U.S. corn syrup makers slash prices to fend off cheap sugar

Mon Nov 11, 2013 12:00am EST
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By Marina Lopes and Chris Prentice

NEW YORK Nov 11 (Reuters) - Corn syrup producers are scrambling to defend their once-dominant share of the U.S. sweetener market, offering rare price cuts for next year as tumbling sugar prices erode the advantage of typically cheaper syrup.

Commodity merchants Cargill Ltd and Archer Daniels Midland Co are kicking off negotiations with high-fructose corn syrup customers over next year's supply contracts with price cuts of 10 percent, according to letters seen by Reuters.

A switch to sugar would further erode corn's role in the sweetener industry, which had already begun to shrink in recent years as studies linking high fructose corn syrup with obesity turned off consumers. Yoplait, General Mills Inc's yogurt giant, removed it from their products in 2013 because of customer demand.

Corn syrup remains the most popular sweetener with a market share of 52 percent, having secured the market over the past three decades as high U.S. sugar prices prompted many major beverage companies to search for cheaper alternatives for use in soda.

However, its competitive cost edge is now under threat. Although corn prices have tumbled this year ahead of a record 2013 harvest, U.S. sugar prices are languishing at multiyear lows as the North American market remains awash in supplies.

In January, spot refined sugar prices fell to a discount against equivalent high-fructose corn syrup prices for the first time ever, according to data compiled by the U.S. Department of Agriculture going back to 2000.

Traders cautioned that the spot market for corn syrup is thinly traded and that 2013 contract prices were already lower than spot trading prices.

But the trend is clear: sugar has never traded so closely with its corn counterpart.   Continued...