Sweetener prices higher, supplies mixed heading into 2009

by Ron Sterk
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KANSAS CITY — October has been a pivotal month for sweeteners as initial 2009 corn sweetener prices were emerging at 10% to 20% above 2008 levels while refined sugar prices weakened but still were 40% above a year ago, indicating ingredient buyers will pay more for sweeteners in the coming year.

Supplies, meanwhile, appear to be a mixed bag with corn for corn sweeteners likely to be available in greater quantity than once thought and sugar supplies also inching upward but still tight and with uncertainty about import levels.

As soda bottlers and many food processors anxiously awaited indications of corn sweetener pricing, one refiner fired the first salvo late Oct. 10, announcing a 6c a lb, or about 20%, increase from 2008 prices for dextrose for 2009. The announcement also included a schedule for fuel surcharges, which would be added to buyers’ costs.

The following week a major refiner issued list prices for 2009 on a delivered basis at a 3.5c a lb premium over 2008 levels for all types of corn sweeteners, effective Oct. 20, 2008, through Dec. 31, 2009, for current customers.

As last week progressed, it appeared more of the industry was falling in line with the 3.5c increase, which would equate to increases from 2008 list prices of about 10% for dextrose, 17% for regular corn syrup, 18% for 42% high-fructose corn syrup and 15% for 55% HFCS. That would put prices for bulk dry dextrose near 34.85c a lb, regular corn syrup at 23.375c, 42% HFCS at 22.375c and 55% HFCS at 25.375c, all basis Midwest.

U.S. Department of Agriculture reports in October provided some clarity for sweetener pricing and supply for 2009.

Corn refiners opted to delay sweetener list pricing until after the Oct. 10 U.S.D.A. crop report, in part because crop development was running about two weeks later than normal across the Corn Belt and was more susceptible to losses from frost. But with 93% of the crop mature as of Oct. 19, most fears of frost damage could be dismissed. The U.S.D.A. forecast 2008 corn production at 12,200 million bus, up 1% from its September forecast and second only in size to last year’s record crop of 13,074 million bus. Overall corn supply is expected to be tighter than in 2007-08, when ending stocks were 1,624 million bus, or nearly 30% more than in 2008-09.

Corn prices, basis Chicago futures, plunged 25% in the two weeks ended Oct. 10, (down 46% from the June 27 record high) pulled down by the larger crop and by concern about the economy overall. Prices have modestly recovered the past two weeks but still remain about 15% above year-ago values.

Sugar supplies, although tight, began to show signs of loosening slightly. The U.S.D.A. in its Oct. 10 supply/demand report projected 2008-09 beet sugar production (from the 2008 crop) at 4,200,000 tons, raw value, up 200,000 tons from its September projection due to larger-than-expected sugar beet yields. Still, beet sugar outturn is expected to be down about 12% from 2007-08 because of reduced acreage this year and because sugar content of beets is said to be lower.

Midwest beet sugar prices had held mostly in the 38@40c a lb range since the first of July, with a brief jump to 45c in early August. But prices eased back to the 35c range in mid-October, in part as the result of increased shipments from Mexico, which was attempting to bolster its peso amid the global economic crises. Imports from Mexico, which do not fall under U.S. import quotas, will largely depend on the economic environment and sugar prices in both countries, which currently favor shipments, according to industry analysts. However, supplies from Mexico were disappointing earlier in 2008.

Hanging over the sweetener industry is the closed Imperial Sugar Co. cane refinery near Savannah, Ga., down since February because of an explosion and fire, which began the year’s run-up in sugar prices. Shipments of bulk refined sugar are expected to resume from the facility later this year, which is critical if sugar supplies are to increase.

Another uncertainty is when or if the U.S.D.A. will increase import quotas, which currently are set at World Trade Organization minimums. The ending stocks-to-use ratio is at a historically low 6%, compared with 13.8% in 2007-08.

Twelve U.S. senators signed a letter Oct. 2 urging U.S. agriculture secretary Ed Schafer to "consider taking discretionary action to address the extremely low supply of sugar that will be available in the U.S. market in the coming year." The letter stated the U.S.D.A. action to initially set raw and refined import quotas at the required minimum "cast a cloud of uncertainty over the market, as sugar users cannot be certain that adequate stocks will be available to meet their needs at a reasonable price."

This article can also be found in the digital edition of Food Business News, October 28, 2008, starting on Page 26. Click here to search that archive.

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