Our Top Ten Projections and Industry Trends for 2022
As 2021 draws to a close, we turn to 2022 and offer our insights, wisdom and just plain guesses for your consideration....
We do solemnly swear that we are thoroughly confused by our government. One part of the government (the USDA) currently supports prices running to the highest level possible for the user/consumer community while the other part (the DOJ) is taking action to prevent high prices.
Rather than increasing tariff-free Tier I volumes to meet cane sugar demand (normal and expected practice), the USDA has been limiting these Tier I supplies so cane sugar refiners have little choice but to buy Tier II sugar and pay the duties (a whopping 15.36 cents/lb!). These costs are passed on the food manufacturers who in turn pass them on the consumer. Inflationary? Of course.
On-the-other-hand, the DOJ has filed suit against two "Big Sugar" companies preventing the sale of a historically, financially challenged refinery on the basis of concentration of supply, unfair competition and increased prices . We are hopeful, that our recent case alleging monopolistic actions by ‘Big Sugar’ (Case 1:17-cv-00214-LMG) in some ways enlightened the DOJ to the anti-competitive behaviors of the traditional refiners. We encourage the DOJ to say the course to ensure the deal is quashed.
COVID-19 will sunset late in 2022, after strain Zachari (Greek for sugar) passes.
Having attended a few industry events at year-end, it is clear that folks are anxious to get back out and do business together, face to face. We like our customers, and we think they generally like us, and it has been great these past few months to meet in-person to discuss solutions to the many challenges that exist. Attendance at these 2021 events was 50-75%, we think we’ll see attendance return to normal in late 2022 as the vaccine rate goes up and more therapeutics become available allowing companies to loosen their travel bans.
History is not always a predictor of the future, however it would project some significant disruption in supply - either weather, crop failure, port labor strike or something combustion related - will occur.
As a result, optionality will rule the day and fewer customers, of significant volume, will remain single-sourced. It is worth mentioning that if suppliers really cared about their customers, they would be encouraging diversification of supply rather than up-charging for it. That defines a real partnership: proactive and cooperative.
Sustainability will continue to rule the day and gain interest from the customer community looking for supply-chain visibility and projects to sponsor.
With the speed with which information can travel, users do not want to put their brands at risk with suppliers who have a shady history or have been associated with past incursions. The micro-refinery business model optimizes the supply chain and through its darker color sucrose minimizes refining and utility costs.
The labor market will continue to be tight, driving up labor input costs with a 61% labor participation rate.
Labor costs will continue to increase, and companies will look for ways to eliminate labor, specifically moving away from dry sugar handling and moving towards liquid sucrose when possible.
Supply chains will remain stretched; especially if you’re on the West Coast.
As we creep up on the July expiration date for the International Longshore and Warehouse Union labor contract negotiations, we expect the issues to worsen. Based upon other union negotiations this year across industries, this will not be easy. Carriers will continue to gain more influence in the industry. Customers that unload consistently and refineries that run consistently will be preferred routes by drivers and trucking companies.
Demand for oil will increase as the global economy recovers leading to a flurry of fuel surcharges in 2022.
The nature of our micro-refinery business model provides some insulation to those rising costs, as we are located closer to our customers. We also hedge fuel to mitigate these risks for us and for our customers. We have never sent a customer a fuel surcharge invoice in our history.
Sugaright’s micro-refinery strategy of co-locating near large customer concentrations will continue to gain momentum.
This is not necessarily a new concept; the automotive industry has embraced the ‘supplier park concept’ in conjunction with the keiretsu concept after World War II. They changed the way the Japanese made automobiles; we are trying to do the same with sugar. Rising logistics expenses will be a catalyst for expansion.
Hail Mary’s are successful 2.5% of the time in the NFL, that is about how successful buyers are going to be waiting to book volume for 2022 at lower pricing, yet many continue uncovered as 2021 sunsets. In general, buyers who have waited will be disappointed.
The Packers will win the Super Bowl. The Yankees will win the World Series. The Maple Leafs will take home the Stanley Cup. Finally, Golden State will beat the Nets to win the Larry O’Brien Trophy because unvaccinated Kyrie Irving is unable to play in home games.
No matter your holiday plans, we hope they are merry and bright and full of an abundance of sweet indulgences!
The CSC Sugar and Sugaright Teams