{"id":196080,"date":"2023-09-13T12:00:00","date_gmt":"2023-09-13T16:00:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=196080"},"modified":"2025-02-12T10:22:26","modified_gmt":"2025-02-12T15:22:26","slug":"sugar-futures-talk-about-a-cereal-killer","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/podcasts\/ibkr-podcasts\/sugar-futures-talk-about-a-cereal-killer\/","title":{"rendered":"Sugar Futures &#8211; Talk About a Cereal Killer"},"content":{"rendered":"\n<p>Are breakfast cereals getting too expensive? The price of sugar futures may be to blame. Find out, as Sean McGovern, vice president of research at McAlinden Research Partners, Jeff Praissman, IBKR\u2019s senior trading education specialist, and IBKR senior market analyst Steven Levine explore the global economics of the sugar trade, its affects on producer and consumer prices, and its influence on the stocks of certain consumer staples companies. Also, what can traders and investors learn about India\u2019s role as a global exporter? What risks does El Ni\u00f1o pose to the sugar industry? And how much could the next box of your favorite breakfast cereal cost? All this and more as our agricultural commodity series continues\u2026.&nbsp;<\/p>\n\n\n\n<p><strong>Note<\/strong><em><strong>:<\/strong>&nbsp;Any performance figures mentioned in this podcast are as of the date of recording (August 28, 2023).<\/em><\/p>\n\n\n\n<iframe title=\"Sugar Futures \u2013 Talk About a Cereal Killer\" allowtransparency=\"true\" height=\"150\" width=\"100%\" style=\"border: none; min-width: min(100%, 430px);height:150px;\" scrolling=\"no\" data-name=\"pb-iframe-player\" src=\"https:\/\/www.podbean.com\/player-v2\/?i=anddy-14a56c4-pb&#038;from=pb6admin&#038;share=1&#038;download=1&#038;rtl=0&#038;fonts=Arial&#038;skin=1b1b1b&#038;font-color=ffffff&#038;logo_link=episode_page&#038;btn-skin=c73a3a\" loading=\"lazy\"><\/iframe>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-summary-ibkr-podcasts-ep-103\">Summary \u2013 IBKR Podcasts Ep. 103<\/h2>\n\n\n\n<p><em>The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made<\/em>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Hello, and welcome to <a href=\"\/campus\/category\/ibkr-podcasts\/\">IBKR Podcasts<\/a>. I&#8217;m Steven Levine, senior market analyst at Interactive Brokers. I&#8217;m your host for today&#8217;s program. We\u2019re very fortunate to have Sean McGovern, vice president of research at <a href=\"https:\/\/www.mcalindenresearchpartners.com\/\">McAlinden Research Partners<\/a>, back with us again for our ongoing series on agricultural commodities. McAlinden Research Partners is an independent investment strategy group. They focus on identifying alpha-generating investment themes, and they\u2019ve got a lot of great commentary on our <a href=\"\/campus\/contributors-categories\/mcalinden-research-partners\/\">Traders\u2019 Insight<\/a> platform. You&#8217;ll want to check that out. Great to have you back, Sean!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Great to be back.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-0\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Jeff Praissman\u2019s also here with us. He&#8217;s our senior trading education specialist here at IBKR. How are you, Jeff?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman\"><strong>Jeff Praissman<\/strong><\/h3>\n\n\n\n<p>I&#8217;m doing well, Steve. Good to see you and Sean, again. Thanks for having me on the podcast.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-1\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Very happy to have you here. Jeff\u2019s been using our <a href=\"https:\/\/www.interactivebrokers.com\/en\/trading\/tws.php\">Trader Workstation platform<\/a> and tools, along with his own research. He&#8217;s provided us with some really great insights into the performance of futures prices, as well as related company stocks and other instruments \u2013 from coffee to wheat to corn \u2026 cocoa and cattle. You can check out our <a href=\"\/campus\/category\/ibkr-podcasts\/\">past podcasts<\/a> for some great information there. And he&#8217;ll be helping us out today on the highs and lows of the sugar futures market. Excited to be talking about that today and how it might be affecting breakfast cereals.<\/p>\n\n\n\n<p>So, just wanted to kick things off with some fun facts:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Around the mid-19th century, a New Orleans-born gentleman named <a href=\"https:\/\/www.acs.org\/education\/whatischemistry\/landmarks\/norbertrillieux.html\">Norbert Rillieux<\/a> invented a sugar refining process for production that transformed \u2026 [it] really revolutionize the industry. It effectively commoditized sugar from what was sort of a luxury item prior to that and made the United States a global leader in sugar production. And he&#8217;s really an interesting and inspiring historical figure. I do urge listeners to learn more about him.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>But It was also in the in the 19th century that <a href=\"https:\/\/www.historyofcereals.com\/\">breakfast cereals were born<\/a>, notably with John Harvey Kellogg&#8217;s granola, and later Corn Flakes, as well as C.W. Post&#8217;s Grape Nuts. A lot of fascinating stories behind those products as well.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>And then <a href=\"https:\/\/www.ice.com\/publicdocs\/ICE_Sugar_Brochure.pdf\">sugar futures<\/a> began trading in the U.S. on the Coffee, Sugar and Cocoa Exchange in New York and the New York Board of Trade in 1914.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>And I suppose without the commoditization of sugar, people couldn&#8217;t actually pour it over their Corn Flakes or buy Frosted Flakes or have the opportunity to purchase any number of sugar-laden cereal brands like <a href=\"https:\/\/www.luckycharms.com\/\">Lucky Charms<\/a> or <a href=\"https:\/\/www.postpebblescereal.com\/products\/fruity-pebbles\/\">Fruity Pebbles<\/a>.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It&#8217;s a market really dominated by only four companies, and we&#8217;ll be exploring that. In fact, according to <a href=\"https:\/\/nationalcerealday.com\/\">National Cereal Day<\/a>\u2026. Yes, there&#8217;s a National Cereal Day, apparently. It&#8217;s on March 7<sup>th<\/sup> \u2013 so, mark your calendars. According to National Cereal Day, roughly half of the U.S. population starts their day off with a bowl of cereal. This adds up to around 2.7 <em>billion<\/em> boxes of cereal sold every year. And, according to them, it&#8217;s enough to wrap around the entire planet Earth thirteen times over \u2026 and that&#8217;s a lot of cereal.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-sugar-trade\"><strong>The Sugar Trade<\/strong><\/h2>\n\n\n\n<p>So, okay, it&#8217;s been a little over a century, Sean, since sugar futures began trading in the U.S. \u2013 100 years ago, it started. So, what&#8217;s it look like today? Let&#8217;s start there.