MEXICO CITY, Aug 9 (Reuters) - The Mexican government assigned all of a 150,000-tonne sugar import quota in a move meant to stabilize prices and ensure supply in the local market, the economy ministry said on Tuesday.

The quota announced in May aims to protect against rising sugar prices in Mexico and prevent a shortage, since next season's harvest is expected to shrink due to drought damage.

The quota lowers tariffs paid on refined sugar to $36 per tonne from the usual $360-per-tonne duties placed on imports, Oliver Flores, the director of basic industries at the Economy Ministry said.

Nicaragua is automatically assigned 10 percent of the quota through a special trade deal with zero tariff. Half of the quota is set aside for end users who need sugar for their projects, like sweets manufacturers and beverage makers.

The other half is open to commercial sugar trading companies like Czarnikow and Sucden, who participated in the tender.

Acted On Time

Mexico's sugar cane union says production could fall to as low as 4.8 million tonnes in the 2011/12 harvest, which begins around November.

The last time production was that low in 2009, Mexico opened a sugar import quota for nearly 400,000 tonnes, surprising the market when global supplies were tight.
This time around, Mexico's economy ministry acted early enough to contain speculation, said traders.

"They got organized a little quicker than what they usually do this time around. We weren't expecting that," said Jonathan Taylor a sugar trader at Sucden Americas Corp in Miami.

"(It has a) psychological effect. Once they announce it ... if people are speculating they really back up and say lets be careful here because buyers know there are going to be imports so the market tends to stabilize," he said.

The government said it is considering doubling the import quota if needed. [ID:nN1E7731WO]

Prices of Mexico sugar tend to follow regional trends depending on the trade flow with the United States, its main sweetener trading partner through the North American Free Trade Agreement, or NAFTA.

On international markets, raw sugar futures on ICE SBV1 have fallen in recent days due to fears of a prolonged global economic slowdown but are still trading around a record high of 31.68 cents per lb touched last month.

Mexico's government-run national sugar committee Conadesuca is slightly more optimistic about Mexico's upcoming harvest, forecasting production of more than 5 million tonnes.