Sweetener Users Association Board Meeting Update November 16
Sweetener Users Association Board Meeting Update November 16, 2018 Ron Sterk Sosland Publishing Company rsterk@sosland. com
SUA November 2018: Presentation Overview § Domestic Sugar Market § § Supply/Imports Demand Cash and Futures Prices U. S. D. A. Preliminary Long-Term Outlook § Global Sugar Market § Corn Sweetener Market § § § Current contracting situation for 2019 Supply-and-Demand indications Prices § Other Issues with Impact on Supply/Demand/Price § Conclusions § Questions
SUA November 2018: 2018 -19 Sugar Overview 2018 -19 – November WASDE and Market Review § Domestic sugar production was lowered from October with beet down 5% and cane up 0. 4%. Beet production is down 5. 8% from the record 2017 -18 level, which was raised 0. 6% from October. § Imports for 2018 -19 were left unchanged from October. § Deliveries for food were lowered 0. 6% from October but still were up 1. 1% from 2017 -18, which was lowered 0. 4% from last month. § Prices for bulk refined sugar continued to escalate in October, with some processors raising offers three consecutive weeks. The largest processors have beet prices where they want them, at 35 c to 36 c f. o. b. Midwest, with others catching up. Beet processors are over 90% sold. Refined cane sugar prices also have been raised, keeping the cane premium to beet sugar at 1 c to 2 c a lb.
SUA November 2018: U. S. D. A. 2018 -19 WASDE 1, 000 short tons raw value Begin. Stocks Production Beet Cane Imports T. R. Q. Other Prog. Mexico High Tier Ttl Supply Exports Deliveries Food Other Misc. Total Use Ending Stocks-to-use Nov. Change from Oct. Change from 17 -18 18 -19 Tons % 1, 993 (21) -1. 0% 117 6. 2% 9, 015 (247) -2. 7% (278) -3. 0% 4, 974 (262) -5. 0% (305) -5. 8% 4, 041 15 0. 4% 27 0. 7% 2, 801 0. 0% (476) -14. 5% 1, 564 0. 0% (99) -6. 0% 350 0. 0% 24 7. 4% 842 0. 0% (381) -31. 2% 45 0. 0% (19) -29. 7% 13, 809 (268) -1. 9% (636) -4. 4% 85 0. 0% (85) -50. 0% 12, 320 (85) -0. 7% 135 1. 1% 12, 175 (75) -0. 6% 127 1. 1% 145 (10) -6. 5% 8 5. 8% 12, 405 (85) -0. 7% (48) -0. 4% 1, 404 (183) -11. 5% (589) -29. 6% 11. 3% - 1. 4 - 4. 7 * S-T-U Ratio change is from prior S-T-U, not in tons. RS-SPC 18 -19 1, 990 8, 990 4, 970 4, 020 3, 224 1, 564 300 1, 320 40 14, 204 85 12, 295 12, 150 145 12, 380 1, 824 14. 7% I feel better about the U. S. D. A. numbers after the cut to beet sugar production. There will have to be a sizeable increase in imports from Mexico in Dec. There is growing uncertainty about deliveries with a drop in September and U. S. D. A. ’s reduction for this and last year.
SUA November 2018: Monthly S-T-U Ratios In per cent, as of Nov. 8. Source: U. S. D. A. 18 17 16 15 14 13 12 11 10 9 It can only go up from here. 2015 -16 2016 -17 2017 -18 2018 -19 8 May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. April
SUA November 2018: Final S-T-U Ratios* In per cent as of Nov. 8. * Except 2018 and 2019. Source: U. S. D. A. 21 20 19 18 17 16 15 14 13 12 11 Only three times since 2000 -01 has S-T-U ended below 13. 5%. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*2019*
SUA November 2018: U. S. Beet and Cane Harvest In per cent, as of Nov. 11. #States not issuing updates assumed 100%. *Five-year average data not available. 100 90 80 70 60 50 40 30 20 5 -yr avg yr ago Cane 11 -11 -2018 10 0 Minn. N. Dak. Idaho Mich. Sources: U. S. D. A. and state field offices. Colo. Wyo. # Mont. # Wash. * Ore. #* La.