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-0\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Well, just give me one second here, because you&#8217;re telling me now for the first time, I&#8217;ve missed National Cereal Day this year. And it&#8217;s kind of devastating, because I guess I have to wait so many months now. Extremely underrated holiday, but I did miss it this year.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-2\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>March 7<sup>th<\/sup>. Mark your calendar. March 7<sup>th<\/sup>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-1\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>I will. I&#8217;m actually going to be preparing for that starting tomorrow. You know, we&#8217;re going to be ready for it next year.<\/p>\n\n\n\n<p>So, sugar futures are a commodity futures contract that can be traded on the Chicago Mercantile Exchange [and the] Intercontinental Exchange. So, you&#8217;re looking at the CME or the ICE. There\u2019s a couple of different types of sugar contracts out there, and we can get into that. But if we&#8217;re talking about the most widely traded contract, that&#8217;s going to be <a href=\"https:\/\/www.cmegroup.com\/markets\/agriculture\/lumber-and-softs\/sugar-no11.contractSpecs.html\">Sugar Number 11<\/a>, and it&#8217;s going to be raw sugar, and one contract is going to be worth 112,000 pounds. The contract series is only four months. So, you&#8217;ve got March, May, July, and October, and that puts the current front month in October.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-3\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>So, there&#8217;s a Sugar Number 11. You&#8217;re saying that&#8217;s the most liquid contract. There&#8217;s other numbers like Sugar Number 16, I saw. Are there other numbers? Is this like red dye number three or something? I mean, how does that work? Do they mean anything?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-2\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p><a href=\"https:\/\/www.ice.com\/products\/914\/Sugar-No-16-Futures\">Number 16<\/a> is going to relate to the delivery of cane sugar of U.S., or duty-free origin. The U.S. has these long-standing <a href=\"https:\/\/www.ers.usda.gov\/topics\/crops\/sugar-and-sweeteners\/policy\/\">subsidies and tariff programs<\/a> that supports our domestic country&#8217;s sugar farmers. So, at least 85% of annual sugar purchases have to originate from the domestic market, and Number 16 is going to fill that need. It&#8217;s also going to trade at a higher price than Number 11. There are also white sugar futures, and that&#8217;s <a href=\"https:\/\/www.ice.com\/products\/37089080\/White-Sugar-Futures\">Number 5<\/a>. Still, Number 11, raw sugar, is an unrefined industrial product that is not really for human consumption. Don&#8217;t eat that. Sometimes you&#8217;ll see things like \u2018sugar in the raw\u2019 or products claiming to be raw sugar, but they&#8217;re not actually raw, if they&#8217;re being sold in the United States. That is totally illegal. So, as I said, Number 5, white sugar, is going to be what you&#8217;re putting in your coffee, drinking your soda, so on and so forth. That&#8217;s what you would really recognize as table sugar.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-4\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Okay. But Number 11, the raw sugar \u2026 that gets put through Rillieux\u2019s refining process? And that comes out in the end as the kind of sugar that gets bought by producers, for example, like the cereal companies?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-3\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Right. Exactly.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-sugar-highs\"><strong>Sugar Highs<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-5\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>So, Jeff, looking at the Trader Workstation \u2026 how are these sugar futures performing? I mean, are you seeing any interesting trends there?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-0\"><strong>Jeff Praissman<\/strong><\/h3>\n\n\n\n<p>Yeah, so, actually, Sugar 11 is trading near its yearly high. I think April was above 27, but really hasn&#8217;t seen this level, in general, since, probably back in October 2017. I&#8217;m just looking at the <a href=\"\/campus\/trading-course\/intro-tws-charts\/\">charting feature<\/a> on the Trader Workstation. And then Sean mentioned Sugar Number 16, which, of course, as you said, is the hedging product for the delivery of cane sugar. That seems like it was relatively flat between 2008 to late 2020. And it&#8217;s just kind of climbing up now as well.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_001_TWS_SUGAR-PRICES-1100x619.jpg\" alt=\"Climbing sugar prices remain elevated; outpacing corn and wheat\" class=\"wp-image-196088 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_001_TWS_SUGAR-PRICES-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_001_TWS_SUGAR-PRICES-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_001_TWS_SUGAR-PRICES-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_001_TWS_SUGAR-PRICES-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_001_TWS_SUGAR-PRICES.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-wide-world-of-sugar\"><strong>The Wide World of Sugar<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-6\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>So, Sean, these sugar futures are at fairly elevated levels, it seems. Before maybe talking about the performance and some of the drivers, how big is this industry globally?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-4\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Well, in total, there&#8217;s about 180 million tons of sugar produced, annually. Brazil is the biggest exporter by far, with over 28 million tons being exported in the 2022 to 2023 marketing season. You also have Thailand and India as the next largest exporters, but they&#8217;re really only putting out a combined 17 or 18 million tons. That just shows how significant Brazil&#8217;s domination of this global market is. And this year, India limited their global exports to just 6.1 million tons in this marketing season. That was down from 11 [tons] in the prior year. And they met that all the way back in May. So, Brazil has been leaned on heavily to fill that gap. That reliance should become even greater next year, as <a href=\"https:\/\/www.reuters.com\/markets\/commodities\/india-set-ban-sugar-exports-first-time-7-years-2023-08-23\/\">India is expected to ban exports of sugar<\/a> totally in the next marketing year.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-7\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>What are they doing that for? Their population \u2026 internally, domestically \u2026 need the sugar?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-5\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Yes, but they&#8217;ve seen a big drop off in output totally. India has really strict restrictions on a lot of their crops, like wheat and other things. And sugar is one of those products that they&#8217;re going to look to protect their domestic market before thinking about the global market. So, yeah, totally. No sugar going out of India next year.