Mexico said on Friday it was dropping legal minimum price guarantees for sugarcane after more than a decade because recent rises in market prices made the government's intervention unnecessary. The guarantees were implemented in 1991 amid a downturn in the strategic industry to assure cane growers a minimum cut of the final price of processed sugars.
"The decree making the planting, growing, harvest and commercialisation of sugarcane of public interest has been annulled," Mexico said in the official government gazette, or Diario Official.
Mexico's sugar industry accounts for about 0.5 percent of Gross Domestic Product (GDP) and sugar cane farming directly supports about 2.5 million people. Sugar prices have risen dramatically in recent years.
Current rules, which will remain until the end of the 2004-2005 harvest in July, establish a fixed reference price for sugar and then guarantee sugarcane farmers a 57 percent cut of that price.
The change, to kick in with next year's harvest, will likely ruffle cane growers because it removes price protections they have enjoyed for 14 years, which were particularly beneficial in recent years as sugar prices soared with higher demand.
"The caneworkers are not going to accept this," said one source close to the caneworkers.
Mexican caneworkers are among the nation's most organised and vociferous farmer groups.
Caneworker protests against low sugar prices and mill owners who could not afford to pay for cane erupted on such a scale in 2001 that the government ended up expropriating half the nation's mills to bring order to the industry.
In the official gazette on Friday, Mexico mandated the formation of a sector-wide committee that will have until September 30 to propose new market price formulas for cane.
The change will likely be applauded by sugar millers because it will allow them to pay cane prices according to quality and market conditions.
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