Expectations of a switch from corn-based sweeteners to sugar
may have been overplayed, Credit Suisse said, after groups such as Cargill and
Tate & Lyle won above-inflation price increases for corn-based products.
Many commentators, such as Czarnikow, and groups such as Canada's
Rogers Sugar have flagged the potential for food and beverage groups to
substitute corn-based sweeteners, such as high fructose corn syrup, or HFCS,
for sugar given relative futures prices.
New York raw sugar futures on Wednesday came 0.2 cents a
pound from their two-year low, while Chicago corn prices, while 14% below last
year's record highs, remain at historically-elevated levels.
But on Credit Suisse calculations, HFCS remains
significantly cheaper, at about 25 cents a pound on a sugar-equivalent basis,
compared with refined sugar at 31 cents a pound.
"In fact, the [price] difference between sugar and HFCS is
still relatively significant," the bank said, adding that there were other
reasons too to expect corn-based sweeteners to retain popularity.
"There is little prospect of a major cola company switching –
the sugar isn't available."
The result is that US demand for HFCS "looks to have held up
pretty well", slowing its rate of decline to some 0.5% last year, with
shipments to Mexico making up for lost American orders.
Indeed, some companies, including Capri Sun and the makers
of Hunt's tomato ketchup, which switched from corn-based sweeteners to sugar
citing consumer concerns "have switched back to the cheaper HFCS when their
sales failed to benefit".
'Whip hand with
The market dynamics had ensured that in the annual round of
negotiation between producers and buyers over HCFS prices, "the whip hand remained
firmly with the sellers", Credit Suisse said.
Corn sweetener producers had achieved "high-single-digit"
increases in prices, well above broader US inflation, if "just about right to
cover off the higher corn cost".
The likes of Cargill are initially believed to have asked
for rises reported at 10-20%, but according to the bank values "fell away slightly
towards the end of the negotiations".
Indeed, some other commentators have attributed greater
clout to buyers, such as Coca-Cola and PepsiCo, in the negotiations, saying
that sugar prices in Mexico have fallen below those of some corn-based
Czarnikow has forecast in Mexico "some demand switching back
to sugar from HFCS", fostering a 400,000-tonne rise to 4.7m tonnes in domestic
sugar consumption in 2012-13.