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-no-halloween-treats-is-this-a-trick\"><strong>No Halloween Treats? Is This a Trick?<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-8\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Wow. So, I suppose this is going to put some pressure on producer and consumer prices. Where are they now, and where do you think they might be going?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-6\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>We actually do have a <a href=\"https:\/\/fred.stlouisfed.org\/series\/CUUS0000SEFR\">Consumer Price Index category for sugar and sweets<\/a>. That&#8217;s what it&#8217;s called \u2026 comes right out from the BLS. The problem is that it&#8217;s only calculated twice per year for the first and the second half \u2013 that&#8217;s obviously very infrequent. But what we can see is that the year-over-year gain in sugar and sweets prices jumped out to an all-time high of around 13% in the second half of 2022. But that increase slowed to 10.9% in the first half of this year. If you look back to some of the headline CPI prints throughout the first half of 2023, those were coming in between 3% to 6%. So, illustrating how aggressively this commodity has risen, really, when compared to broader inflationary pressures.<\/p>\n\n\n\n<p>On the producer side of the equation, there&#8217;s a variety of sugar-related sub-indices in the PPI [Producer Price Index], and it appears that the cost pressures mostly rose in line with price hikes that have been passed on to consumers. So, for example, the annual gain in the <a href=\"https:\/\/fred.stlouisfed.org\/series\/PCU31133113\">PPI for Sugar Confectionery Product Manufacturing<\/a> \u2013 that peaked at 11.8% last September but has been falling to below 9% since then. There&#8217;s been a few headlines over the past several months about an emergent sugar candy shortage this Halloween in the U.S., which obviously would be terrible, but seems unlikely that&#8217;ll be the case. And, overall, the softer gains in the prices of sugar products may be following a broader trend of disinflation in the economy. All of this is highly dependent on commodity prices for sugar, but obviously companies are going to be beholden to what consumers are willing to pay as well. And, you know, based on some of the strong sales numbers we talked about for Mondelez and Hershey on our <a href=\"\/campus\/podcasts\/ibkr-podcasts\/cuckoo-for-cocoa-futures\/\">May podcast with the cocoa futures<\/a>, right. It doesn&#8217;t look like some of the big names are having too many issues selling their sugar-rich products.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_002_CPI-PPI-1100x619.jpg\" alt=\"\" class=\"wp-image-196087 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_002_CPI-PPI-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_002_CPI-PPI-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_002_CPI-PPI-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_002_CPI-PPI-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_002_CPI-PPI.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-9\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Well, we&#8217;ll see. We&#8217;ll see. Because these cereals seem to be suffering some pain pretty recently. But we&#8217;ll come back to that. You know, I&#8217;d love to understand what your outlook on the markets, say, for the rest of the year is. What are you going to be looking for?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-7\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>So, we&#8217;re going to be looking at weather for sure. As always, traders are looking at weather, right. And as far as Brazil goes, the center south of the country, that&#8217;s the most important place to watch. That&#8217;s where most of the sugar growing goes on. The weather in that area has been pretty dry recently, which actually favors the harvest this time of year, since it makes farmers\u2019 jobs a lot easier. Both the sugar cane crush, which is the actual sugar cane they&#8217;re taking out \u2026 they\u2019re processing \u2026 and resulting sugar output were up year-over-year in the back half of July and rose by a third in the first half of August, which has probably helped to keep those futures prices off the 2023 peak that we talked about, which was reached back in April. Part of that could also be tied to uncertainty regarding interest rates as well, and things like that. But when just sticking with the weather for a second, we&#8217;re really looking at anomalies, and there&#8217;s a <a href=\"https:\/\/seekingalpha.com\/article\/4629204-will-el-nino-help-sugar-prices-to-bounce-higher\">very high probability that a strong El Ni\u00f1o<\/a>, which has been talked about in the media, that is probably going to be a critical factor for production across the world. This is the meteorological phenomenon that causes unusual warming of surface waters in the Pacific Ocean. So, it sounds a little bit mundane at first, but this El Ni\u00f1o has wide flung implications across the globe \u2013<\/p>\n\n\n\n<p>places like Brazil, right. We&#8217;re going to get probably soggier, rain-intensive weather. Southeast Asian nations like Thailand can expect dryness and potential drought. And these are two nations we already talked about. Back in July, Bloomberg had reported rainfall across Thailand may be as much as <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-07-03\/drought-menacing-thailand-threatens-global-supply-of-sugar-rice?in_source=embedded-checkout-banner\">10% below the average in the monsoon season<\/a>. And that forecast wasn&#8217;t even accounting for the impact of El Ni\u00f1o. Conversely, heavier rains than usual in Brazil, that&#8217;s going to make harvesting more difficult. You know, rain is obviously good for crops, but generally mud \u2026 flooding, not good for harvesting, makes the farmers\u2019 jobs a lot harder. The <a href=\"https:\/\/www.cpc.ncep.noaa.gov\/products\/analysis_monitoring\/enso_advisory\/ensodisc.shtml\">NOAA [National Oceanic and Atmospheric Administration]<\/a> \u2026 their latest El Ni\u00f1o update says that there&#8217;s more than a 95% chance that the El Ni\u00f1o event will last through February 2024. So, this is a concern that&#8217;ll cover the rest of 2023, at least. And the latest instance of a strong El Ni\u00f1o was back in <a href=\"https:\/\/www.beroeinc.com\/blog\/el-nino-sugar-production-surplus\/\">2015\/2016 marketing year<\/a>, and that was responsible for wiping out seven million tons of sugar output.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-10\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Wow. So, maybe sweet for sugar prices, but it sounds like, overall, a fairly bitter forecast.