Inventories in the sugar market in Mexico

Objective: To determine the minimum inventory which guarantees the domestic consumption supply and sugar exports in Mexico. The hypothesis was that an optimal inventory would lower storage costs and increase the sugar producers’ income.Methodology: To achieve the objective a spatial and temporal equilibrium model applied to the Mexican sugar market for the 2015 sugar cycle was formulated.Results: The sugar industry in Mexico maintains an average monthly inventory of 831 thousand tons of sugar, a high inventory for most of the year. The inventory level could decrease to 416 thousand tons, given that this level guarantees the supply of the domestic demand and exports in the assessed year.Implications: A management policy that keeps sugar inventories at their minimum level allows for a reduction of storage costs by 594 million pesos (MXN) and increases the income of the sugar producers by 635 million pesos (MXN).Conclusions: Due to the positive effects on the producer’s income, it is recommended that the sugar sector promotes a minimum inventory policy.