SUA November 2018: Louisiana Cane Rating In per cent, as of Nov. 11. Source: U. S. D. A. state field office. 90 2018 2017 2016 85 80 75 76% 70 66% 65 60 55 50 45 7 -1 7 -8 7 -15 7 -22 7 -29 8 -5 8 -12 8 -19 8 -26 9 -2 9 -9 9 -16 9 -23 9 -30 10 -7 10 -1410 -2110 -28 11 -4 11 -11
SUA November 2018: U. S. Total Sugar Production In 1, 000 short tons, raw value. *2017 -18 estimated, 2018 -19 projected. Source: U. S. D. A. 9 500 9 000 8 500 8 000 Record total production of 9, 293, 000 tons estimated for 2017 -18; Outturn for 2018 -19 forecast down 2. 7% at 9, 015, 000 tons due to 5. 8% drop in beet sugar only partially offset by a small bump in cane sugar. Current year beet would be third highest on record. 7 500 7 000 6 500 6 000 5 500 5 000 18/19* 17/18* 16/17 15/16 14/15 13/14 12/13 11/12 10/11 09/10 08/09 07/08 06/07 05/06 04/05 03/04 02/03 01/02 00/01 99/00 98/99 4 500
SUA November 2018: U. S. Imports from Mexico Annual, in 1, 000 tonnes, raw value. 2000 U. S. D. A. needs to be at 1, 010, 000 tonnes with all else equal for 13. 5% 1800 1600 U. S. D. A. Nov. at 764, 000 tonnes 1400 RS-SPC at 1, 197, 000 tonnes for 14. 7% final S-T-U ratio 1200 1000 800 600 400 200 0 07 -08 08 -09 09 -10 10 -11 11 -12 12 -13 13 -14 14 -15 15 -16 16 -17 17 -18 Sept. -Nov. to 13. 5% RS-SPC
SUA November 2018: U. S. D. A. 2017 -18 WASDE 1, 000 short tons raw value Begin. Stocks Production Beet Cane Imports T. R. Q. Other Prog. Mexico High Tier Ttl Supply Exports Deliveries Food Other Misc. Total Use Ending Stocks-to-use Nov. Change from Oct. 17 -18 Tons % 1, 876 0. 0% 9, 293 45 0. 5% 5, 279 34 0. 6% 4, 014 10 0. 2% 3, 277 (38) -1. 1% 1, 663 (1) -0. 1% 326 0. 0% 1, 223 (46) -3. 6% 64 9 16. 4% 14, 445 6 0. 0% 170 0. 0% 12, 185 (70) -0. 6% 12, 048 (52) -0. 4% 137 (18) -11. 6% 97 97 12, 453 28 0. 2% 1, 993 (21) -1. 0% 16. 0% (0. 2) * S-T-U ratio change is from prior S-T-U, not in tons. § For 2017 -18 (ended Sept. 30), minor changes were made for supply/demand. § Beet sugar and Louisiana cane sugar were raised slightly; beet & total record high. § Imports from Mexico were lowered. § High-tier imports were raised 9, 000 tons, although discount of world raws to domestic raws narrowed in October. § Change in deliveries for food, reflecting lower September beet and cane deliveries, although total use increased due to jump in miscellaneous. § Year-over-year deliveries for food declined 54, 000 tons, or 0. 45%. § These numbers will continue to be fine tuned but no major surprises expected.
SUA November 2018: U. S. Imports from Mexico Monthly, in 1, 000 tonnes, raw value. *September was forecast. 275 250 225 For 2017 -18, raw sugar appears to have comprised 75% of imports from Mexico and refined sugar 25%, based 14 -15 15 -16 16 -17 17 -18 200 175 150 125 100 75 50 25 0 Oct. Nov. Dec. Jan. Feb. Sources: U. S. D. A. and U. S. Census Bureau Mar. April May June July Aug. Sep. *
SUA November 2018: Beet and Cane Deliveries Monthly 2017 -18 beet and refined cane deliveries, in 1, 000 tons, raw value. Source: U. S. D. A. 600 Cane average 509, 000 tons per month 550 500 450 400 350 Beet average 439, 000 tons per month Cane 300 Oct. Nov. Dec. Jan. 18 Feb. Mar. April May June July Aug. Sept. Beet and cane deliveries were stronger in July and August but ended weaker in September. For 2017 -18, cane deliveries averaged 70, 000 tons/month more than beet, compared with 58, 000 more in 2016 -17, 154, 000 more in 2015 -16 and 126, 000 more in 2014 -15.