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-8\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>It really depends. I mean, this is all kind of up in the air. El Ni\u00f1o is very, very unpredictable. That&#8217;s why we call it \u2018anomalies\u2019. Now, we know what typically happens, and it seems like a very high chance we will get these anomalies, and if demand remains strong for sugar, then it seems like we&#8217;re going to get more of the same.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-living-on-sugar-mountain\"><strong>Living on Sugar Mountain<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-11\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>I know we touched on breakfast cereals, and they use a lot of sugar. And from what I understand, the cost share of sugar as a raw material in breakfast cereal manufacturing is among the highest, I think, if not <em>the<\/em> highest of just about all products containing sugar. I read, according to <a href=\"https:\/\/www.trade.gov\/sites\/default\/files\/2020-12\/Employment%20Changes%20in%20U.S.%20Food%20Manufacturing_The%20Impact%20of%20Sugar%20Prices.pdf\">one study<\/a> [that] uses data from the Economic Census \u2013 it&#8217;s nearly 33%, placing it higher than confectionery products \u2026 that\u2019s non-chocolate and chocolate, as well as ice cream and frozen dessert manufacturing, and soft drinks \u2026 all by fairly wide margins. So, I took a look at some of the more <a href=\"https:\/\/www.kulicksfrenchtoastrecipes.com\/the-19-most-popular-cereals-based-on-boxes-sold\/\">popular ready-to-eat breakfast cereals<\/a>, and I&#8217;m sorry to scare y&#8217;all \u2013 I don&#8217;t know if\u2026. I&#8217;m sure you already know it already, but their respective percent daily value, that&#8217;s percent \u2018DV\u2019 of sugar \u2026 and people listening can look at the backs of these boxes and look at \u2018percent DV and added sugar\u2019.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_003_NUTRITION-LABEL-EXAMPLE-1100x619.jpg\" alt=\"Daily Value of sugar example\" class=\"wp-image-196086 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_003_NUTRITION-LABEL-EXAMPLE-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_003_NUTRITION-LABEL-EXAMPLE-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_003_NUTRITION-LABEL-EXAMPLE-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_003_NUTRITION-LABEL-EXAMPLE-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_003_NUTRITION-LABEL-EXAMPLE.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n\n\n\n<p>Just keep in mind that <a href=\"https:\/\/www.cdc.gov\/nutrition\/data-statistics\/be-sugar-smart.html\">the CDC [Centers for Disease Control and Prevention] recommends<\/a> that Americans [aged] two years and older should keep their intake of added sugars to less than 10% of their total daily calories. That&#8217;s less than 10%. And the USDA [United States Department of Agriculture] places any amount of sugar over 21% per serving as exceeding their <a href=\"https:\/\/www.ncdhhs.gov\/55cacfpworksheetcalculatingsugarlimitscerealpdpdf\/download?attachment\">limit in their Child and Adult Care Food Program<\/a>. That&#8217;s a CACFP for short. So, I&#8217;m looking at the labels, and I&#8217;m seeing brands like <a href=\"https:\/\/www.cheerios.com\/products\/honey-nut-cheerios\">Honey Nut Cheerios from General Mills<\/a>, by some counts, one of the most popular breakfast cereals, more than 129 million boxes sold, annually, 24% total sugar as a percent DV, or nearly 32.5% per serving. It&#8217;s exactly the same with <a href=\"https:\/\/smartlabel.kelloggs.com\/Product\/Index\/00038000199042\">Kellogg&#8217;s Frosted Flakes<\/a>, [which] sells around 132 million boxes a year. <a href=\"https:\/\/www.capncrunch.com\/products\/cap-n-crunch-s-crunch-berries\">Cap&#8217;n Crunch Crunch Berries<\/a>, 32% total sugar, that&#8217;s 43% by serving.<\/p>\n\n\n\n<p>And on the borderline of the USDA&#8217;s program limits: Post&#8217;s <a href=\"https:\/\/www.honeybunchesofoats.com\/cereals\/\">Honey Roasted, Honey Bunches of Oats<\/a>, 16% DV or 19.5% per serving; <a href=\"https:\/\/www.quakeroats.com\/products\/cold-cereals\/life-cereal\/regular\">Life Cereal from Quaker Oats<\/a> \u2026 now, Quaker Oats is owned by Pepsi \u2026 15% percent daily value, 19% per serving; and probably among the lowest is <a href=\"https:\/\/www.cheerios.com\/products\/honey-nut-cheerios?gclid=Cj0KCQjwl8anBhCFARIsAKbbpyQJO_LML2Qw3sxCtwt-yubymqJJIRXuRj2OdgILawOWwMPHhHssNkkaAgwAEALw_wcB&amp;gclsrc=aw.ds\">Cheerios<\/a>, with only 4.6% of sugar per serving.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_004_POPULAR-CEREALS-SUGAR-1100x619.jpg\" alt=\"US popular breakfast cereals + % sugar (DV)\" class=\"wp-image-196085 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_004_POPULAR-CEREALS-SUGAR-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_004_POPULAR-CEREALS-SUGAR-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_004_POPULAR-CEREALS-SUGAR-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_004_POPULAR-CEREALS-SUGAR-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_004_POPULAR-CEREALS-SUGAR.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n\n\n\n<p>I can&#8217;t say I&#8217;m too surprised. But these cereals <a href=\"https:\/\/www.veri.co\/learn\/why-was-cereal-invented\">can&#8217;t be all that good for you<\/a>. In fact, I think <a href=\"https:\/\/www.luckycharms.com\/products\/original-lucky-charms\">Lucky Charms<\/a> [is] one cereal brand that&#8217;s been <a href=\"https:\/\/www.chicagotribune.com\/dining\/table-talkers\/sns-stacker-us-foods-banned-other-countries-20211103-gxobzgtxvnf6pnt26ugjstmxka-photogallery.html\">banned in certain countries<\/a> \u2026 like Norway and Austria \u2026 given its use of food dyes like yellow 5. We talked about red dye 3. Well, this is yellow 5, yellow 6, red 40. Because of these additives, the product&#8217;s also required to wear a warning label in the EU \u2013 this was according to Stacker, a site [that] provides data-driven journalism. They also say that Frosted Flakes, Honey Bunches of Oats, Rice Krispies all contain a flavor enhancer called <a href=\"https:\/\/www.webmd.com\/vitamins\/ai\/ingredientmono-1071\/butylated-hydroxytoluene-bht\">BHT [Butylated Hydroxytoluene]<\/a>, which the site claims is a potential carcinogen. And while the evidence for that is inconclusive, these products are still banned in Japan, as well as the EU. It goes on and on.<\/p>\n\n\n\n<p>I mean, I remember last year the FDA [United States Food and Drug Administration] looked into mass complaints \u2026 I think over 8,500 self-reports were made last year \u2026 people were basically claiming that <a href=\"https:\/\/www.fooddive.com\/news\/fda-closes-investigation-into-reported-illnesses-from-lucky-charms\/631572\/\">Lucky Charms made them violently ill<\/a> \u2013 like they&#8217;d been poisoned. Cheerios, I think, to some extent as well. The FDA didn&#8217;t find anything in its investigation that gave the claims any merit, but still \u2026 kind of alarming. And to a lesser degree, <a href=\"https:\/\/www.cdc.gov\/salmonella\/mbandaka-06-18\/index.html#:~:text=On%20June%2014%2C%202018%2C%20the,recalled%20Kellogg's%20Honey%20Smacks%20cereal.