Was visiting the Middle East this week and news reports there are that arrest are being made in Pakistan and India of large suppliers for hoarding sugar. This could be a sentiment flag and the kind of news that comes out near a major top.
wondering what kind of impact this will have on coke and pepsi's earnings, too lazy to dig whether or not they fully hedge sugar prices
If it hasn't hit the evening news yet, the bull market ain't over. So much for my short - will have to wait to do that until after my long is profitable!
Coke and Pepsi for the most part use corn syrup not sugar. Corn syrup is a rather recent phenomenon, and can provide true competition to pure sugar. What we need to know then is the substitution cost(s) for going from sugar to high fructose corn syrup (HFC in food industry parlance). Anyone know? Able to find out?
Corn sugar is used in the US, but not in all parts of the world for coke and pepsi. During passover, sugar cane is used is some parts of the country. Corn sugar is getting a bad rap from nutritionist, but at these prices, it is a substitute.
Right, well the question is, how hard is it for producers worldwide who use sugar to switch to corn syrup? In the US we use corn syrup precisely because sugar prices are kept artificially high by gov't policies. (Btw this backfires because corn isn't that healthy, but anyway...) In the booms of the late Seventies the transition to corn syrup was underway but not as far advanced as now. So what I'm saying is that maybe we don't see new all time highs, or maybe sugar has some cap on it's price, and that's about the price where corn syrup can substitute. Simple idea, but a little tough to figure out the real substitution price. But if we can get a rough estimate then that can provide a general area where it becomes a little less dangerous to short, though I'd still only use puts or some kind of options spread like a put backspread.