2023 Forecast: Don't Be Surprised, Be Prepared
We predict that 2023 will be the year that we are no longer surprised by the unexpected. To the contrary, the changes required to grow, remain profitable and relevant will become imbedded into buying strategies, operations, and customer relations. And valued partners who share the same goals and objectives will be necessities on this journey.
Prices for Both Beet and Cane Sugar Will Continue to Rise
Though it appears that inflation may be slowing in some sectors of our economy, food inflation has been a bit “stickier” and sugar is no exception. We expect beet and cane pricing will continue to elevate uniformly. The net effect of the removal of the bio-engineering label from beet sugar did not drop the price of cane sugar to the beet equivalent, as some customers anticipated. It did, however, elevate beets to pricing equivalency. And the pain will continue. One major U.S. supplier is already telling customer’s to plan for 6% price increases in 2024 on top of already elevated 2023 prices.
Just-In-Case Supply Replaces Just-In-Time Supply
With all the supply uncertainty due to weather events, unrest, and the leftovers of COVID, Just-In-Case Supply will continue to proliferate. Supply chain flexibility will be a necessity and buyers will continue to favor secondary and trusted suppliers - those that answer their phones and work hard to assure product is available.
And “just in case” your beet supplier declares force majeure and takes no responsibility for finding you alternative supply, suppliers (like Sugaright) who have access to a global supply of raw cane sugar offer significant risk mitigation.
The Legs of Legacy Ingredient Specifications are Getting a Bit Tired
Increased costs will motivate suppliers to be looking for more ways to save money including changing sugar specifications away from historical excessive low color requirements. The flight will continue to less processed, darker colored sucrose inputs to save both money and to meet sustainability goals.
Buyers will book as early in 2023 as their organizations permit them to as it is obvious that the beet crops are potentially short and recent weather may be problematic for the southeast domestic cane crops. The most logical solution is more raw sugar, but cane refiners are operating near demonstrated, recent capacity. The waiting game to get pick off lower prices later in the year just doesn’t work in this environment.
Labor Dynamics Will Create Opportunities to Optimize Operations
Most job losses will occur in other sectors and turnover will remain high within the food manufacturing sector (nearly 90% turnover on average in 2022). This will cause operations leadership to look for ways to shed costly, unavailable labor and turn to alternatives like liquid sucrose vs. labor intensive rail, bag and tote unloading.
Transportation Pressures will Favor Local Supply
The on-going challenges will lead to more creative transportation solutions - the best solution for high prices is high prices. This will cause companies to defer to localized supply, reducing transportation burdens, and customers moving towards self-delivery in some cases. Oil prices will likely rise making local supply alternatives even more attractive in 2023.
Borrowing Rates Will Continue to Rise
As the Central Bank strives towards its’ 2% inflation aspiration, we predict rates will continue to elevate (to roughly 5%) and sustain. This will put all kinds of pressure on the industry - likely provoking customers to ask suppliers to extend payment terms. Suppliers that are more adept at providing financing alternatives will make progress.
Big Sugar Continues to Exert Big Influence on Government Actions and Policy
Expect more of the same government pandering to big sugar without significant change in direction from the USDA. There was some evidence late in the year of a potential crack (Senators Warren/Booker letter to USDA), but memories tend to dull with new headlines and campaigns.
In 2023, Congress will start negotiating a new farm bill. That sweeping spending package gets an update roughly every five years. With Congress never more divided, companies that are strategic about how they can influence the outcome may or not be rewarded. Don’t be surprised, be prepared.
Philadelphia Fever (and neighbors)
With Sugaright’s headquarters outside of Philadelphia, we have to go with the Eagles to win the Super Bowl and the Phillies to win the World Series, the first time since Boston held that honor in 2004. Boston, however, does take the NBA crown in 2023. Keeping things in the northeast, we head across the Delaware and select the New Jersey Devils to win the Stanley Cup.
Sugaright believes that challenge breeds opportunity and we will continue to be a valued partner to assist our customers for long-term growth and success.
Thank you for your partnership today and into the future.