\">Kellogg&#8217;s recalled Honey Smacks<\/a> \u2013 they used to be called Sugar Smacks \u2013 in 2018, after 135 people across multiple states said they felt sick after eating it. About 34, 35, I understand, were hospitalized. So, this is all just very alarming, and they have these cartoon characters on them as mascots, and they seem very friendly, and positioned towards children. So, I also recently passed by a box called Cocoa Munchies \u2026 [it] had this hippopotamus with like four teeth \u2026 47% sugar per serving. It&#8217;s like over twice the amount the USDA\u2019s program has stated as a limit.<\/p>\n\n\n\n<p>Growing up, we had <a href=\"https:\/\/www.hobbydb.com\/marketplaces\/hobbydb\/subjects\/kellogg-s-sugar-smacks-product\">Sugar Smacks<\/a> \u2026 what&#8217;s now Honey Smacks \u2026 <a href=\"https:\/\/www.postconsumerbrands.com\/honeycomb\/\">Honeycomb<\/a>s, <a href=\"https:\/\/www.generalmills.com\/food-we-make\/brands\/trix\">Trix<\/a>, <a href=\"https:\/\/www.frootloops.com\/en_US\/home.html\">Froot Loops<\/a>\u2026. Later, it was <a href=\"https:\/\/www.kixcereal.com\/products\/\">Kix<\/a> and <a href=\"https:\/\/www.ricekrispies.com\/en_US\/home.html\">Rice Krispies<\/a>, <a href=\"https:\/\/smartlabel.kelloggs.com\/Product\/Index\/00038000207501\">Frosted Mini-Wheats<\/a> \u2026 I had to put sugar on the Kix, but\u2026 Did you all have breakfast cereals growing up? I&#8217;m really curious. How do you position that now \u2026 just psychologically \u2026 knowing that they have this kind of possible effect on your health or well-being?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-9\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>I sort of buried the lead at the top, you know. I mean, I&#8217;m talking about National Cereal Day. Yeah, of course, I love cereal. And as a kid, funny enough, I think my favorite was <a href=\"https:\/\/cereals.generalmills.com\/products\/cookie-crisp\/\">Cookie Crisp<\/a>, which is actually one of the <a href=\"https:\/\/www.mashed.com\/705176\/the-reason-some-american-cereal-has-to-be-smuggled-into-canada\/\">banned American cereals in Canada<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-12\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>There you go\u2026.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-10\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>I was eating a banned cereal, but it was those. <a href=\"https:\/\/cereals.generalmills.com\/products\/reeses-puffs\/\">Reese&#8217;s Puffs<\/a>. And I mean, if we&#8217;re talking sugar content, those have really got to be at the top of the list. And that&#8217;s a little too much for me now.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-13\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Is it contraband If you if you smuggle in a box of Cookie Crisp into Canada? Is that considered contraband?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-11\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Next time I&#8217;m going up there, maybe I&#8217;ll bring it with me. I&#8217;ll see what happens.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-14\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>I don&#8217;t know if you\u2019ll want to cross the border\u2026.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-12\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>\u2026.I get dragged off the plane \u2026 like one of those crazy people with my box of Cookie Crisps. And so, it&#8217;s a little too much for me now. But as you said, like Frosted Mini-Wheats \u2013 those are great. I love Frosted Mini-Wheats, <a href=\"https:\/\/smartlabel.kelloggs.com\/Product\/Index\/00038000199875\">Raisin Bran<\/a>, maybe a little bit more of a controversial choice, but I&#8217;ve been a huge fan of those, too.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-1\"><strong>Jeff Praissman<\/strong><\/h3>\n\n\n\n<p>Well, you know, I&#8217;m just thinking back, you know, being a kid, Saturday morning cartoons, you open that box of cereal, and my \u2018go-to\u2019s were either <a href=\"https:\/\/www.postpebblescereal.com\/products\/fruity-pebbles\/\">Fruity Pebbles<\/a>, <a href=\"https:\/\/www.capncrunch.com\/\">Cap\u2019n Crunch<\/a>, Cookie Crisp. So, apparently, I couldn&#8217;t go to Canada either. And of course, I don&#8217;t know if people remember, but the triple threat of <a href=\"https:\/\/www.generalmills.com\/news\/stories\/the-history-of-our-monsters\">Count Chocula, Franken Berry, and Boo Berry<\/a> \u2013 they all had their made up, you know, monsters on the on the cover. But I love cereal as well. I think it&#8217;s a great food. I love it either with milk or even, honestly, just kind of eating it dry sometimes. I&#8217;ll just kind of, you know, don\u2019t tell my wife and kids this, but I&#8217;ll stick my hand in the box and just start eating. My kids, they&#8217;re all a little bit younger, so their \u2018go-to\u2019s are \u2026 <a href=\"https:\/\/www.cinnamontoastcrunch.com\/\">Cinnamon Toast Crunch<\/a> is super popular in my house, Lucky Charms, Froot Loops, and also like, I guess, it&#8217;s <a href=\"https:\/\/www.chex.com\/products\/chocolate-chex\">Chocolate Chex<\/a> mix.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-15\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Chocolate Chex mix?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-2\"><strong>Jeff Praissman<\/strong><\/h3>\n\n\n\n<p>Yeah, I think that&#8217;s the cereal. And maybe Cinnamon Chex. But definitely Cinnamon Toast Crunch is probably their favorite.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-still-dig-em\"><strong>Still Dig \u2018Em?<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-16\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Have you all noticed if they&#8217;re any more expensive, say, recently than they were maybe this time last year?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-3\"><strong>Jeff Praissman<\/strong><\/h3>\n\n\n\n<p>I can definitely speak to the fact that they&#8217;re definitely more expensive. I&#8217;d say probably 10% to 15% more. And I know Sean&#8217;s talked about shrinkflation before on our <a href=\"\/campus\/podcasts\/ibkr-podcasts\/time-for-a-coffee-break\/\">coffee podcast<\/a>, and it definitely seems that the boxes have gotten smaller as well. They might be thinner width. They seem to make them look like \u2026 if you&#8217;re looking straight on, they look the same, but then when you turn them sideways, they seem a lot more shallow than they used to be.