Food Business News - January 15, 2013 - 22

Market Insight
corn sweetener prices
Market conditions
keep lid on
Continued from Page 1
equated to increases of about
15% to 20%, depending on the
specifi c corn sweetener product
and the region.
The lofty price increase request
mostly was based on record
high corn prices during
the summer and uncertainty
about milling quality of corn
in some key production areas,
especially Illinois. Nearby corn
futures prices in mid-August
soared to an all-time high of
$8.43¾ a bu, up about $1.50 a
bu, or more than 20%, from a
year earlier after the U.S. Department
of Agriculture’s August
Crop Production report
that refl ected the devastating
effects of the summer drought
on the U.S. corn crop.
But a number of factors “conspired”
against corn refi ners’
efforts to secure their initial
price offers. Corn futures prices
quickly fell from their record
highs, although they remained
above year-earlier levels. By the
time the initial corn sweetener
offer letters reached buyers in
mid-October, two more U.S.D.A.
crop reports had been released
indicating the size of the crop
was far smaller than initially projected
but at least was stabilizing
near the August forecast. Corn
futures prices from mid-August
to mid-October tumbled about
$1 a bu, or more than 10%, from
the August record.
Perhaps sensing that support
for the corn refi ners’ increase
was waning, most buyers
balked at the initial offers,
even letting a mid-November
“deadline” pass after which
one refi ner indicated it would
raise its corn sweetener prices
weakness in the sugar market
resulted from a combination of
an untimely increase in import
quotas by the U.S.D.A. in April
2012, when it was thought sugar
supplies may be short, a bumper
U.S. sugar beet crop and a larger
U.S. sugar cane crop at a time
when cane sugar supplies in
Mexico and the rest of the world
also were growing.
The result was refi ned sugar
prices in both the United States
Midwest beet sugar price
versus corn futures, nearby price
$5
$6
$7
$8
$9
Corn futures
Jan.
2012
March
May
July
another 1c a lb above the initial
increase. Corn futures prices
fl uctuated but mostly continued
to slide, starting 2013 down
just shy of 20% from August
highs and barely 5% above yearearlier
levels.
But the greatest foil to corn
RON STERK
rsterk@sosland.com
22 FOODBUSINESSNEWS
®
refi ners’ attempts to secure larger
price increases came from
the sugar market. The declines
in corn prices paled in comparison
to sugar, which ended 2012
at 4½-year lows, down nearly
40% from a year earlier. The
Midwest beet sugar
Sept.
Nov.
Jan.
2013
28
35
42
49
56
and Mexico around 31c a lb
f.o.b., which was below offering
prices for some corn sweetener
products, especially in Mexico,
which has become a key outlet
for U.S. HFCS as use in the
United States steadily has declined
over the years.
As the year wound down, most
2013 corn sweetener contracts
were coming in with increases
of 2@3c a lb, or about 10%, above
2012 contracted levels, an increase
both sides appeared willing
to live with, although a small
minority of buyers held out for
still smaller increases. As 2013
began, though, the vast majority
of uncovered business, estimated
at only around 10%, was
mostly concluded.
Corn refi ners late in 2012 had
pushed for quick movement on
2013 contracting because of
much uncertainty in the market.
But some in the trade suggested
they became willing to
accept smaller price increases
to protect market share, especially
in Mexico where the
beverage industry is under
more pressure to use domestic
cane sugar when prices to cane
growers become low.
There also was talk of switching
from corn sweeteners to
sugar in the United States, but
it appears little if any actually
occurred. With sugar and corn
sweetener prices relatively even,
food and beverage manufacturers
had to consider other costs,
including label changes, that may
be incurred in switching.
Further, although sugar prices
appear they may remain in the
low 30c-a-lb range into 2014, the
prospect for corn is much different
at this early point in the season.
Analysts already are predicting
record 2013 U.S. corn production,
which is refl ected in new
crop corn futures prices about $1
a bu, or nearly 15%, below nearby
prices. If a record large corn crop
materializes, corn sweetener
prices may retreat back below
sugar prices next year, even if
sugar values see little change. FBN
January 15, 2013
f.o.b. plant, cents per lb
per bu
Food Business News - January 15, 2013

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