Milling & Baking News - October 7, 2008 - 26

Corn Wet Milling

September WASDE provides clues,
surprises about sweeteners outlook

some to approach 800,000 to 900,000
short tons, raw value (STRV), but a
short crop in Mexico and limited refining capacity in Mexico should repricing backdrop for corn sweeteners. strict them to 550,000 STRV.
BY PETER A. MEYER
These stocks-to-use forecasts have
The September WASDE's sugar
The September WASDE (World Agricultural Supply and Demand Es- supply and use report held a sur- caused firming both in the refined
timates) report provided some in- prise. Despite an increase in the re- sugar price and in the price of U.S.
teresting clues as to the outlook for fined sugar tariff rate quota in Au- raws as measured by the No. 14 fusweeteners for the next year, led by gust, the estimated stocks-to-use ra- tures price. It is important to rememthe revelation that the corn crop was tio projected for 2008/2009 has fallen ber that at the end of fiscal 2007-08
pegged at 12.1 billion bus, a reduction from August's estimate of 7% to an the stocks-to-use ratio remains a
comfortable 14.3%. So there
of 216 million bus from the
is no need to run to your loAugust estimate because
U.S. Sugar Supply and Use 1/
cal supermarket for an extra
of dry weather in the Mid5-lb bag of sugar for your
west during August and
2007/08
2008/09 Projection
Christmas cookies. As we
the late planted crop. There
Item
Est.
August
September
have seen in crude oil, high
is uncertainty among ana1,000 short tons, raw value
prices are sometimes their
lysts about the impact of
Beginning stocks
1,799
1,643
1,568
own solution. However, it is
this summer's weather on
Production 2/
8,197
7,721
7,454
certain that over the course of
the crop, therefore the earBeet sugar
4,765
4,141
4,000
the next few months the U.S.
ly harvest yield in the corn
Cane sugar
3,432
3,580
3,454
Department of Agriculture
belt this autumn will have
Imports
2,507
2,363
2,443
1,402
1,378
1,458
T.R.Q. 3/
will move to increase the U.S.
a more pronounced imOther program 4/
550
425
425
sugar supply by authorizing
pact on corn prices than in
Other 5/
550
560
560
additional imports.
the more "normal" growMexico
545
550
550
The nature of those imports
ing season.
Total supply
12,503
11,727
11,465
will impact the domestic sugThe ending stocks of
Exports
220
250
250
ar industry for more than a
corn were only lowered
Deliveries
10,715
10,710
10,710
few months. An increase in
by 115 million bus beTotal use
10,935
10,960
10,960
raw sugar imports will alcause feed use estimates
Ending stocks
1,568
767
505
low domestic cane refiners
were lowered with ample
Stocks-to-use ratio
14.3
7.0
4.6
to increase production. With
sorghum and feed wheat
excess capacity and more caavailability damping corn
1/ Fiscal years beginning Oct 1. Historical data are from F.S.A.,
pacity in the Southeast scheddemand. In the face of
"Sweetener Market Data" except imports (U.S. Customs Service, Census Bureau).
uled to come back on stream
that reduction in ending
the domestic industry could
stocks, a year ago, corn
2/ For 2008/09, F.S.A. compilations of processor projections (FL,
HI, TX cane). Trend sugar per acre applied to area for harvest
grow to handle future needs.
prices would have moved
(LA cane adjusted for seed, and beet), adjusted for SeptemRelying solely on an increase
up 50c to $1. But in Sepber production area for harvest (LA cane adjusted for seed,
and beet), adjusted for September production.
in refined sugar imports
tember of 2008 the rally
3/ For 2008/09, includes tariff rate quota shortfall of 100,000
would complicate logistics,
lasted one day followed
tons.
potentially increase quality
by two down days, which
4/ Includes sugar under the re-export and polyhydric alcohol
problems and leave the Unitbrought the price for the
programs.
ed States with a sugar hangDecember future to $5.32¼
5/ Does not include Mexico T.R.Q. imports. For 2006/07, other
over as it had two or three
per bu almost limit down
high-tier (0) and other (6). For 2007/08, other high-tier (10)
and other (0). For 2008/09, other high-tier (10) and other (0).
years ago when statistics were
on the day and one penny
misleading and inventories
lower than prior to the
were not well positioned.
report. The next day, the
In any event, the sweetener mareven more dangerously low 4.6%.
corn market was 21c per bu higher.
For corn processors the tight sup- That ratio is dangerous because it ket in the United States likely will be
ply/demand balance should con- does not allow for sufficient stocks higher priced over the next year than
tinue to keep the corn price volatile to keep the entire food retailing and the past year. More sugar - raw or
through next planting season. Sup- production industry in the United refined - will need to be imported.
plies should be adequate assuming States adequately supplied with in- Corn availability should be assured
ethanol start-ups are moderate and ventories, particularly if next year is but prices volatile. The market will
not be boring, hopefully not quite as
the world-wide feed wheat surplus also tight on supply.
The tight supplies resulted from thrilling as investment banking and
damps demand.
The prices for corn sweeteners may several factors. Beginning stocks insurance, but not boring. MBN
expect little relief from corn availabil- were reduced as consumption this fisity. The crop is not as large as hoped cal year has climbed an unprecedentand corn prices will remain volatile ed almost 7%. Beet acreage was cut
depending on the fluctuations in the largely because of competition from
Peter A. Meyer is president of
prices of other grains, crude oil, and other crops with resulting shortfalls
PMI Consultants, a Chicagothe dollar for signals on price direc- in production. Mexican imports unbased consultant to the food
tion. On the other hand, domestic U.S. der their North American Free Trade
and agribusiness industry.
sugar prices should provide a higher Agreement access were expected by
26 / October 7, 2008

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Milling & Baking News - October 7, 2008

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