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-13\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Yeah, sometimes what they&#8217;ll do is \u2026 they&#8217;ll keep the box the same size, but they&#8217;ll decrease the net weight of what&#8217;s inside of it. That&#8217;s what you have to actually look at is the net weight, not necessarily the packaging. And, yeah, the name brands for sure are more expensive. I buy generic store brands, and you know from our prior company conversations, I&#8217;m really not one to hammer home some of the clich\u00e9, ultra-frugal financial advice, but, you know<s>,<\/s> I&#8217;ll tell you the prices on the name brand cereal \u2013 sometimes, I&#8217;m just like, wow, that is really crazy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-17\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Yeah. I&#8217;ve seen something like <a href=\"https:\/\/pattern.com\/blog\/inflation-bites-at-breakfast-table-in-2023\/\">Cap\u2019n Crunch Crunch Berries up 114%<\/a>. I mean, this is one of the more sugar-laden cereals, but that&#8217;s a significant hike over last year. That&#8217;s from one statistic that I saw from a company that was looking at the statistics from purchases off of Amazon. But 114%, you know, that&#8217;s pretty hefty.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_005_CPI-BREAKFAST-CEREALS-PRODUCER-PRICES-1100x619.jpg\" alt=\"Consumer costs of breakfast cereals rise as producer prices soar\" class=\"wp-image-196084 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_005_CPI-BREAKFAST-CEREALS-PRODUCER-PRICES-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_005_CPI-BREAKFAST-CEREALS-PRODUCER-PRICES-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_005_CPI-BREAKFAST-CEREALS-PRODUCER-PRICES-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_005_CPI-BREAKFAST-CEREALS-PRODUCER-PRICES-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_005_CPI-BREAKFAST-CEREALS-PRODUCER-PRICES.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-14\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Grain prices have continued to soften almost perpetually since May of last year. This is going to be another big factor in the cost of the cereal that&#8217;s helped to offset some of the cost pressure that cereal producers would have felt if prices of both commodities were rising. So, you&#8217;ve got sugar up, grain down, a little bit of canceling each other out there. We talked on the podcast a few months back about risks facing the global supply of the wheat crop, specifically, those futures have remained subdued, and if that pattern were to reverse and grain prices began rising, that would compound the pressure from sugar. Probably make the cereal companies feel the sting of surging sugar prices a little bit more acutely. Until then, however, I feel that cereal won&#8217;t be one of the product categories seeing severely above average inflation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-18\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>And I can just imagine that Cap\u2019n Crunch Crunch Berries going for like $30, if sugar prices go higher, and grain prices aren&#8217;t enough to offset. That&#8217;s mostly sugar, I think.<\/p>\n\n\n\n<p>And it&#8217;s really hard to separate out the marketing of these from what you\u2019re actually getting in your bowl. You know, when you think about the health benefits that are touted from certain cereals like Chex, perhaps, or Cinnamon Toast Crunch or Honey Nut Cheerios \u2026 or Life. I mean, boy, Life cereal \u2026 there&#8217;s really no better benefit than Life, I would say. Why those other kids didn&#8217;t like Life. I don&#8217;t know \u2026 why they had to <a href=\"https:\/\/www.youtube.com\/watch?v=CLQ0LZSnJFE\">pass it off to Mikey<\/a>, I have no idea. And what you look at in your bowl \u2026 when you just take a hard look at it and divorce yourself from the marketing that takes place, you have to ask: \u2018Is this really food fit for consumption?\u2019 Lucky Charms is just a bowl of dried up, puffed sugar, basically, it seems. I don&#8217;t know. It makes the milk taste, you know, pretty good for a little while, but then, you know<s>,<\/s> you start to wonder whether this is really going to help you out in the future in terms of health impacts. And so, marketing it towards kids, it&#8217;s a whole other story&#8230;. But yes, it looks like the elevated prices of sugar, and the and the amount of sugar that goes into these cereals, is really having an impact. So, I\u2019d love to ask Jeff where he sees company stocks like Kellogg&#8217;s and General Mills going. I remember, Sean, you were talking about, you know, demand at any cost. But I don&#8217;t know, these both hit like 52-week lows recently, didn\u2019t they?<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-sugar-lows\"><strong>Sugar Lows<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-4\"><strong>Jeff Praissman<\/strong><\/h3>\n\n\n\n<p>They did, yeah. Kellogg&#8217;s and General Mills, they&#8217;re both trading near or at their 52-week lows. I think it was last Wednesday, in fact, that they both hit their 52-week low. Then the other two major players, Post Holdings, which yeah, they own a couple other items such as Peter Pan peanut butter \u2013 they seem to kind of be cruising along. And then Pepsi, which is really hard to decipher, because obviously they own Frito-Lay; they own, you know, soft drinks, which is such a big part of it as well, besides the cereal business. So, those other two ones are a little bit harder to kind of do a direct correlation. But certainly with Kellogg&#8217;s and General Mills, the stock price is hurting somewhat in the last year or so.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_006_STOCK-CHART-1100x619.jpg\" alt=\"Cereal makers' stocks sink amid elevated sugar futures\" class=\"wp-image-196083 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_006_STOCK-CHART-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_006_STOCK-CHART-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_006_STOCK-CHART-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_006_STOCK-CHART-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/2023-0901_006_STOCK-CHART.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-15\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>The impact of high sugar costs may not be impacting the companies making cereal as it had in the back half of 2022 and the first half of this year. Sugar prices are rising more gradually now than they were in those periods. So, it&#8217;s going up, but not as sharp.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-sugar-substitutes\"><strong>Sugar Substitutes<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-19\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>I know Kellogg&#8217;s is <a href=\"https:\/\/investor.kelloggs.com\/news-and-events\/press-releases\/news-details\/2023\/KELLOGG-COMPANY-UNVEILS-STRATEGIES-AND-FINANCIAL-OUTLOOKS-FOR-KELLANOVA-AND-WK-KELLOGG-CO-AT-INVESTOR-DAY\/default.aspx#:~:text=.unleashingourpotential.com.-,About%20the%20Separation,tax%2Dfree%20spin%2Doff.