ADM to increase corn syrup exports to Mexico
fructose corn syrup to Mexico once the market opens up in 2008,
which will effectively tighten the supply and demand situation
further, a company executive has said.
Speaking at the Prudential Equity Group conference in Boston yesterday morning, ADM's executive vice president for global processing William Camp said Mexico is already expected to double its imports of the sweetener next year.
This would bring up its import levels of US high fructose corn syrup (HFCS) to 500,000 tons in 2007 compared to 250,000 this year.
Mexico and the US ended a decade long dispute in July this year, after the two countries concluded an agreement under which access will be granted for US high fructose corn syrup exports to Mexico
For over four years now, there has been a shut down of sales of US HFCS to Mexico, after Mexico introduced a 20 percent tax on the product in January 2002. The tax was designed to protect the country's struggling sugar industry, and to retaliate against US curbs on imports of surplus Mexican sugar after anti-dumping duties introduced in 1998 were declared illegal by the WTO in an earlier ruling.
The US Department of Agriculture (USDA) in July announced a 15-month HFCS tariff-rate quota to Mexico, as part of its sugar program provisions for 2006 and 2007.
The agreement, which covers the period October 1 2006 to December 31 2007, provides for 250,000 metric tons dry basis of HFCS access into Mexico for the first twelve months and a minimum of 175,000 metric tons, or up to a maximum of 250,000 metric tons, for the remaining three months.
An equivalent amount of access will be granted for Mexican sugar exports to the United States.
Addressing investors yesterday morning, Camp said that there is already a relatively tight HFCS supply-demand situation. If the market opens up to free trade in 2008 as expected, this would "just tighten it up that much more".
At that point, ADM said it expects the market to go higher than 500,000 tons.
Other issues raised at yesterday's conference included the future of the corn market on the back of an increased demand for ethanol.
According to Camp, this increase in demand has been "significantly larger" than it was around five years ago, and he expects it to be even higher two to three years down the line.
However, he did not express concern over supply issues.
"If you go back ten years, the corn yields in this country were 120 bushels per acre. Today, they are easily 150 bushels per acre. I think the market is responding to an increased need for corn," he said.
The company also said it plans to increase its spending in order to take advantage of opportunities in a number of its already expanding operations, including its cocoa business, which it hopes to expand around the world.
Although ADM's recent fiscal year results revealed a slight decline in its cocoa business on a year-on-year basis, the company said it is still generating strong returns, and has recently invested in a new cocoa plant in Hazleton, Pennsylvania.
