Dr. Peter Baron, Dr. Peter Baron, Executive Director International ...
Dr. Peter Baron, Dr. Peter Baron, Executive Director International ...
Dr. Peter Baron, Dr. Peter Baron, Executive Director International ...
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
<strong>International</strong> Sweetener Colloquium<br />
<strong>Dr</strong>. <strong>Peter</strong> <strong>Baron</strong>, <strong>Executive</strong> <strong>Director</strong><br />
<strong>International</strong> Sugar Organization<br />
12 February 2007<br />
Tucson, Arizona
Dec-06<br />
23.00<br />
21.00<br />
19.00<br />
17.00<br />
15.00<br />
13.00<br />
11.00<br />
9.00<br />
7.00<br />
World Spot Prices<br />
Jan 05<br />
Feb 05<br />
Mar 05<br />
May 05<br />
Jun 05<br />
Aug 05<br />
Sep 05<br />
Oct 05<br />
Dec 05<br />
Jan 06<br />
Mar 06<br />
Apr 06<br />
May 06<br />
Jul 06<br />
Aug 06<br />
Nov-06<br />
Sep 06<br />
ISO White Sugar Price Index<br />
ISA Daily Price<br />
(raw sugar)<br />
US cents/lb
Sugar Production in India<br />
25<br />
Sugar Production in India<br />
23<br />
21<br />
19<br />
17<br />
15<br />
13<br />
11<br />
9<br />
1990/91<br />
1992/93<br />
1994/95<br />
1996/97<br />
1998/99<br />
2000/01<br />
2002/03<br />
2004/05<br />
2006/07<br />
mln t, raw value
6000<br />
5000<br />
4000<br />
3000<br />
2000<br />
1000<br />
0<br />
Production of Starch<br />
Sugar in China<br />
in thousand tonnes, tel quel<br />
1990<br />
1991<br />
1992<br />
1993<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
2004<br />
2005<br />
2006
Russia: beet sugar production<br />
Russia: beet sugar production<br />
(1,000 metric tonnes, white value )<br />
3500<br />
3000<br />
2500<br />
2000<br />
1500<br />
1000<br />
500<br />
1991-1995<br />
0<br />
1996-2000<br />
2001<br />
2002<br />
2003<br />
2004<br />
2005<br />
2006
Winners and Losers<br />
Main Production Falls and Rises in 2006/07 (October/September)<br />
______________________________________________________________________<br />
Losers Changes from 2005/06 Winners Changes from 2005/06 in<br />
in mln tonnes, raw value<br />
in mln tonnes, raw value<br />
______________________________________________________________________<br />
EU -4.6 India +3.8<br />
Australia -0.7 China +2.3<br />
Thailand +1.8<br />
Russia + Ukraine +1.3<br />
USA +1.1<br />
Pakistan +0.9<br />
Brazil +0.7<br />
______________________________________________________________________
World Sugar Balance<br />
(mln tonnes, raw value)<br />
2006/07<br />
2005/06<br />
Change in<br />
mlt t %<br />
Production<br />
158.6<br />
152.5<br />
6.1<br />
3.8<br />
Consumption<br />
152.5<br />
149.8<br />
2.7<br />
1.8<br />
Surplus/Deficit<br />
6.1<br />
2.7<br />
Import demand<br />
44.9<br />
46.7<br />
-1.8<br />
-3.8<br />
Export availability<br />
47.7<br />
46.7<br />
1.0<br />
2.2<br />
End Stocks<br />
62.9<br />
59.8<br />
3.1<br />
5.1<br />
Stocks/Consumption<br />
ratio in %<br />
41.3<br />
40.0
Fuel ethanol programmes<br />
Established<br />
programmes<br />
Fledgling<br />
programmes<br />
Planned<br />
programmes
Fund New Long/Short Positions<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
-20 0<br />
-40<br />
31.05<br />
Fund Net Long/Short Positions in<br />
NYBOT in 2005-2007<br />
(1,000 lots, 1 lot=50 long tons)<br />
19.07<br />
6.09<br />
25.10<br />
13.12<br />
31.01<br />
21.03<br />
09.05<br />
27.06<br />
22.08<br />
10.10<br />
5.12
Conclusions<br />
• We have all ingredients for a surplus market:<br />
– Production significantly higher than<br />
consumption<br />
– World stocks to grow for the second consecutive<br />
season<br />
– Export availability exceeds import demand<br />
• In terms of future market values the<br />
fundamentals are clearly bearish, possibly<br />
exerting further downwards pressure<br />
• Therefore the price outlook 06/07 and most<br />
likely 07/08 is not rosy.