\">undergoing a restructuring<\/a>, and, I don&#8217;t know \u2026 I mean, there are <a href=\"https:\/\/www.hopkinsmedicine.org\/health\/wellness-and-prevention\/facts-about-sugar-and-sugar-substitutes\">sugar substitutes<\/a>\u2026. There&#8217;s <a href=\"https:\/\/www.britannica.com\/story\/whats-the-difference-between-cane-sugar-and-beet-sugar\">beet sugar and cane sugar<\/a>, I think we mentioned, and for those people who are more health conscious, is there a sugar substitute market that rivals the raw sugar market \u2026 the refined sugar market? <s><\/s><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-16\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Probably not in the near term. Personally, I don&#8217;t use sugar in my coffee. I actually use <a href=\"https:\/\/www.stevia.com\/\">Stevia<\/a>. I like the idea of zero calorie, right. That&#8217;s one of those things that appeals to me about alternatives to sugar. So, any kind of sweetener like that, you&#8217;re going to have that kind of appeal. But what we&#8217;re actually seeing with the demand trend of sugar is that it&#8217;s rising globally. That&#8217;s why we&#8217;re seeing the prices go up so aggressively, as it&#8217;s really a demand side, even in light of higher <a href=\"https:\/\/home.treasury.gov\/resource-center\/data-chart-center\/interest-rates\/TextView?type=daily_treasury_yield_curve&amp;field_tdr_date_value=2023\">interest rates<\/a> and slowing growth in many parts of the global economy, or at least some parts of the global economy. We&#8217;ve not seen demand drop off for sugar all that much. There definitely is some amount of its market share being bitten off by alternatives, but nothing that would eat its lunch in the near-term, I don&#8217;t think.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-20\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Yeah. It&#8217;s been sold on the market as a commodity since 1914. I think it&#8217;s very well-entrenched as a staple in our diets or our habits \u2026 very hard to replace that. What do you think, Jeff?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-5\"><strong>Jeff Praissman<\/strong><\/h3>\n\n\n\n<p>Yeah, I&#8217;m not too keen on, like, the chemical substitutions. I would imagine if manufacturers were able to put, say, beet sugar in \u2026 or some other natural substitute \u2026 I wouldn&#8217;t have any issue with it at all. <s>I <\/s>mean, It&#8217;s more, I guess, a taste preference. I would imagine they&#8217;d be able to do it seamlessly and not alter the taste of the product.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-starting-the-day-off-right\"><strong>Starting the Day Off Right?<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-21\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>Well, I can tell you, I loved Honeycombs, and I loved Trix, and, you know, I miss the <a href=\"https:\/\/thetakeout.com\/cereal-box-prizes-history-general-mills-post-kellogg-1848133426\">prizes in the boxes<\/a>. And I miss these\u2026. I guess I could have them again, but I have a feeling they&#8217;re just not the same that they used to be. I have a feeling that they just produce these very differently from the way they did when I was growing up. And, so, I just won&#8217;t touch anything anymore.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-17\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>You know, It\u2019s interesting, Steven, too, that you mentioned \u2026 kind of your declining demand for cereal, right \u2026 is a little bit of an anecdotal example \u2026 but we&#8217;re seeing that across the American populace. It&#8217;s one of the fading items in the American breakfast. You know, you mentioned Kellogg&#8217;s, who&#8217;s a real cereal giant, and just reported <a href=\"https:\/\/s1.q4cdn.com\/243145854\/files\/doc_financials\/2023\/q2\/Q2-2023-Earnings-Press-Release-FINAL-1.pdf\">second quarter earnings<\/a> earlier this month. They&#8217;re in an interesting spot when it comes to the cereal business. For the company as a whole, their net income expanded year-over-year \u2026 sales were up by about 4.6%, largely due to price hikes. But if you look at the cereal business by itself, its North American sales were only up by 1.8% from last year. That&#8217;s seriously trailing snacks and frozen foods growth \u2026 that&#8217;s creating a drag on the company. And that&#8217;s probably why, as you mentioned, Kellogg&#8217;s is trying to spin out the cereal business into its own standalone company, perhaps to the dismay of its existing shareholders.<\/p>\n\n\n\n<p>Cereal is suffering from a transformation of the carbohydrate-heavy American breakfast, which is really probably going to affect other perceived breakfast foods as well. Two major forces driving that \u2013 one being just growing emphasis on protein over carbohydrates. It&#8217;s probably going to protect things like eggs and meats in the breakfast and degrade the consumption of cereal, pancakes, waffles\u2026. But the other factor is a general, sort of abstinence from breakfast altogether, with the popularity of <a href=\"https:\/\/www.hopkinsmedicine.org\/health\/wellness-and-prevention\/intermittent-fasting-what-is-it-and-how-does-it-work\">intermittent fasting<\/a>. And I did that myself. And I haven&#8217;t regularly eaten breakfast in a long time. But it&#8217;s maybe a little bit more of an unsettling development \u2013 but Americans are skipping breakfast more frequently due to its simply being more expensive. The Wall Street Journal had an article out in March, I believe it was titled, \u2018<a href=\"https:\/\/www.wsj.com\/livecoverage\/cpi-report-today-january-2023-inflation\/card\/to-save-money-maybe-you-should-skip-breakfast-fSd6mz0miaAPhUFb2jgy\">To Save Money, Maybe You Should Skip Breakfast<\/a>\u2019. And the text of the article was more focused on the degree to which breakfast food prices were rising, not necessarily suggesting, you know, you should not eat breakfast to deal with that. But the headline was very ominous. And that&#8217;s&nbsp; just another one of these factors for cereals \u2013 that\u2019s sugar-heavy foods, in general, in the American breakfast, I think, that&#8217;s negative.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-22\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>I&#8217;ve heard people increasingly going without breakfast. And I remember this cartoon. It was sort of like a stop-motion animation, when I was growing up, and there were these tops \u2026 there was<s>,<\/s> like, five tops, right? And four of the tops would spin, and then they&#8217;d just fall. But one top kept going, and it would stop mid-turn, and it would say, \u2018I had my breakfast, and they didn\u2019t,\u2019 right. And, so, it was kind of a promotion to like, you know, say that you have to start your day off right. You have to eat breakfast. But now I&#8217;m finding that maybe it&#8217;s not even healthy for you to digest so much protein so early in the morning. I mean, there&#8217;s all of these kinds of questions as well. I don&#8217;t know the answers to them. It seems to keep changing every year. And so, we&#8217;ll just go with what we&#8217;ve got, right, which are higher, elevated sugar prices, a great deal of sugar being consumed by producers of breakfast cereals \u2026 and very expensive breakfast cereals \u2026 and lower stocks in Kellogg&#8217;s and General Mills. And, basically, that&#8217;s where we&#8217;re going. And let&#8217;s just hope El Ni\u00f1o doesn&#8217;t destroy the outlook so much so that it gets even more and more expensive on the consumer side. I suppose, for those who are holding sugar futures, that would be a plus.