2024: The Good, the Bad and the New

As 2024 unfolds, we offer these 10 predictions for the new year....

1. Beet and cane pricing will run lower earlier in the year and then run higher in the back-half for 2025.

Customers will take advantage of the lower pricing in the first quarter helping to consume available supply, leading to more bullish pricing in the back-half of the year. Farmers and producers undoubtedly have higher operational costs, so their appetite to accept lower prices will be minimal.

2. Mexico crop volatility will persist.

We expect a severely low crop yet again in Mexico (we are predicting 4.65MM MT’s) causing significant supply chain stress across the border. This deficit in domestic supply in Mexico will increase the demand for U.S. sugar into Mexico, resulting in higher prices in the U.S.

3. Interest rates will likely not come off until later in the year – which will have a dulling effect on sales and pressure on companies to provide financing solutions.

Companies that can get by on less inventory, who take liquid perhaps, will be better positioned to weather the ‘higher for longer’ environment. Solid companies like Sugaright that can provide financing solutions will be in a better position to compete. The estimates are from 3-6 interest rate cuts, trending lower as the year progresses.

4. Although the expiration of the Farm Bill adds some uncertainty, expect more of the same government pandering to Big Sugar without significant change in direction from the USDA.

There was some evidence of a crack again late last year with the engagement of the Government Accountability Office (GAO). This may be an attempt to address detrimental inefficiencies in the administration of the trade aspects of the U.S. sugar program, but the actual ability of the GAO to materially change the agreements is minimal. Memories tend to dull with new headlines, especially in an election year, and we expect the 2023 (2024?) Farm Bill to pass without much change. At best, users could hope for some cosmetic changes that provide for less volatility at elevated prices.

5. The last low color sugar specs will change.

Every buyer and R&D person who took the position of, ‘not on my watch’ to darker sucrose inputs, will have to answer to their senior procurement, financial and company leaders as to “Why not? Others are using it?”. With slowing sales and retailers pushing back on higher prices, companies will look to cut costs, especially in ways that have no impact on overall product quality or consumer preference. The last havens for fully refined sugar products like alcohol and beverages, have begun to crack and eventually they too will fall.

6. We have great confidence that food companies will do whatever is necessary to maintain serving sizes on nutritional labels even if they do not reflect what consumers actually consume.

If serving sizes require reformulations to meet added sugar targets, we may see reduced added sugars across product channels. Therefore, we are predicting a small contraction in sugar demand in the U.S. in 2024. There is a lot of chatter about the impact weight loss drugs may have on the consumption of sugar. But there is no hard evidence to date that the effect will be substantial until when (and if) they are used more widely, and the long-term changes in eating patterns are known.

7. The great expansion of capacity and supply chains that took place in concert with the COVID-19 pandemic will unwind.

Much of the additional capacity that was put online, manufacturing and warehouse, was in response to transitory demand and/or false demand signals. As companies take this unnecessary supply off-line, these plant closures will lead to contract complications and some sugar deliveries will be looking for new destinations.

8. Manufacturing labor dynamics will remain tight.

This is the new normal even though the number of available openings is at a pre-Covid level (1.4 jobs:1 unemployed individual). This will continue to motivate operations leadership to look for ways to shed costly, unreliable labor and turn to alternatives like liquid sucrose vs. labor intensive rail, bag and tote unloading. Liquid sucrose will continue to be an ingredient of choice over dry sugar and its many problems.

9. Transportation will continue to improve in 2024, but it needs to.

To meet public GHG emissions reduction goals, companies will defer to localized supply wherever possible, reducing transportation risks and exposure. The long-term story on oil is bullish, but sluggish short-term economic factors and improved energy resiliency will make it less of a story.

10. We swung and missed on our sports predictions entirely in 2023, so it is with great apprehension that we make the following predictions: