The Future of the
HFCS Market
Influences on Demand
0
1
The Future of the HFCS Market
• U.S. HFCS demand: flat to slightly declining
• HFCS in Mexico: potential growth
• Alternatives for grind: less ethanol
2
North American HFCS Demand
25
20
Billion Pounds Dry
19.9
20.2
20.6
19.6
19.0
19.0
19.4
20.3
20.1 20.0
15
10
5
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
*
20
09
*
0
U.S.
CANADA
MEXICO
* Estimate
3
Source: McKeany-Flavell
U.S. HFCS Demand: Steady Decline
Billion Pounds (dry basis)
18.5
18.0
17.5
17.0
From its peak in 2002, total HFCS
demand has fallen 2.27 billion lbs.,
or 12.4%
16.5
16.0
15.5
15.0
4
*
20
09
*
20
08
*
07
20
06
20
05
20
04
20
03
20
02
20
01
20
20
00
14.5
* Estimate
U.S. Case Sales (Volume) of CSD
CSD Consumption in U.S.
Gallons per Capita
54
53
52
2007
2008
Coca-Cola
Down 2%
Down 8%
Pepsi
Flat
Down 6%
Cott
Down 4.8%
Down 11%*
51
*As of 2008 Q2 report.
50
49
48
47
46
45
44
U.S. CSD Consumption
43
5
2000 2001 2002 2003
2004 2005 2006 2007 2008*
* Estimate
Consumers Are Hesitant to Spend
Baseline 2005 $
Percentage
$44,000
4.00
2.97
3.26
$42,000
3.00
2.69
2.54
2.12
$40,000
1.57
2.00
1.94
1.12
1.00
0.66
$38,000
0.40
0.00
-0.20
$36,000
-1.00
$34,000
-2.00
$32,000
-3.00
1998
1999
2000
2001
2002
2003
Per Capita GDP
6
-2.00
Source: USDA ERS, Congressional Budget Office
2004
2005
2006
Annual Growth Rate
2007
2008
2009*
* Estimate
Consumers Are Concerned
7
Consumers Want Natural Foods
al
r
u
at
Third-most used claim in product launches in
N
l
Al
2007 and fourth-most popular for beverages
Bottled Water Comsumption, Per Capita
Bottled Water Consumption in U.S.
35
30
31.0
Gallons per Capita
25
20
15
10
5
8
*
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
0
* Estimate
Sources: Mintel, Beverage World Annual Report
Consumers Explore Other Sweeteners
Nearly two-thirds of Americans are concerned
about the safety of artificial sweeteners
New Products
9
2003
2007
With Agave
56
176
HFCS-Free
6
146
Sources: Datamonitor, Mintel
Americans Still Like Sweet
160
Per Capita Nutritive Sweetener Deliveries
302
140
Pounds
120
290.3
100
80
U.S. Population (in millions)
279.3
266.6
60
Refined Sugar
HFCS
20
08
*
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
40
Total Nutritive Sweeteners
* Estimate
10
Who Buys Sweetened Products
The 12-19 age group consumes the most sweeteners
11
% of Population
1980
2000
2020
Demographic Profiles
Hispanic
6.5%
12.6%
18.0%
Black
11.6%
12.3%
12.9%
Hispanic – Young, increasing
affluence, may favor nutritive
sweeteners
Asian/Pacific Islander
1.5%
3.9%
5.0%
White
79.9%
70.4%
62.5%
Source: U.S. Census Bureau, U.S. Dept of Commerce
Asian – Increasing affluence, may
favor non-nutritive sweeteners
Sugar-Free Appeals to Aging Population
% of people who regularly buy
sugar-free products ...
48%
24%
26%
18-24
25-34
34%
37%
35-44
45-54
38%
55-64
65+
People 65+ made up 12.4% of the population in 2000 and are expected to make
up 20% by 2030.
12
Carbonated Soft Drink Industry
Market Share: Regular Nutritive CSD vs. Diet
80%
2008: Diet makes
up over 30% of total
75%
Diet
70%
Regular
65%
13
Source: Beverage Marketing Corporation
* Estimate
20
08
*
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
60%
Future of HFCS Capacity
• No major capacity changes over the next
ten years.
• Wild card: Tate & Lyle Fort Dodge, Iowa
facility may add HFCS capacity – but
probably not before 2011/12.
14
Theoretical HFCS Production
Capacity vs. Demand
Billion Pounds (Dry).
