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MPR’s Brigid Shea interviews Robert Spaeth, vice-president for sales and marketing for the Corn Products Council (CPC International), who discusses the bright future for corn and sugar products.

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(00:00:00) The sugar cycle is now on the upswing. Whereas the past four or five years prices were very low production exceeded consumption by a good deal throughout the world. They were tremendous overburdening stocks throughout the world and that Force the price down. As an any cycle it tends to repeat itself. And what happens is in Sugar that low prices caused increased consumption underdeveloped countries feed more sugar and cause a discouraging a discouragement of production increases. If you can't get the returns, you don't expand your industry consumption is increasing a two to four percent per year inexorably every year on year after year two to four percent production is now dropping off because of the very low prices in the bad returns. This is the first year in the past five where consumption will outpace production by a good (00:01:00) amount. Now why is it (00:01:03) production drops off at very low prices? Because the returns aren't there you're not going to continue to produce in some areas when you're losing money some areas just cut back production. I mean consumption especially in underdeveloped countries. Increases more than usual when the prices are very low. It's just the cheapest energy source, you can feed your people in India has increased their sugar consumption 35 percent in one year unbelievable. That's what happens now so much. So the consumption is now outpacing production will for the next couple years because there's always a lag time the prices will begin to move up on the prices get to a certain high level the production that went out a couple years ago will come back because there is a return high prices bring back consumption low prices discourage consumption. (00:01:55) I'm curious about that consumption. I would have thought and this probably reflects my awareness only of the marketing in the United States that that the consciousness of the health problems related to high sugar consumption might have caused it to drop off might have caused people to go to fake sweeteners or to Honey or to you know, some other means of getting their sweeteners is that an any effect on the market, (00:02:24) you know, a third of the world is starving two-thirds of the world are undernourished and don't have enough calories to operate. The cambodians are not interested in synthetic sweetness because of nutritional. Know the answer your question. Absolutely not what not. It states has been a slight ever. So slight downturn in Scandinavia. There's been a slight downturn but most of the world continues on their merry way consuming sugar. In fact, the first sign of effluence in an underdeveloped country is there. Turning to processed foods. and that sugar the per capita consumption the u.s. Is 95 time Britain. Its honored five in China People's Republic. It's eight pounds per they have a long way to go. (00:03:17) So there's a huge sugar (00:03:18) marketing potential again. Most of the world is underdeveloped and 95% of the world couldn't give a damn about nutritional claims by u.s. To consumer groups. Believe me. (00:03:32) Now what happens to those consumers in underdeveloped countries who are now gobble, you know, gobbling up sugar because it's so cheap what happens to them when the price of sugar shoots up again can we assume that they will continue to develop and be able to afford (00:03:45) that some of them will some of the Moon But it's it gets to be very tricky political question. It's like the Soviets increasing consciously the government increasing meat protein availability. There was a demand for and to keep social Tranquility. They've increased the per capita consumption of meat. So much so that when there's a shortfall in the grain Harvest which they had a tremendous one this year. They're forced to go out in the external Market at whatever price and buy enough grain to feed the animals to feed the people. Now, there's a very delicate political balance there. Some countries may be Southeastern. Asia will cut off sugar gets to be too hot But other countries have to walk a tightrope keeping their populist fed with the sweet so that meets or whatever. It's very very tricky (00:04:45) business. They've had that that taste it's hard to get them to go back (00:04:49) the Soviets are made the decision that going to continue to make available animal protein. (00:04:57) Now you're in the corn sweetener business and I'm curious about what particularly for the economy of this area how the the sugar beet markets are going to do as compared to the corn sweetener (00:05:13) Margot. I'll just give you an opinion just my own personal opinion that the Red River Valley will not have any trouble because they're among the low cost producers in this country. There will be some further shrinkage of the u.s. Sugar industry as the Hyksos produces can't stand the Gaff and have to get out of the business but There is a very solid place for sugar in the US economy that last slide I showed what it showed that Sugar would 1985 be about 92 pounds per capita. corn will take all of the growth in nutritive sweeteners, which there is some plus take 4 or 5 Points away from sugar, but there's still a very solid foundation for sugar and I think the Red River Valley is Is a in a good position in the u.s. Sugar industry (00:06:07) will be 92 pounds per capita in 1985. What is it now? But how much how much dough how many more pounds will we be eating (00:06:14) you'll be eating less sugar, but more total nutritive sweeteners. The roommate the difference will be in corn sweeteners. (00:06:24) Why is corn so much cheaper corn sweetener so much cheaper now? Why will it take the growth? I (00:06:30) guess the United States is by far and away the most efficient producer of corn in the entire world supplies the world with fifty percent of the Corn by the way gross fifty percent of the Corn. there are a number of byproducts from the corn wet Milling process corn oil which we make, Missoula from Corn gluten feed corn gluten meal high protein feed products which help reduce the cost of the Corn as a raw material plus our plants are very new very efficient. And we've spent hundreds of millions of dollars on Capital where as you just said the u.s. Sugar industry has not kept up. Our technology is better. Our process is better corn is a raw material is grown more efficiently in this country a lot of good (00:07:20) things. Do