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World Biofuels
Symposium
November 13-15, 2005
Beijing, China
2nd Annual Canadian Renewable Fuels Summit
December 13-15, 2005
Toronto, Ontario, Canada
Hosted by:
Candadian Renewable Fuels
Association
National Biodiesel
Conference & Expo 2006
February 5-8, 2006
San Diego, California
Organizer:
National Biodiesel Board
11th Annual
National Ethanol Conference: "Policy & Marketing"
February 20-22, 2006
Las Vegas, Nevada, USA
Sponsored by:
Renewable Fuels Association
22nd
Annual International Fuel Ethanol Workshop & Expo
June 20-23, 2006
Milwaukee, Wisconsin, USA
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Posted on
December 12, 2001ADM, and others look to higher 2002 sweetener prices By Deborah Cohen
CHICAGO, Dec 5 (Reuters) - Archer Daniels Midland Co. and other agribusiness companies expect big price increases for corn sweetener next year as tightening capacity and industry consolidation give them more bargaining power and may signal a turnaround for the depressed market, analysts said.
ADM, the largest maker of high-fructose corn syrup used by Coca-Cola Co. , PepsiCo Inc. and candy makers, is angling for a price boost of 15 percent to 20 percent for 2002, said a company spokesman, who confirmed that negotiations for next year's prices are in the works.
A spokeswoman for rival Corn Products International Inc., the No. 3 U.S. corn sweetener maker, said her company is also in talks for increases ``on the same trends'' as ADM. Most soft drink customers lock in their pricing with suppliers for about a year at a time.
``You have tight capacity,'' said Prudential Securities analyst Jeffrey Kanter. ``If there's ever a time where you can get better pricing, now is the time.''
Corn milling capacity has fallen as major producers such as ADM and privately held rival Cargill Inc. have shifted production to make ethanol, a bio-fuel. ADM said it has shifted more than 10 percent of its capacity to produce the fuel, which is considered cleaner than other gasoline additives.
Coca-Cola was not immediately available to comment on the procurement of sweeteners for its drinks. But top Coke bottler Coca-Cola Enterprises Inc. said on Tuesday it hopes to raise retail soda prices next year, in part to offset an expected climb in sweetener costs.
Pepsi Bottling Group Inc., the largest bottler of Pepsi drinks, could not immediately provide details about its purchasing arrangements.
Any possible increase in retail prices of soft drinks would come from the bottling companies, not from Coke or Pepsi.
Decatur-based ADM makes about one-fourth of the more than 30 billion pounds of corn sweetener produced in the United States each year. Successful negotiations by the company likely will translate to similar contracts for Corn Products, No. 2 corn sweetener maker Cargill and No. 4 A.E. Staley, a Tate & Lyle unit, analysts said.
Still, most doubt ADM and its rivals will be able to lock in the price boost they are seeking. Instead, they are looking for increases about 9 percent to 10 percent, or roughly 2 cents a pound.
``I'm expecting a high-single-digit to low-double-digit increase,'' said Merrill Lynch analyst Leonard Teitelbaum.
A MORE RATIONAL MARKET
Prices for high-fructose corn syrup began to dive in the late 1990s after manufacturers overbuilt capacity to meet expected growth in Mexico, which failed to materialize due to regulatory hurdles. Prices fell to a low of about 12 cents a pound on average in 1997.
Recently prices have averaged around 13 cents to 14.85 cents, depending on the region, according to trade publication Milling & Baking News. Even a big price boost would still leave the price of sweetener well below that of sugar in the United States, which currently trades around 21 cents a pound.
``The industry has been beaten up,'' said Banc of America Securities analyst William Leach. ``Margins are a little better this year, but they're still poor.''
Besides giving manufacturers more bargaining power, several recent deals may put a halt to steep price undercutting from smaller players, analysts say.
Early last month, Cargill agreed to buy a 56 percent stake in French agribusiness concern Cerestar , one of Europe's largest corn millers, for $428 million. Though a minor player in the United States, Cerestar plants here had been blamed for undercutting prices in efforts to build market share, making it more difficult for U.S. makers to lock in favorable contracts.
In addition, Corn Products formed a joint venture earlier this year with Minnesota Corn Processors LLC, a cooperative, further helping to consolidate the industry.
``There just aren't the small players that there were in the past to be disruptive in pricing,'' said Midwest Research analyst Christine McCracken. ``You should have a more rational market.''
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