Tate & Lyle Profit in Line, Warns of Surging Corn Prices
Between 15 June 2012 and 20 July 2012, the September 2012 US corn futures price increased from $5.09 per bushel to $8.24 per bushel, an increase of 62%. September 2012 US corn futures price on 25 July 2012 at 18.00 BST $7.95 per bushel
26 Jul 2012 --- Tate & Lyle PLC has reported that adjusted operating profit for the Group for the first quarter was in line with expectations. The company said that overall the outlook was for expected progress this financial year while recognising the current level of uncertainty surrounding the wider economy and volatile corn markets.
“In Speciality Food Ingredients, volumes and sales grew compared with the first quarter of the previous financial year, with solid overall volume growth in the US and within emerging markets offset by a weaker performance from Europe. Sucralose volumes were lower than the prior year period (which included an unusually large volume from customers’ new product launches), primarily due to the more difficult market conditions in Europe. This, together with the impact of the strike at our joint-venture plant in Turkey, which was settled towards the end of the period, resulted in operating profit in this division being lower than our expectations,” stated Sir Peter Gershon, Chairman.
Within Bulk Ingredients, operating profit was slightly above our expectations with a strong performance from liquid sweeteners in both the US and Europe more than offsetting extremely challenging conditions in US ethanol and more normal co-product returns, following the exceptionally strong performance in the comparative period last year.
Since mid-June 2012, corn prices in the US have increased significantly as a result of the severe and ongoing drought in the mid-west and concerns over the impact this will have on this year’s harvest and corn supplies overall. Continued dry and hot conditions in central Europe have also driven up European corn prices.
Co-products generated a small amount of additional income during the quarter, as we locked in prices at levels marginally higher than those anticipated during the 2012 pricing round.
“It is not clear how the current volatility in the corn price and markets that drive co-product demand and pricing will impact the business over the remainder of the year. As in previous years, we will continue our strategy of maintaining full corn silos in the US to secure supply against the backdrop of tight market conditions,” Gershon added.
Between 15 June 2012 and 20 July 2012, the September 2012 US corn futures price increased from $5.09 per bushel to $8.24 per bushel, an increase of 62%. September 2012 US corn futures price on 25 July 2012 at 18.00 BST $7.95 per bushel
This week, US Agriculture Secretary Tom Vilsack announced new flexibility and assistance in the U.S. Department of Agriculture's major conservation programs to get much-needed help to livestock producers as the most wide-spread drought in seven decades intensifies in the United States. Vilsack also announced plans to encourage crop insurance companies to provide a short grace period for farmers on unpaid insurance premiums, as some farming families can be expected to struggle to make ends meet at the close of the crop year.
"President Obama and I are committed to getting help to producers as soon as possible and sustaining the success of America's rural communities through these difficult times," said Vilsack. "Beginning today, USDA will open opportunities for haying and grazing on lands enrolled in conservation programs while providing additional financial and technical assistance to help landowners through this drought. And we will deliver greater peace of mind to farmers dealing with this worsening drought by encouraging crop insurance companies to work with farmers through this challenging period. As severe weather and natural disasters continue to threaten the livelihoods of thousands of our farming families, we want you and your communities to know that USDA stands with you."
The assistance announced uses the Secretary of Agriculture's existing authority to help create and encourage flexibility within four USDA programs: the Conservation Reserve Program (CRP), the Environmental Quality Incentives Program (EQIP), the Wetlands Reserve Program (WRP), and the Federal Crop Insurance Program.
To assist farmers and ranchers affected by drought, Vilsack is using his discretionary authority to allow additional acres under CRP to be used for haying or grazing under emergency conditions. CRP is a voluntary program that provides producers annual rental payments on their land in exchange for planting resource conserving crops on cropland to help prevent erosion, provide wildlife habitat and improve the environment. CRP acres can already be used for emergency haying and grazing during natural disasters to provide much needed feed to livestock. Given the widespread nature of this drought, forage for livestock is already substantially reduced. The action will allow lands that are not yet classified as "under severe drought" but that are "abnormally dry" to be used for haying and grazing. This will increase available forage for livestock. Haying and grazing will only be allowed following the local primary nesting season, which has already passed in most areas. Especially sensitive lands such as wetlands, stream buffers and rare habitats will not be eligible.