SUA November 2018: Deliveries for Human Use PRODUCT OR BUSINESS OF BUYER FY 2018 (OCT - SEP) FY 2017 (OCT - SEP) PERCENT CHANGE Total Deliveries/1 (actual weight) 1 -Bakery, cereal, and related products 4 -Confectionery and related products 6 -Ice cream and dairy products 7 -Beverages Canned, bottled and frozen foods 5 -Multiple and all other food uses Non-food uses Hotels, restaurants, institutions 2 -Wholesale grocers, jobbers, dealers 3 -Retail grocers, chain stores Government agencies All other deliveries 10, 741, 446 2, 498, 493 1, 212, 601 807, 924 711, 410 369, 689 1, 180, 730 121, 293 94, 526 2, 168, 126 1, 240, 969 13, 154 322, 531 10, 765, 553 2, 522, 028 1, 152, 195 756, 146 684, 159 425, 094 942, 812 141, 764 86, 725 2, 268, 802 1, 234, 727 13, 846 537, 256 -0. 2 -0. 9 5. 2 6. 8 4. 0 -13. 0 25. 2 -14. 4 9. 0 -4. 4 0. 5 -5. 0 -40. 0 Total Deliveries/1 (short tons, raw value) Crystalline: Consumer-size packages Packages 50 lbs and greater Unpackaged (bulk) Non-crystalline/2 11, 493, 348 9, 974, 731 2, 294, 557 2, 930, 267 4, 749, 906 1, 518, 617 11, 519, 142 10, 003, 128 2, 292, 593 2, 931, 839 4, 778, 696 1, 516, 014 -0. 2 -0. 3 0. 1 -0. 6 0. 2 1/Deliveries from domestic sugar beet processors, sugar cane processors and refiners. 2/Includes all liquid, edible molasses, sugar syrups and cane juice. Two largest users are down about 1% and 4%, resp. , but next five largest users are up from 0. 5% to about 25%. Total deliveries for 2017 -18 are nearly flat (down 0. 2%) compared with 2016 -17. Bulk deliveries are down 0. 6% Source: U. S. D. A.
SUA November 2018: Mexico WASDE Source: U. S. D. A. November WASDE. 1, 000 tonnes Actual weight Begin. Stocks Production Imports Total Supply Exports Domestic Use Total Use Ending Stocks S-T-U (total) S-T-U (dom. ) November 17 -18 1, 002 6, 010 220 7, 232 1, 099 4, 739 5, 838 1, 395 23. 9% 29. 4% Change from Oct. 30 30 (48) 12 (36) 67 1. 3 November 18 -19 1, 395 6, 025 115 7, 535 1, 028 4, 893 5, 921 1, 613 27. 2% 33. 3% Change from Oct. from 17 -18 67 393 15 (105) 67 303 (53) (71) (59) 154 (112) 83 178 218 3. 4 3. 3 4. 3 3. 9 Exports for 2017 -18, consisting of 1, 047, 000 tonnes to the U. S. and of 51, 985 tonnes to non-U. S. destinations were lowered by 48, 345 tonnes from October. Exports for 2018 -19 were lowered by 53, 201 tonnes, reflecting lower FIMAE stocks. Deliveries for human use were lowered for both years, but were all or partially offset by higher deliveries for IMMEX.
SUA November 2018: U. S. and Mexico Sugar Prices Average monthly cash sugar prices. Sources: U. S. D. A. and Sosland Publishing Company 41 40 Refinado Estandar U. S. Beet U. S. Cane 39 38 37 36 35 34 33 32 31 30 29 28 Oct. -17 Nov. Dec. Jan. -18 Feb. Mar. April May June July Aug. Sept. Oct. -18
SUA November 2018: Cash Sugar Price Outlook Beet sugar 2018 -19 Cane sugar 2018 -19 Firm at 35 c to 36 c f. o. b. Midwest; 39 c West Coast (41 c to 42 c delivered) 37 c to 38 c Northeast 36 c to 36. 5 c South/Southeast 35 c to 36 c Gulf 41 c to 42 c delivered West Coast Recent Developments and Factors to Watch • Beet sugar prices firmed throughout October with major processors at 35 c to 36 c f. o. b. Midwest. • Beet processors are over 90% sold. • Beet sugar production was reduced due to wet weather and freezes early in October that cut acres and reduced tonnage and sucrose content. • At least one beet processor is out of the bulk industrial market (still has bags and retail). One cane refiner also is “comfortably sold. ” • Imports from Mexico should be revised sharply upward in December to offset lower U. S. beet sugar production. • Sugar supplies are relatively tight, but should improve with imports.
