Despite modest but steady growth in sweetener demand, ample supplies of sugar, both in the United States and the world, likely will keep sugar prices stable and well below last year’s levels. Corn sweetener prices, however, could move higher because of sustained high corn prices and potentially increased exports to Mexico.

Still, the U.S. sweetener situation will be somewhat in a state of flux for the next several months over uncertainties about trade with Mexico, competition for corn from the ethanol sector and a new farm bill. And always in the background is weather, with the U.S. beet crop off to a good start but above-normal hurricane activity forecast for Florida and Gulf coast cane areas.

Perhaps more troubling for confectioners, though, are soaring prices for other ingredients, especially dairy products, with many prices at record highs and some supplies tight or unavailable.

Meanwhile, Cargill, Minneapolis, and the Coca-Cola Co., Atlanta, recently said they plan to produce and market Rebiana, a non-sugar, natural sweetener that could impact the high intensity sweetener market at some point, although approval in the U.S. is thought to be a couple years away.

Per capita use down but total use up

Efforts to link sugar and corn sweeteners as contributors to obesity, especially in children, have had some impact on declining per capita use of sweeteners, particularly high-fructose corn syrup (H.F.C.S.), said Thomas Earley, executive vice-president of Promar International, an Alexandria, Va., consulting firm. Rising commodity prices in general also could dampen demand, he said.

Total caloric sweetener consumption on a per capita basis, (including sweeteners in imported products) peaked at 153.9 lbs in 1999 and dipped to a recent low of 144.7 lbs in 2006, according to U.S. Department of Agriculture data. But total demand for sweeteners has increased because of population growth of about 7% since 1999. Total sweetener use at 43,186 million lbs (dry basis) in 2006 was up slightly from 1999 but was down from the 2005 peak of 43,468 million lbs, the U.S.D.A. data shows.

Changes within sweetener categories over that time have been significant. Per capita refined sugar consumption peaked at 66.3 lbs in 1999, sank to 61 lbs in 2003 and was estimated at 62.5 lbs in 2006. Corn sweeteners have slipped steadily from the 1999 peak of 83.5 lbs to 75.2 lbs in 2006. Honey and edible syrups have held steady at 1.5 lbs per person. But sugar in imported products more than doubled during that period, from 2.5 lbs per person to 5.4 lbs.

Total sweetener use by category since 1999 shows an increase of about 1% in refined sugar, 14% in honey and 10% in edible syrups, a decrease of 4% in corn sweeteners and a dramatic increase in sugar from imported products of nearly 2.3 times.

Sugar deliveries in the first seven months of fiscal 2007 (October-September) were slightly below year-earlier levels, based on the latest U.S.D.A. data. April shipments, though, were up 9.5% from April 2006.

Global sugar production in 2007-08 was projected by the U.S.D.A. at 163 million tonnes, up 1% from a year earlier and up 13% from two years ago. Production in 2007-08 is expected to be up in most major producing and exporting countries, except for the European Union and the United States. The International Sugar Organization (I.S.O.) projects a record large global sugar surplus this year, with even larger production in 2007-08. World consumption was expected to grow at about the 10-year average of 2.3%, the I.S.O. said. The surplus is expected to keep pressure on prices, which recently have been at two-year lows.

Brazil, the world’s largest sugar producer and exporter, will continue to control excess production by converting more than half of its projected 33-million-tonne crop to ethanol.

U.S. beet and cane sugar production for 2007-08 is projected by the U.S.D.A. at 7.5 million tonnes, down 3% from 2006-07. Midwest spot beet sugar prices have been in the 25@25½c a lb range since January, compared with 35@36c a year earlier when prices still were working down from the Hurricane-Katrina-induced high of 40@42c in late 2005. For the 2007-08 marketing year Midwest beet has traded mostly at 25@25½c a lb, although it is estimated that less than half of the 2007-08 supply has been booked.

Mr. Earley predicts prices will be "flat on sugar" in 2008. He expects U.S. beet sugar production will be above that projected by the U.S.D.A., and imports from Mexico also will be higher than projections, which means supply will be "abundant."

Key to the U.S. situation in coming months will be Mexico, with tariffs on sugar and corn sweeteners going away Jan. 1, 2008, under provisions of the North American Free Trade Agreement. The U.S.D.A. recently estimated 2006-07 Mexican cane sugar production at 5.3 million tonnes, up from some earlier private estimates as low as 5 million, and projected 2007-08 production at 5.6 million tonnes, which would indicate additional supply available for export to the U.S., especially if U.S. shipments of H.F.C.S. to Mexico increase and displace sugar demand in that country.

Meanwhile, confectioners also have to contend with much higher prices for other ingredients, especially dairy products. Despite monthly milk production above year-ago levels every month for more than two years, prices are up about 50% from a year ago and are forecast to remain strong through the middle of 2008. Dry dairy product prices have soared, with dry buttermilk, for example, up 45% since Jan. 1 and triple the year-ago price.

Egg product prices also have moved well above year-ago levels, but have tended to fluctuate more than most other ingredients. New exports that began last fall contributed to tighter egg supplies, at the same time higher feed costs pushed egg prices higher. Dried egg white prices in mid-June were up 75% from last year. Export shipments appear to be over, at least for now, but processors expect egg and egg product prices to remain well above year-ago due to feed costs.

Consistently strong corn prices, just slightly below the 10-year highs set last fall, likely will translate to higher corn sweetener prices when new contracts are negotiated later this year, Mr. Earley said. The potential for additional shipments to Mexico also could keep supplies tight, despite consistently weakening demand in the U.S., the I.S.O. predicted.

"Corn millers still face high feedstock costs over coming months because of strong offtake of corn for ethanol production," the I.S.O. said.

Cocoa prices, meanwhile, appear to be holding about steady. The latest forecast from the International Cocoa Organization (I.C.C.O.) called for a global cocoa deficit of 145,000 tonnes in the current marketing year (2006-07). However, a large carryover from 2005-06 means cocoa supplies will remain adequate, and the I.C.C.O. projected increased production in 2007-08.

Price changes have been reflected in Food Business News’ ingredient indexes, which are based on ingredient costs using standard industry formulas. In mid-June the index for vanilla ice cream had soared about 75% above the year-ago level while the milk chocolate bar index was up about 25%.

Although strong opinions about the U.S. sugar program abound, and sugar users and producers have been aligning their supporters on the issue, the program as contained in the new farm bill could be a "non-issue" for now. The House Committee on Agriculture has proposed leaving the sugar program "as is" in the new farm bill, except for extending it through 2012. The U.S.D.A. also had recommended only minor changes to the program.

The next key for U.S. sugar producers will be the U.S.D.A. announcement of the overall marketing allotment quantity, which usually comes in July, although the effect on users as related to price or quantity should be minimal, due to plentiful supply.