VI A sugar policy for México

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