Milling & Baking News - August 21, 2012 - 10

Business 

Growers discuss sugar program, surplus supply at Symposium
COEUR D’ALENE, IDAHO — The new farm bill with an unchanged sugar program and the first sugar surplus in four years were key topics at the 29th International Sweetener Symposium held Aug. 3-8 in Coeur D’Alene. The Symposium, sponsored by the American Sugar Alliance, brought together mostly sugar beet and cane growers and refiners, along with brokers, buyers, politicians and government representatives, to hear topics ranging from U.S. and Mexican markets, consumer trends and politics. The as yet unfinished farm bill with the controversial sugar program was discussed by speakers and attendees alike. Currently, the Senate has passed its version of the bill, but the House left for summer recess without approving its version, even though the House Committee on Agriculture completed its work in the measure. Both versions of the bill include the sugar program basically unchanged from its current form. “When we return in September we’ll have the momentum to deal with the bill and all the amendments,” Representative Frank Lucas of Oklahoma told the group via video link. “In coming weeks, we hope, not months, we’ll get a good farm bill.” Others were less hopeful a final farm bill could be agreed upon yet this year. “What’s holding up the farm bill?” Bart Fischer, chief economist, House Committee on Agriculture, asked rhetorically. “It’s all about nutrition in the House.” “We passed our bill,” chided Jim Miller, senior policy adviser, Senate Budget Committee and former undersecretary of the U.S. Department of Agriculture. While “it’s possible” to get the bill done this year, Mr. Miller indicated it wasn’t likely. And Representative Raul Labrador of IdaLabrador ho said, “I don’t think you’re going to get a five-year farm bill; at most, a one-year extension.” Markets also were a popular topic with sugar prices trending downward and supply currently in surplus. “Surpluses have finally arrived,” said Owen Wagner, senior economist – North America, LMC International
10 / August 21, 2012 Milling & Baking News

Ltd. He cited production increases in the European Union, Russia, India, China, Pakistan and Thailand among others as contributing to a global sugar surplus. World sugar prices will be bearishly influenced Wagner by the global economy, Mr. Wagner said, although he did not expect world raw values to fall below 15c a lb. He suggested the “rest of the world” had a three-tofive year window before Brazil, the world’s largest sugar producer and exporter, will have increased production from expanded cane fields. Several speakers, including those from the U.S.D.A. who run the U.S. sugar program, noted the United States would have a sugar surplus this year for the first time in four years. Speakers from the department acknowledged their increase in the tariff-rate quota in April contributed to the surplus, in part because sugar shipments from Mexico came in higher than expected. U.S. bulk refined sugar prices currently at 42@45c a lb f.o.b. Midwest are the lowest since October 2009 and prices for 2012-13 at 38@41c are the lowest since August 2009. Frank Jenkins, president of Jenkins Sugar Group, told the group he could see 2012-13 prices dropping into the mid- to low-30c a lb range if U.S. sugar supplies come in above Jenkins U.S.D.A. expectations, but other speakers did not expect prices to fall below 35c. U.S. and Mexican markets always are a hot topic at sweetener meetings because of the unrestricted flow of products — specifically sugar from Mexico and high-fructose corn syrup from the United States — under the North American Free Trade Agreement. In 2012-13 (beginning Oct. 1), the situation will be more interesting because the much smaller U.S. corn crop is expected to drive prices of delivered HFCS in Mexico near or above prices for estandar, or standard sugar, the most widely used sugar there. “There’s no question delivered costs of HFCS 55% will come closer to the price of standard sugar,” said

Craig Ruffolo, vice-president, McKeany-Flavell Co. He noted that HFCS still will be cheaper, though. “We could see some reduction in Mexican sugar exports,” he said. Humberto Jasso Torres, director general of the Mexican Sugar Chamber, said he also expected there would be a decrease in Mexican imports of HFCS by bottlers in that country. He noted the sharp increase of HFCS imports by Mexico since NAFTA kicked in on Jan. 1, 2008. “Where does HFCS penetration stop,” he asked, with the corn sweetener now making up about 30% of Mexico’s total sweetener use. However, Mr. Torres also said, “NAFTA has been very successful from Mexico’s perspective,” noting Mexico has built a “very effective” sweetener market. Sweetener consumption has been strong, sugar prices have increased and growing sugar exports to the United States have offset surging HFCS imports, he said. “Our export patterns and flows have not matured yet,” Mr. Torres added. Mr. Jenkins noted Mexican sugar production has been “in sync” with U.S. sugar needs in the early years of NAFTA, even though Mexican sugar exports to the United States have varied widely month-to-month. “It’s about supply in Mexico,” he said. “It’s not currency driven.” Steadily rising U.S. sugar consumption and consumer buying trends also were discussed at the Symposium. A 4% increase in dry grocery (which includes sugar) dollar sales for the 52 weeks ended June 9 compared with a year earlier was the result of inflationary pressure, not demand, as unit sales decreased by 1%, said. Todd Hale, senior vice-president, Consumer & Shopper Insights, The Nielsen Co. He also noted dollar sales growth in most of the six key sugar ingredient categories, including a 4% increase in baked goods, cookies and mixes, during the period, but unit sales declines of 1% to 3% in all categories. “You need to think about demand for your categories long term,” Mr. Hale said. He noted changing age demographics as well as product categories offered both sales challenges and opportunities for sugar. MBN Hale
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Milling & Baking News - August 21, 2012

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