you think if corn sweeteners had been essentially the bulk of the of the sugar market and then people discovered beats and started producing beet sugar that because of the new capital and you know, all the Investments going into it that it would be able to have the growth that corn is having now. I mean surely because it would be new and have new (00:07:42) capital. No, I doubt it. The corn process is more efficient because of the great efficiency of the Corn growing system in the US and the high value. Of the byproducts of the Corn wet Milling process. It puts us in a large advantageous position over any sugar industry in the US. (00:08:05) Do you think it will reach a point some years down down the road where corn sweeteners will just be so much more efficient to produce that that it might might squeeze sugar beet and sugarcane out of the market altogether (00:08:21) know there's a very definite application limitations. We can't make high fructose in dry form. And also what do you do with all the dry form applications in the country? There are some applications like in the confectionery are where they can't use any type of liquid. I don't think the consumer will be using high fructose. For instance. (00:08:47) I'm curious about foreign markets in the future of domestic corn production compared with subsidized corn growing around the world. One of the big complaints that we've been hearing from sugar beet growers in the Red River Valley is that they need a stable sugar price because countries all around the world are subsidizing sugar production and there's no way they can compete with that. It's you know, losing proposition unless the US guarantees some floor for the sugar prices. (00:09:17) Well, I suppose it doesn't make any difference whether the industries of subsidized which many of them are or whether the government's are forced to sell sugar no matter what the price is. Governments are forced to keep the sugar industry going at whatever cost because of again. I'll say social Tranquility or the demand for hard currency or balance of payments. So either way, I think the US industry is Is fighting a situation where? Price is not just based on pure economics. So I'll generally agree with that. (00:09:55) But what's that going to mean in? The future will will other countries around the world continue to have to sell the sugar at whatever price they can get in there by sort of strangling the domestic sugar Market. (00:10:08) Don't forget the u.s. Subsidizes our industry also. Not to the extent that most would like them. The US adds three cents a pound to the price of sugar. Without the duty the u.s. Duty the price of sugar would be three cents low in these people in that room today. We'll all be broke. So don't think the u.s. Does not subsidize. They just don't subsidize to the extent that everyone would like or that the be crows would like (00:10:35) you foresee a day when the government will have to subsidize to a much higher degree than they are now (00:10:43) depends what your goals are if you want to keep it domestic industry viable. However, small you may have to do it. If you're of the mind to let the most efficient country produce what they can produce most efficiently then you let it go Brazil and the Philippines can produce a hundred pounds of sugar probably probably cheaper than the US industry can do for a lot of reasons cheap labor cheap land So I don't know which which way (00:11:13) I'm just thinking way down the road maybe a couple of decades from now and wondering if things like a standardization of wages somewhat these to the point where countries won't be able to produce products so cheaply because they're paying their workers so little and is standardization of that kind of thing. So that markets will even out around the world (00:11:41) that has happened in industrialized countries. The u.s. Now is not the high cost of wage country in the world. Japan has Germany is But it has not happened very much in agricultural countries. So I don't know where that chicks that we can produce an automobile cheaper than the Japanese can produce an old automobile or wages of less than Japanese wages wages of less than the Swedish a wages of less than German. But in agricultural countries that has not progressed like you like to see it progress because you'd like to see all countries being able to pay their people and being able to forestall Revolution. But it doesn't seem to be happening in many countries will see what the Chinese can do that's going to the in their 10-year leap, you know, we'll see what they can do. But there's no answer to the question. (00:12:38) What country do you think is going to be in your Market? Anyway that the big sugar producer in the future you name Brazil in the Philippines? Will they probably continue to lead just because they're to their vast natural (00:12:49) resources. So it unions a lot of sugar produced in the world. Okay, they will continue to be Cuba's second. So two communist countries are the largest sugar producers Brazil will begin to fade somewhat because of the gasohol situation. They're diverting more sugar towards gasohol. Philippines will take some sugar out of the market and divert towards gasohol. (00:13:15) Imagine that a diversion of corn and beet and whatever other products can be used for gasohol will affect the US industry much the u.s. Sugar industry. (00:13:29) It will probably as it has now and it's small relatively small. Pull sugar from the supply side of the equation and cause the imbalance or the a balanced. Let's say between supply and demand. We're in the past that wouldn't have been and Firma prices. I think it'll it portends Firma prices, which is good for the u.s. Sugar industry from a World prices, (00:13:58) but it really won't become a sizeable chunk taken out of sugar production and diverting to gas hole. (00:14:09) Yes. There will be sizable chunk ultimately. how big do you think I have no idea the Brazilians hope to have replaced 20% of all of their gasoline usage by ethanol or gasohol by 1985 and that's a hell of a lot of sugar and molasses. (00:14:31) Is this something that that sweetener producers in the US are are watching very carefully to see if it could be adopted in the (00:14:39) US. We've just announced CPC a feasibility study for a joint venture with Texaco to make ethanol gasohol is 20 is 10 percent ethanol eight. Ninety percent unleaded gasoline. Okay. We just announced a feasibility study for joint venture with Texaco to make ethanol at one of our corn Woodling plans. So yes, we're watching very carefully and we're doing things we're putting money up.


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