Total HFCS
25
100%
20
80%
15
10
Cargill re-opens
Dayton, Ohio
and Decatur, Ala.
Industry expansion
for Mexico
Cargill stops HFCS
production at Dayton, Ohio,
then shutters Dimmitt, Tex.
and Decatur, Ala.
Capacity Utilization
60%
40%
20%
5
Total Capacity
0%
19
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
20 07
0
20 8*
09
*
Total Demand
19
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8*
09
*
0
Capacity Utilization (%)
Includes Canada and Mexico. Assumed capacity expansion: 1% annually through 2003 due to de-bottlenecking.
15
Source: McKeany-Flavell
* Estimate
MEXICO - Estimated HFCS Imports
600
Thousand Metric Tons
Price of sugar within Mexico makes it
difficult for U.S. HFCS to compete
500
440
400
300
300
200
155
100
400
290
200
262
175
100
55
30 2
25
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
*
20
09
*
0
416
350
385
500
*Estimate
16
Source: Mexican Trade Sources and McKeany-Flavell
Wet Milling Industry Compensates
for Slowdown in HFCS Demand
• Industry Consolidation
• Capacity Reduction
• Grind Diversification
– Ethanol, specialty starches, dextrose feedstock,
crystalline fructose, bioplastics
– About 2.0 billion lbs. (wet) of HFCS grind reallocated
to other products since 2002
– Demand down for these products
17
U.S. Corn Wet Milling Usage by Product Line
2008/09 Crop Estimate = 12.101 Billion Bushels
Wet Milling Usage by Product Line
% of Crop
Fuel Ethanol = 3.600 Billion Bushels*
29.8%
HFCS = 588 Million Bushels
4.9%
Starch = 175 Million Bushels
1.4%
Corn Syrup & Dextrose = 303 Million Bushels
2.5%
Cereal and other products = 226 Million Bushels
1.9%
Industrial Alcohol = 126 Million Bushels
1.0%
Beverage Alcohol = 25 Million Bushels
0.2%
Total = 5.043 Billion Bushels
41.7%
*Includes Dry Milling
In 1975, corn refiners used 5% of the corn crop
18
Source: USDA and CRA
Numbers may not add due to rounding
Biofuels Mandate by Type
Biofuels Mandate by Type
40.00
35.00
Billion Gallons
30.00
25.00
20.00
15.00
10.00
5.00
Conventional Biofuel*
20
22
20
20
20
18
20
16
20
14
20
12
20
10
20
08
20
06
0.00
Advanced Biofuel
*Corn starch-based ethanol
19
Ethanol Supply/Demand/Capacity
Utilization
20
(Billion Gallons)
Demand
Domestic Supply
Utilization
1999
1.5
1.7
88%
2000
1.7
1.9
89%
2001
1.9
2.2
86%
2002
2.1
2.5
84%
2003
2.8
2.9
97%
2004
3.6
3.7
97%
2005
4.0
4.3
93%
2006
5.0
5.4
93%
2007
6.5
7.5
87%
2008
9.0
11.5
78%
2009
10.0
12.5
80%
2010
12.5
14.0
89%
2011
13.5
15.0
90%
2012
14.5
15.0
97%
Source: McKeany-Flavell estimates
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
Ethanol trading at premium to RBOB gas
reduces blender incentive to use ethanol
3/
21
1 1 /20
/2 05
8/
20
8/ 05
7/
2
4 / 00
16 6
/2
10 00
/1 7
1 1 /20
/2 07
0/
20
1/
0
14 7
/2
3 / 0 08
6/
2
4 / 00
28 8
/
6 / 20 0
18 8
/2
8 / 0 08
8/
2
9 / 00
30 8
1 1 /20
/1 08
9/
2
1 / 00 8
13
/2
00
9
$ per Gallon
Ethanol vs. RBOB Gasoline Pricing
Ethanol (CBOT)
Unleaded/RBOB (NYMEX)
Note: as of Dec. 29, 2006, unleaded gas contract replaced by RBOB contract on NYMEX
21
RBOB = Reformulated blendstock for oxygenate blending
Key Factors that Impacted HFCS
Negotiations for 2009
• U.S. HFCS demand: flat to slightly declining
• HFCS in Mexico: potential growth?
• Alternatives for grind: fewer options - less
ethanol demand
• HFCS prices at 20% to 25% discount to sugar
22