2023 Predictions: How Did We Do?
On the cusp of the New Year, we find it helpful to reflect on the accuracy of past assumptions. Last year we predicted that 2023 will be the year that we would no longer be surprised by the unexpected. To the contrary, the changes required to grow, remain profitable and relevant became imbedded into buying strategies, operations, and customer relations.
So how did reality mirror predictions? And how will the past inform the future?
Prediction: Prices for Both Beet and Cane Sugar Will Continue to Rise
Correct!
Prices ran high at the end of 2022. due to expected supply issues. And as we predicted they continued to elevate throughout 2023 with some slight deceleration towards year end as new crops came in.
Prediction: Just-In-Case Supply will replace Just-In-Time Supply as buyers will favor trusted suppliers and welcome secondary suppliers.
Correct!
In general, this was on target, as customers continue to search for value, with suppliers that have flexibility in raw supply. The bruising from past force majeures remains.
Prediction: The Sacred Cows of Legacy Ingredient Specifications Are Being Put Out to Pasture
Correct!
The Cows are more nervous than ever. ‘Big Sugar’s costly and unnecessary color standards that have been around for decades are falling one category at a time. Ice cream, creamers, teas, baked goods, carbonated beverages, energy drinks, liquors, beer and now seltzers are all finding it hard to resist the flight to approving and using less processed liquid sucrose.
Prediction: Buyers will book early
Correct!
This was clearly the case in 2023 as contracts were signed as soon as volumes were identified. Folks that waited got stung as the year went by. There was a respite in the last few days of 2023, which allowed some to cover 2024 at a more favorable level.
Prediction: Big Sugar will continue to make its’ problems their customers’ problems
There may be some cracking here, perhaps an unintended or intended consequence of 1) a recent consolidation in the industry, and 2) U.S. crops demonstrating solid yields in 2023 for 2024. In the future, it will become harder to claim force majeure events when beet refineries now have direct access to cane. But this comes at a cost. Despite testimony to the DOJ, the price of industry consolidation is going to lead to higher prices. Economics 101.
Prediction: Labor Dynamics Will Create Opportunities to Optimize Operations
Correct!
The labor dynamic continued to be challenging for most manufacturers despite efforts to raise wages. There are still 1.4 jobs available at year-end for every unemployed worker, as the contraction in workforce participation has stuck. Companies continue to pursue dry to liquid conversions as a more sustainable and economic solution, that is also far less labor intensive. With labor costs high, the ROI of the capital investment becomes very attractive. More so with interest rates starting to come down.
Prediction: Transportation Pressures will Remain Tight
This has been a bit of a mixed bag,
We saw a lot more physical assets come to the marketplace, which was deflationary on freight pricing, but it came later in the year. Industrial users continue to demonstrate a preference for local supply chains which permit lower inventories and less risk. We see this deceleration of transportation costs continuing on the physical asset side in 2024 as post-Covid capacity continues to work itself out of the system.
Prediction: Borrowing Rates Will Continue to Rise
We underestimated the rise to level out at a 5% interest rate.
This increase put pressure on customers to ask suppliers to extend payment terms. But rates rise for everyone, so different payment terms necessarily came with commercial tradeoffs.
Prediction: Big Sugar Will Continue to Exert Big Influence on Government Actions and Policy
Nailed it, but that was an easy one.
Nothing ever came of the Senator Warren & Booker letters to the USDA. We now have the Government Accountability Office working with members of Congress to address detrimental inefficiencies in the administration of the trade aspects of the U.S. sugar program – so who knows? Perhaps an expired Farm Bill could be a catalyst for change, but doubtful as a divided House pushed that into the new year.
Prediction:
Philadelphia Eagles Win the Super Bowl
Phillies Win the World Series
Boston Celtics Take the NBA crown
NJ Devils Win the Stanley Cup
Except for the Eagles getting TO the Super Bowl, this was a big miss.
So 0-4.
Let’s just say that we’ll stick to sugar!
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.