Please don’t kill me<br />
I’m only the messenger!
Thank you
Supply and Demand<br />
Outlook:<br />
US Sugar market<br />
2007<br />
<strong>International</strong><br />
Sweetener<br />
Colloquium
Agenda:<br />
• Look back at the recent dynamics<br />
• 2006-07<br />
– Current situation<br />
– Near term prospects<br />
• 2008 and beyond<br />
–Mexico<br />
– New farm legislation<br />
• Conclusion
07 I proj.<br />
US refined prices 1982 – present:<br />
average price - quarterly<br />
82 I<br />
83 III<br />
85 I<br />
86 III<br />
88 I<br />
89 III<br />
91 I<br />
92 III<br />
94 I<br />
95 III<br />
97 I<br />
98 III<br />
00 I<br />
01 III<br />
03 I<br />
04 III<br />
06 I<br />
40<br />
38<br />
36<br />
34<br />
32<br />
30<br />
28<br />
26<br />
24<br />
22<br />
20<br />
18<br />
16<br />
Source: USDA – Sugar and Sweeteners Outlook
US Supply and Demand:<br />
2005-06 (JAN)<br />
2006-07(JAN)<br />
Beginning stocks<br />
1347<br />
1698<br />
Production<br />
7593<br />
8615<br />
Beet<br />
4435<br />
5078<br />
Cane<br />
3158<br />
3537<br />
Florida<br />
1455<br />
1756<br />
Hawaii<br />
260<br />
248<br />
Louisiana<br />
1263<br />
1335<br />
Texas<br />
180<br />
198<br />
Imports<br />
2770<br />
2103<br />
TRQ<br />
2140<br />
1718<br />
Other program<br />
325<br />
325<br />
Non-program<br />
305<br />
60<br />
Total Supply<br />
11710<br />
12416<br />
Exports<br />
175<br />
200<br />
Domestic<br />
10215<br />
10415<br />
Food use<br />
10050<br />
10250<br />
Other<br />
165<br />
165<br />
Misc.<br />
0<br />
0<br />
Source: USDA January<br />
2006 &2007<br />
WASDE reports<br />
Total use<br />
Ending stocks<br />
Stocks/use ratio<br />
10390<br />
1320<br />
12.70 %<br />
10615<br />
1801<br />
17.00 %
US Sugarcane Production<br />
FY’s 1996-2007<br />
10000<br />
9000<br />
8000<br />
7000<br />
6000<br />
5000<br />
4000<br />
3000<br />
2000<br />
Texas<br />
Hawaii<br />
Louisiana<br />
Florida<br />
Beet<br />
1000<br />
0<br />
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07<br />
est.<br />
Source: USDA – Sugar and Sweeteners outlook
US Sugar Consumption<br />
FY’s 1996-2007<br />
11000<br />
10000<br />
9000<br />
8000<br />
7000<br />
6000<br />
5000<br />
4000<br />
3000<br />
2000<br />
1000<br />
0<br />
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07<br />
est.<br />
Source: USDA – Sugar and Sweeteners Outlook
Source: USDA Febuary<br />
2007 WASDE report<br />
US Supply and Demand:<br />
Beginning stocks<br />
Production<br />
Beet<br />
Cane<br />
Florida<br />
Hawaii<br />
Louisiana<br />
Texas<br />
Imports<br />
TRQ<br />
Other program<br />
Non-program<br />
Total Supply<br />
Exports<br />
Domestic<br />
Food use<br />
Other<br />
Misc.<br />
Total use<br />
Ending stocks<br />
2005-06<br />
1332<br />
7399<br />
4444<br />
2955<br />
1367<br />
223<br />
1190<br />
175<br />
3443<br />
2588<br />
349<br />
506<br />
12174<br />
203<br />
10341<br />
10184<br />
157<br />
-68<br />
10476<br />
1698<br />
2006-07<br />
1698<br />
8598<br />
5059<br />
3539<br />
1756<br />
249<br />
1336<br />
198<br />
1964<br />
1604<br />
300<br />
60<br />
12260<br />
300<br />
10265<br />
10100<br />
165<br />
0<br />
10565<br />
1695<br />
Change<br />
366<br />
1199<br />
615<br />
582<br />
389<br />
26<br />
145<br />
23<br />
-1479<br />
-984<br />
-49<br />
-446<br />
86<br />
97<br />
-76<br />
-84<br />
8<br />
68<br />
89<br />
-3<br />
Stocks/use ratio<br />
16.20%<br />
16.00%<br />
-0.2 %
'Oct06<br />
'Jan07<br />
42<br />
40<br />
38<br />
36<br />
34<br />
32<br />
30<br />
28<br />
26<br />
24<br />
22<br />
20<br />
18<br />
US refined prices FY’00 – present:<br />
average price - monthly<br />
Jan-00<br />
Apr-00<br />
Jul-00<br />
Oct-00<br />
'Jan01<br />
'Apr01<br />
'Jul01<br />
'Oct'01<br />
'Jan02<br />
'Apr02<br />
'Jul02<br />
'Oct02<br />
'Jan03<br />
'Apr03<br />
'Jul03<br />
'Oct03<br />
'Jan04<br />
'Apr04<br />
'Jul04<br />
'Oct04<br />
'Jan05<br />
'Apr05<br />
'Jul05<br />
'Oct05<br />
'Jan06<br />
'Apr06<br />
'Jul06<br />
Source: USDA – Sugar and Sweeteners Outlook<br />
Oct-99
Beets gone wild…<br />
1,000 strv<br />
• If allotments had been<br />
respected:<br />
– Carry-in 1,698<br />
– Beet 4,756<br />
– Cane 3,539<br />
– Imports 1,964<br />
– Total 11,957<br />
• With 455,269 short tons premarketed:<br />
– Carry-in 1,698<br />
– Beet 5,059<br />
– Cane 3,539<br />
– Imports 1,964<br />
– Total 12,260<br />
– Total use 10,565<br />
– Carry-out 1,392<br />
– Stocks/use 13.2 %<br />
– Total use 10,565<br />
– Carry-out 1,695<br />
– Stocks/use 16.0 %
Beet production vs. Refined prices<br />
1997-2007 - August 2006 est.<br />
5100<br />
40<br />
4900<br />
4700<br />
35<br />
4500<br />
30<br />
Beet crop<br />
4300<br />
Refined price<br />
4100<br />
25<br />
3900<br />
20<br />
3700<br />
3500<br />
15<br />
96 IV<br />
97 II<br />
97 IV<br />
98 II<br />
98 IV<br />
99 II<br />
99 IV<br />
00 II<br />
00 IV<br />
01 II<br />
01 IV<br />
02 II<br />
02 IV<br />
03 II<br />
03 IV<br />
04 II<br />
04 IV<br />
05 II<br />
05 IV<br />
06 II<br />
06 IV proj<br />
07II proj<br />
Source: USDA – Sugar and Sweeteners Outlook/SSS-246/May 30,2006
Beet production vs. Refined prices<br />
1997-2007 - February 2007 est.<br />
5100<br />
40<br />
4900<br />
4700<br />
35<br />
4500<br />
30<br />
4300<br />
4100<br />
25<br />
3900<br />
20<br />
3700<br />
3500<br />
15<br />
Beet crop<br />
Refined<br />
price<br />
96 IV<br />
97 II<br />
97 IV<br />
98 II<br />
98 IV<br />
99 II<br />
99 IV<br />
00 II<br />
00 IV<br />
01 II<br />
01 IV<br />
02 II<br />
02 IV<br />
03 II<br />
03 IV<br />
04 II<br />
04 IV<br />
05 II<br />
05 IV<br />
06 II<br />
06IV<br />
07II proj<br />
Source: USDA – Sugar and Sweeteners Outlook/SSS-246/May 30,2006
Short term prospects:<br />
• Refined prices likely to remain under<br />
pressure due to massive beet crop<br />
• Raw sugar prices largely dependant on<br />
Mexican shipments – currently 100,000<br />
strv in WASDE, but summer months are<br />
likely to trend higher. Mexican crop<br />
progress should be watched closely.<br />
Difference between 15.0 % and 18.0 %<br />
stocks/use.
