What’s ahead in 2014 for sugar, oil and flour?

February 3rd, 2014


Category: Commentary, Grains, Oilseeds, Sugar

(IngredientNews) – Below is a look at the forces shifting the sugar, oil and flour markets in 2014 as presented at the International Food Products’ webinar on Jan. 28th view here. Featuring sugar expert Bill Holtgrieve, flour legacy Carl Zimmerman and commodity specialist Alex Norton, the webinar revealed the latest news and predictions on key commodities’ supply and pricing in 2014. If you missed it, here’s the latest from International’s experts:


Short-Term Factors

-The world sugar market is currently in surplus with prices heading downwards to 13 cents.

-China’s demand is currently soft due to a built up stockpile.

-Hand-to-mouth buying is occurring with buyers looking, but not extending coverage.

-The spread between the #11 and #16 markets is widening.

-Overall demand seems to be softer.


Long-Term Factors

-The domestic cane crop will probably be forfeited as the #16 market heads below forfeiture.

-The dislocation of sugar in the Midwest is potentially due to the decline in beet refiners selling bags with expensive boxcar rates, warehouse costs and differential charges.

-A big factor affecting the #16 market is how the USDA can control the Mexican sugar surplus brought on by NAFTA. The sugar surplus is an issue that American taxpayers will eventually have to pay themselves in taxes.


Price Outlook in ‘14

-Beet bulk basis will be pressured by domestic cane and Mexican pricing.

-Bulk basis could continue to slide towards forfeiture levels. This is a repeat of last year.

-Having patience in buying will help for lower pricing, barring any catastrophic event.



Short-Term Factors

-US soybean oil prices have been under pressure the last year or so.

-Soybean meal and export demand has been incredibly strong. The meal demand has left a surplus of soybean oil, driving prices lower.

-Biodiesel production has dropped off at the beginning of the year, which leaves no incentive for producers to yield soybean oil since the subsidy has expired.


Long-Term Factors

-The soybean crop in South America is expected to be quite large, which makes a big difference on domestic prices. This will make prices in the US lower.

-Palm oil stocks in Malaysia have tightened but the outlook for export demand is weak.

-How many acres of corn versus soybeans are planted? There is an expectation that there will be an increase in soybeans over corn in ‘14/’15.

-The biodiesel subsidy is not expected to be renewed but could be the biggest potential bullish surprise if so.


Price Outlook in ‘14

-We expect very little downside from current lows. We’re expecting to see a rise very soon.

-Look for prices to flatten out and turn higher in coming months.

-Prices will be attractive again in Q4 as new crop supplies come into the US.

-Basis values will firm as we approach the end of old crop soybean supplies.

-Buyers should get through Q3 and hold off on buying the new crop until later.



Short-Term Factors

-The flour market is selling well below five year average prices.

-Since October we have seen prices drop $1.20 per cwt.

-Due to railroads being unavailable, basis has been very strong and higher than anyone can remember. This will not cure itself until after Q1. After Q1, basis is expected to be back to normal levels and we will see a decline in prices.


Long-Term Factors and Price Outlook in ‘14

-The new wheat crop is off to a very good start. There is some concern with winterkill but not a major issue at this time. The extent will not become apparent until the crop emerges in the spring.

-The Horizon Milling and ConAgra merger has not yet been approved by the government. There is the looming question if the merger will even happen.

-Prices will remain close to what they are today, barring any major weather event.

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