RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

ADM sees 'tremendous opportunities' in EU sweeteners

Twitter Linkedin

Archer Daniels Midland highlighted "tremendous opportunities" in Europe's sweeteners market, despite tumbling sugar prices, as it bought Tate & Lyle out of most of a joint venture in corn-based products.

ADM said that it was paying E240m, with a potential top-up of E20m in 2019, to Tate & Lyle for a deal which will see it take charge of the lion's share of assets at the groups' 23-year old Eaststarch tie-up.

ADM will take full ownership of corn processing plants in Bulgaria and Turkey, and Eaststarch's 50% stake in a Hungarian facility which is Europe's largest corn wet mill, while Tate & Lyle will take the joint venture's Slovakian site.

The deal comes amid a shake-up in Europe's sweeteners sector prompted by reforms due in 2017, which will lift quota on production of sugar, and corn-based sweeteners, while pulling a guaranteed minimum price for sugar beet farmers.

"Tremendous opportunities"

"With the coming end of sugar production quotas in the EU, the artificial cap on cereal-based sweeteners will be lifted," said Chris Cuddy, president of ADM's corn processing business.

"There will be tremendous opportunities in the new European sweetener market," he said, flagging in particular prospects in Eastern Europe, "where there is less sugar production".

Three of the big four European Union sugar beet-growing countries – France, Germany, Poland and the UK – growing more than 100,000 hectares a year are in western Europe, with the likes of Hungary, Romania and Slovakia growing less than 30,000 hectares each.

"By acquiring a greater ownership share in these corn assets, ADM will be able to better serve our customers as they meet this expanding European demand for sweeteners," Mr Cuddy said.

Many observers have forecast a significant rise in EU consumption of corn-based isoglucose, the equivalent of high fructose corn syrup in the US, when 2017 reforms scrap a production limit of 5%, in terms of the proportion of sugar output.

Tate & Lyle exit

However, Tate & Lyle flagged the potential need for spending in the Eaststarch assets to prepare for Europe's sugar reforms.

The group will, through Tuesday's deal, "substantially exit from bulk sweeteners in Europe for good value and before a decision on potential future capital investment is required arising from the reform of the EU sugar regime," Tate & Lyle said.

The group's strategy since 2010 has been to boost growth in specialty food ingredients.

ADM made no mention of any capital spending plans on its Eaststarch assets, which will take the group's global grind capacity to about 3m bushels (76,000 tonnes) a day.

However, Mr Cuddy said that the deal would "meet our returns objectives", adding that the deal value reflected the potential for a further decline in EU sugar prices.

Low global prices

The profitability of corn-based sweeteners has been hit by falling prices of sugar, which have been hurt in Europe by the prospect of reforms besides by low world market values.

Eaststarch is expected to see profits for the year to the end of last month down 23% to £83m.

Tate & Lyle shares stood 1.7% lower at 642.5p in lunchtime deals in London.

By William Clarke

Twitter Linkedin
Related Stories

Evening markets: South American double whammy brings ags back down to earth

Ags lose early gains, undermined by a tumble in Brazil’s real, and falling rain in Argentina. Still, wheat futures remain in positive territory

Wheat leads respectable week for US crop exports

Sales of hard wheat - spring and winter - prove particularly strong. Cotton export data return to type - ie with strong sales but...

Can cotton prices extend their rally?

History suggests futures will not stay long in the 70s cents a pound. So which way will they trend?

Morning markets: Hard wheat regains premium over soft, amid US dryness worries

Kansas City wheat outperforms, as Plains precipitation worries extend to a dearth of snow cover. But Kuala Lumpur palm oil hits a 16-month low
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069