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sean-mcgovern-18\"><strong>Sean McGovern<\/strong><\/h3>\n\n\n\n<p>Yes, that&#8217;s what it would seem.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-6\"><strong>Jeff Praissman<\/strong><\/h3>\n\n\n\n<p>Yeah, I think I&#8217;m just going to go have a bowl of cereal after this podcast. I&#8217;m going to go hit the Cinnamon Toast Crunch out of my pantry.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-steven-levine-23\"><strong>Steven Levine<\/strong><\/h3>\n\n\n\n<p>This has been really great! Sean, Jeff, thanks so much, again, for taking the time to do this. This has been really another fascinating commodities, futures-related podcast!<\/p>\n\n\n\n<p>For our listeners, you can read more commentary and market analysis at <a href=\"\/campus\/category\/traders-insight\/\">IBKR Traders\u2019 Insight<\/a> at our <a href=\"https:\/\/interactivebrokers2-my.sharepoint.com\/personal\/slevine_interactivebrokers_com\/Documents\/Documents\/2023\/IBKR%20Podcasts\/Completed_Underway\/SL\/006_SUGAR\/TRANSCRIPT_SUMMARY\/www.interactivebrokers.com\">IBKR Campus \u2013 that&#8217;s at www.interactivebrokers.com<\/a>. You can keep abreast there about topics we&#8217;ve discussed here today, as well as a wide range of other news critical to your investment decisions. McAlinden Research Partners has got <a href=\"\/campus\/contributors-categories\/mcalinden-research-partners\/\">a host of articles<\/a> on several themes \u2013 from central banks and gold buying to issues involving cybersecurity. Contact Rob Davis for more details. He&#8217;s at rob@mcalindenresearch.com. And for a full list of financial offerings, visit the IBKR Campus, where, as always, all of our educational material is presented to the public at no cost.<\/p>\n\n\n\n<p>And wherever you listen to your podcasts, please rate and review us. We&#8217;d love to hear from you.<\/p>\n\n\n\n<p>And until next time, I&#8217;m Steven Levine with Interactive Brokers.<\/p>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p><strong>LEARN MORE<br><\/strong><strong><br><\/strong><strong>RESEARCH &amp; STATS<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.fao.org\/worldfoodsituation\/foodpricesindex\/en\/\">FAO Food Price Index<\/a><\/li>\n<\/ul>\n\n\n\n<p><strong>WHAT\u2019S FOR BREAKFAST \u2013 PODCAST SERIES<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"\/campus\/podcasts\/ibkr-podcasts\/live-cattle-futures-herd-around-the-world\/\">Live Cattle Futures \u2013 Herd Around the World<\/a><\/li>\n\n\n\n<li><a href=\"\/campus\/podcasts\/ibkr-podcasts\/cuckoo-for-cocoa-futures\/\">\u2018Cuckoo\u2019 for Cocoa Futures<\/a><\/li>\n\n\n\n<li><a href=\"\/campus\/podcasts\/ibkr-podcasts\/eyepopping-corn-prices-fueling-food-inflation\/\">Eyepopping Corn Prices \u2013 Fueling Food Inflation<\/a><\/li>\n\n\n\n<li><a href=\"\/campus\/podcasts\/ibkr-podcasts\/the-war-on-wheat-how-much-bread-is-on-the-table\/\">The War on Wheat \u2013 How Much Bread Is on the Table?<\/a><\/li>\n\n\n\n<li><a href=\"\/campus\/podcasts\/ibkr-podcasts\/time-for-a-coffee-break\/\">Time for a Coffee Break?<\/a><\/li>\n<\/ul>\n\n\n\n<p><strong>IBKR TRADERS\u2019 INSIGHT<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"\/campus\/traders-insight\/securities\/commodities\/still-dig-em-breakfast-cereals-soar-on-sugar-highs\/\">Still Dig \u2018Em? Breakfast Cereals Soar on Sugar Highs&nbsp;<\/a><\/li>\n<\/ul>\n\n\n\n<p><strong>IBKR TRADERS\u2019 ACADEMY<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"\/campus\/traders-academy\/futures\/\">Courses On Futures<\/a>\n<ul class=\"wp-block-list\">\n<li>Introduction to Futures<\/li>\n\n\n\n<li>Futures Fundamental Analysis<\/li>\n\n\n\n<li>CME Micro WTI Crude Oil Futures<\/li>\n\n\n\n<li>Understanding South American Soybean Futures<\/li>\n\n\n\n<li>Introduction to Grains and Oilseeds<\/li>\n\n\n\n<li>Hedging with Grain and Oilseed Futures and Options<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>MORE FROM McALINDEN RESEARCH PARTNERS<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.mcalindenresearchpartners.com\/2023\/08\/16\/indian-trade-restrictions-create-10-million-tonne-hole-in-global-rice-market-more-exporters-may-follow\/\">Indian Trade Restrictions Create 10 Million Tonne Hole In Global Rice Market, More Exporters May Follow<\/a>&nbsp;(8\/16\/23)<\/li>\n\n\n\n<li><a href=\"https:\/\/www.mcalindenresearchpartners.com\/2023\/08\/02\/russia-shifts-missile-strikes-toward-ukraines-river-ports-cutting-off-back-door-for-black-sea-grain-ships\/\">Russia Shifts Missile Strikes Toward Ukraine\u2019s River Ports, Cutting Off Back Door for Black Sea Grain Ships<\/a> (8\/2\/23)<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Are breakfast cereals getting too expensive? The price of sugar futures may be to blame. Find out, as Sean McGovern, vice president of research at McAlinden Research Partners, Jeff Praissman, IBKR\u2019s senior trading education specialist, and IBKR senior market analyst Steven Levine explore the global economics of the sugar trade, its affects on producer and consumer prices, and its influence on the stocks of certain consumer staples companies. <\/p>\n","protected":false},"author":1155,"featured_media":196223,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[10842,13857,3],"tags":[12154,147,169,772],"contributors-categories":[13576],"class_list":{"0":"post-196080","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ibkr-podcasts","8":"category-podcasts","9":"category-traders-insight","10":"tag-agricultural-commodities","11":"tag-commodities","12":"tag-futures","13":"tag-sugar","14":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.7) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Sugar Futures &#8211; Talk About a Cereal Killer<\/title>\n<meta name=\"description\" content=\"Sean McGovern, vice president of research at McAlinden Research Partners, Jeff Praissman, IBKR\u2019s senior trading education specialist, and IBKR senior...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/196080\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sugar Futures - Talk About a Cereal Killer | IBKR Campus US\" \/>\n<meta property=\"og:description\" content=\"Sean McGovern, vice president of research at McAlinden Research Partners, Jeff Praissman, IBKR\u2019s senior trading education specialist, and IBKR senior market analyst Steven Levine explore the global economics of the sugar trade, its affects on producer and consumer prices, and its influence on the stocks of certain consumer staples companies.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/sugar-futures-talk-about-a-cereal-killer\/\" \/>\n<meta property=\"og:site_name\" content=\"IBKR Campus US\" \/>\n<meta property=\"article:published_time\" content=\"2023-09-13T16:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-02-12T15:22:26+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/09\/pod-20230828-Sugar-Futures-rect.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"563\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Sean McGovern\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" 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