Mexican Sugar Agreement: One Year Later
Sugaright wants to thank our customers, suppliers and employees for their perseverance and support through what has been a challenging first year, post the revised Mexican Sugar Suspension Agreement.
Last year, as the ink was drying on the agreement, we predicted that 1) it would be a financial windfall to traditional refiners and beet growers, and 2) food processors and consumers would pay more for this basic commodity.
Our predictions have proven to be 100% correct.
Specifically, three primary rules changed the market:
Raw sugar must arrive by bulk vessel; no longer by truck or rail
The rule engineers the flow of raw sugar away from end-users and traditional melters as raw sugar that had been fit for human consumption must now be refined to remove contaminants picked up in transit. This artificially protects traditional refineries and inhibits fair competition.
Raw to Refined Ration has shifted to 70% Raws/30% Refined
Due to a lower supply of refined sugar entering the U.S., the price of domestic refined cane and beet sugar has gone up. We believe this has delivered over $1 billion in increased profits to the traditional sugar refiner community; a good return on their political contributions for sure. This effect will be exacerbated in 2019 as the overall quota is further reduced and supply is further restricted.
The Reduction on polarity from 99.5 to 99.2
Polarity is the measure of the purity of the raw sugar. Lower pol means more impurities. More impurities means more refining steps are required. This pol change, aggressively fought for by the traditional refiners, was intended to negatively impact a discrete community of micro-refineries in a blatant anti-competitive move. Refining margins are up, and companies like Sugaright have been challenged in maintaining our through-put and cost objectives.
In response to these changes, we have made significant advances in our technology and supply footprint, which is yielding significant improvements in our overall capacity and cost. We still believe, as a company, in the spirit of competition and that it is more noble and sustainable to compete through safety, quality, customer service, innovation, cost and sustainability than anti-competitive regulations and trade deals.
We stand with our customers and we will continue to “change the way you think about sugar.”