SUA November 2018: New York #16 Raw Futures ICE domestic raw sugar futures as of Nov. 7, in cents per lb. Source: Tech Nova The market remains nearly flat (about a 1. 50 c-a-lb carry) nearby through 2020 in the 25 c to 26. 50 c a lb range, as would be expected because of minimum pricing outlined in the U. S. -Mexico suspension agreements.
SUA November 2018: Long-Range Supply Forecast In 1, 000 short tons, raw value. Issued Nov. 2, 2018, by U. S. D. A. 16 000 14 000 12 000 2 304 2 399 2 515 2 611 2 776 2 846 2 046 1 959 1 934 1 937 1 993 2 131 1 269 842 1 324 1 192 1 393 1 453 1 468 1 510 1 529 1 542 1 494 1 533 4 004 4 026 4 032 4 067 4 085 4 101 4 121 4 145 4 175 4 209 4 245 4 286 5 245 5 236 5 427 5 680 5 565 5 508 5 455 5 445 5 429 5 415 5 402 1 876 2 014 1 686 1 713 1 735 1 757 1 778 1 799 1 820 1 840 1 859 1 878 10 000 8 000 6 000 4 000 2 000 0 8 -1 2 7 01 9 -1 8 01 2 Beg. stocks 0 -2 19 0 2 21 20 0 2 U. S. beet -2 1 02 2 2 U. S. cane -2 2 2 02 3 4 -2 3 02 2 from Mexico -2 4 02 2 5 02 6 -2 other imports 7 -2 2 6 02 2 7 02 8 -2 9 -2 2 8 02
SUA November 2018: Annual Per Cent Increase Long-range annual per cent increase in total sugar use. Issued Nov. 2, 2018, by U. S. D. A. 1, 60% U. S. D. A. will make adjustments based on November and future WASDE reports. 1, 40% 1, 20% 1, 00% 0, 80% 0, 60% 0, 40% 0, 20% 0, 00% 2017 -18 2018 -19 2019 -20 2020 -21 2021 -22 2022 -23 2023 -24 2024 -25 2025 -26 2026 -27 2027 -28 2028 -29
SUA November 2018: U. S. Imports from Mexico In 1, 000 short tons, raw value. Long-range outlook issued Nov. 2, 2018, by U. S. D. A. 1 600 1 400 Will have to be 1 200 1 000 800 600 400 200 0 2017 -18 2018 -19 2019 -20 2020 -21 2021 -22 2022 -23 2023 -24 2024 -25 2025 -26 2026 -27 2027 -28 2028 -29
SUA November 2018: Global Sugar Overview § Global supply/demand § § Brazil shift § § 2018 -19 surplus forecasts are being trimmed or switched to a deficit, with a larger deficit expected in 2019 -20. Sugar production/export potential remains down with continued strong focus on ethanol (especially under new president). Developments in other countries critical § § 2018 -19 production in India no longer at second consecutive record. Lower production in Europe, Thailand some other key countries. § Potential for large exports from India still overhang the market § Nearby world raw sugar future soared 40% from 10 -year low in late September on short covering, lower production in key areas and strength in Brazil’s currency, but has since pulled back as net short shifted to small net long, speculative buying petered out and on potential for increased production next year.
SUA November 2018: New York #11 Raw Futures ICE world raw sugar futures as of Nov. 7, in cents per lb. Source: Tech Nova The nearby contract rallied 4. 11 c a lb, or 41. 5%, from a 10 -year low on Sept. 26 to an nine-month high over 14 c a lb on Oct. 24. Prices have since dropped about 1. 35 c a lb but are not expected to revisit the September low as somewhat more supportive features are emerging on the global market.