2007-08:<br />
• Unless Mexico fails to export to US, 2006-<br />
07 ending stocks are likely to be high<br />
• Import quota likely to be at minimum<br />
• Marketing allotments should be sufficiently<br />
restrictive to preclude defaults in final year<br />
of farm bill
Mexico<br />
Potential triple threat
Triple threat:<br />
• Higher production<br />
• Imports of non-NAFTA sugar above<br />
domestic needs<br />
• Substitution of HFCS for sugar
Mexican Sugar Production<br />
1996-2007 - 1,000 mt<br />
6000<br />
5500<br />
5000<br />
4500<br />
4000<br />
3500<br />
3000<br />
2500<br />
2000<br />
1500<br />
1000<br />
500<br />
0<br />
1996 1998 2000 2002 2004 2006<br />
2007 Proj.<br />
Source: USDA – Sugar and Sweeteners Outlook/SSS-246/May 30,2006
Mexican HFCS Consumption<br />
1,000 metric tonnes, dry weight<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
'00-'01 '01-'02 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07<br />
proj<br />
Source: ERS, USDA
Mexican bottling industry:<br />
• Prior to tax, 75 % to 80 % of HFCS<br />
deliveries in Mexico went to bottlers<br />
• HFCS deliveries accounted for about 13 %<br />
of total sweetener deliveries to the food<br />
industry in 2006 versus 25 % prior to<br />
imposition of the tax<br />
• 2005-06 bottling industry mix was about<br />
88 % sugar, 12 % HFCS
Mexican HFCS consumption:<br />
• USDA looked at various scenarios:<br />
– 30 % HFCS use by soft drink industry would<br />
be 760,000 tonnes dry weight – similar to<br />
2006-07 estimate.<br />
– 75 % HFCS use by soft drink industry would<br />
be 1.521 million tonnes dry weight – similar to<br />
pre-tax Mexican percentage, but not “worst<br />
case” scenario of 95 %, which is similar to<br />
current US percentage.<br />
Difference from 30 % to 75 % is 761,000 tonnes
New Farm Bill
Implications of Bush Administration<br />
Sugar Proposal<br />
• Reduction in availability of domestically<br />
produced refined beet and raw cane sugar<br />
through allotments will be the mechanism<br />
for keeping prices above default level, to<br />
ensure program is run at no cost.<br />
• “Blunt instrument” policy which does not<br />
serve either the producing or consuming<br />
community well. Goal is managing the<br />
sugar program, not the sugar market.
Implications of Bush Administration<br />
Sugar Proposal cont.:<br />
• Winners:<br />
– Mexico, CAFTA countries<br />
and future trade deal<br />
partners<br />
• Free option on US market<br />
• Guaranteed access at<br />
expense of US producer<br />
– USDA<br />
• Can run market at no cost<br />
without the headaches of<br />
writing new policy<br />
– Cane refiners<br />
• Possibly – additional<br />
through put/capacity<br />
utilization<br />
• Losers:<br />
– US beet processors<br />
• Loss of market share<br />
• More blocked sugar<br />
– US cane producers<br />
• Loss of market share<br />
• More blocked sugar<br />
– US industrial users<br />
• Floor under market at<br />
default level<br />
• Less reliable supply<br />
• Less ability to choose<br />
supplier
Conclusions:<br />
• USDA trying to fine tune supply and<br />
demand in increasingly volatile arena<br />
• Mexico is the swing factor in US supply<br />
and demand, and will continue to be so for<br />
the foreseeable future. Very complex<br />
dynamics at play<br />
• Sugar provisions in new farm bill do not<br />
serve US producer or consumer well, but<br />
alternative policy will be difficult to achieve
Supply and Demand<br />
Outlook:<br />
US Sugar market<br />
2007<br />
<strong>International</strong><br />
Sweetener<br />
Colloquium
Change language