Milling & Baking News - October 6, 2009 - 24

Corn Wet Milling 

Sugar and corn markets a mixed
bag entering harvest
BY PETER A. MEYER

The sugar and corn markets as we
enter the harvest season in North
America have presented a tumultuous display of abundance, avarice and
confusion.
The corn crop started with a large
estimate by the U.S. Department of
Agriculture and seemed to grow
larger with each passing day. The wet
spring delayed planting but provided
bountiful moisture in most growing
areas. The anecdotal yield information
from Iowa, Illinois and Indiana, with
yields of well over 200 bus per acre in
many spots has been phenomenal.
With harvest 6% complete as of
Sept. 21, we should begin to get some
solid numbers over the next two to



environment both domestically and
around the world.
Data from a September report from
the International Sugar Organization
illustrated in the table below shows
two major reductions in stocks. This,
combined with shortages in India and
China, has caused a significant jump
in world sugar prices. Even Brazil,
with a large crop, has been buffeted by
heavy amounts of rain during harvest
that has slowed harvest and reduced
sugar yield.
NAFTA region chaotic
For the North American Free Trade
Agreement region the sweetener
markets have been chaotic, at best.
The litany of the sweetener crisis is

World sugar balances

September-August, million tonnes, raw value

Production

2005-06
150.2

2006-07
166.2

2007-08
167.2

2008-09
154.2

2009-10
159.0

152.3

156.4

160.9

164.6

167.4

56.2
-2.2

65.7
9.7

72.0
6.3

61.7
-10.4

53.2
-8.4

36.9%

42.0%

44.7%

37.5%

31.8%

Consumption
Ending stocks
Increase/decrease
Stocks/use

Source: International Sugar Organization, September 2009 Report

three weeks. The frost danger has receded as the crops have matured. The
U.S.D.A. stocks estimates issued Sept.
30 should add to the clarity of the outlook for U.S. and world grain prices.
Ample corn supply
In any event, there will be ample
corn for food and feed in the United
States and enough left over for a drop
or two of ethanol. The federal government is trying to expand the mandate
beyond 10% inclusion but a number
of eastern states have sued to at least
slow this plan. Prices for products
from corn, high-fructose corn syrup,
corn syrup, and dextrose look better given the higher priced sugar
24 / October 6, 2009 Milling & Baking News

something out of a phantasmagorical
novel. The Mexican producers were
faced with relatively large inventories
of sugar at the start of the year, an exceedingly weak peso and relatively
high U.S. dollar prices for sugar. They
exported like crazy.
In fiscal year 2009 imports to the
United States from Mexico were estimated at 1,245,000 metric tons, raw
value (M.T.R.V.). This was both an
extraordinary amount of sugar and
oddly was needed because of a plant
explosion and shutdown at the Imperial Sugar Co. plant in Port Wentworth, Ga. The fire, which occurred
in February 2008, killed 14 workers
and injured nearly 40 others. As that

restart dragged out supply/demand
balances got tighter and refined prices rose. The commitment of the rest
of the industry to maintain high production rates and the backup of beet
sugar inventories seemed to allow the
United States to squeak by on available supplies.
It would appear that the U.S.D.A.
was willing to allow their Mexican
counterparts to struggle with supply issues from their side of the border. Economia went through a series
of variations of emergency tariff rate
quotas and other measures to assure
a sugar supply in the near term. Having first dismissed the need for sugar
in the short term, the Mexican government quickly learned that short-term
prices rises and shortages were not a
good political strategy.
Declines in deliveries for food?
For the next year the U.S.D.A. is
projecting fiscal year 2010 deliveries
for U.S. food to decline by 5.5% from
fiscal year 2009. The higher sugar
prices may result in this kind of decline. However, on a fiscal year to
date basis, U.S. food use is up 2.7%
this year. It is also likely that in April,
in accordance with the new sugar
program, some additional T.R.Q.
will be granted to increase supply, if
in fact the market demand does not
decline. If consumer preferences are
truly driving more sucrose usage the
additional T.R.Q. may be needed.
With additional sugar about to enter the Mexican market prices have
moved to a level similar to the United
States. In the background these higher prices have formed a solid basis
for increased HFCS imports from the
United States. Lower corn prices have
helped with that as has the willingness of the U.S. soft drink companies
to offer advice and comfort on these
transactions. An additional 200,000
tons per year of HFCS in Mexico over
each of the next two years would not
be a surprising outcome.
Corn refiners are suffering from a
20% decline in starch demand and
lower starch prices. Some respite for
HFCS in Mexico and somewhat more
stable U.S. sales volume would be
welcome developments. MBN

Peter A. Meyer is president of
PMI Consultants, a Chicagobased consultant to the food
and agribusiness industry.

bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - October 6, 2009

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