SUA November 2018: World/Domestic Futures Nearby ICE New York raw sugar futures, in cents per lb, as of Oct. 14, 2018. #16 Nearby domestic raw (#16) remains in 25 c to 25. 5 c a lb range, drifting closer to 25 c #11 Nearby world raw (#11) is about 1. 35 c a lb off recent high but still 2. 75 c above 10 -year low set Sept. 26 11. 14. 18 10. 17. 18 09. 18 08. 22. 18 07. 25. 18 06. 27. 18 05. 30. 18 05. 02. 18 04. 18 03. 07. 18 02. 07. 18 01. 10. 18 12. 13. 17 11. 15. 17 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9
SUA November 2018: Corn Sweetener Market § Domestic demand for HFCS continued to shrink in 2017, but demand for regular corn syrup, dextrose and starch has been stable to strong. § HFCS consumption in Mexico in 2017 -18 was estimated at 1, 593, 000 tonnes, dry basis, up 4. 7% from 2016 -17, and is forecast flat in 201819 at the same level, which is down from earlier forecasts of 1, 608, 000 tonnes for both years. § Refiners have noted higher labor, transportation and manufacturing costs this year and for next year, despite second largest corn crop, and thus are seeking higher prices for corn sweeteners in 2019. § But buyers aren’t rushing to contract for 2019 and the pace is well behind a year ago, when most contracting for liquid products was concluded by mid-October. § Dry dextrose pricing has just come out, up $1. 50 a cwt from 2018.
SUA November 2018: Corn Sweetener Prices Cents/lb or $/cwt. Midwest Northeast Southeast South West Midwest Northeast South West 42% HFCS Spot 2018 2017 24¾-25¾ 23⅞-24⅞ 26¼-27¼ 25¼-26¼ 26½-27½ 25⅜-26⅜ 26 -27 25 -26 26¾-28¾ 25⅞-27⅞ 55% HFCS Spot 2018 2017 30¼-31¾ 29¼-30¼ 31¾-33¼ 30¾-31¾ 31½-33 30½-31½ 32¼-34¾ 31¼-33¼ Corn Syrup Spot 2018 2017 34¼-35¼ 32¼-34¼ 36½-37½ 34½-36½ 37½-38½ 35½-37½ 38¾-39¾ 36¾-38¾ Liquid 55% HFCS and regular corn syrup mostly is being contracted for 2019 at $1 to $1. 50 per cwt above 2018 levels, with increases for 42% HFCS about 50 c below those of 55% HFCS. Best demand is for regular corn syrup. Contracting has progressed slowly and is well behind a year ago, with refiners not aggressive in pricing or pushing deadlines to avoid price increases. Buyers have tended to hold back. One refiner estimated over 50% of available supply (not including multi-year contracts) is booked. Shipments to Mexico expected to be on pace with 2018. Dry dextrose was offered in late October at $1. 50 a cwt above 2018. Buyers are balking at that level; an increase nearer +50 c is more likely. Dextrose East Midwest South West Spot 2018 2017 39½-41 38½-40 40½-42 41½-43 39 -41 38 -40 40 -42 41 -43
SUA November 2018: Other Issues § Elections are done – No more commercials! This is the S. U. A. ’s area of expertise. There was no immediate effect on markets, except for weaker U. S. dollar. § Trade – Future easing of trade rhetoric, tariffs? § Farm Bill – Passed in lame duck session of Congress or start the process over in January? § November ballot issues – Oregon voted down attempt to ban taxes on food (soda), but Washington approved a ban. § § Weather – Focus turns from hurricanes to effects of potential El Nino mainly on Southeast Asia and India crops, including cane. Also need to watch weather in northern U. S. sugar beet areas to see if cold is sufficient to keep beet piles frozen into spring. Onslaught of very cold weather last week in northern states is positive for freezing of beet piles. Source: DTN
SUA November 2018: Conclusions § Domestic Sugar Market § § § A bullish tone persists in the refined sugar market. Beet sugar prices have firmed to 35 c to 36 c f. o. b. Midwest. Cane sugar ranges from 35 c to 38 c f. o. b. , depending on region. Prices likely will stabilize or firm a bit more as processors are nearly sold out and have prices at or near desired levels. Both beet and cane deliveries picked up in July and August but slowed in September; watch going forward. § Global Sugar Market § The market is shifting from a surplus to a deficit; prices have pulled back from recent highs but won’t revisit recent lows; India exports still loom with large sales to China expected. § Domestic Corn Sweetener Market § § Slow but contracting likely will be completed by end of year. Pricing flat to up $1. 50 per cwt from 2018.
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