Sugar manufacturer Tate & Lyle has seen its shares drop today (18 December) after providing a trading update for its 2007 calendar year that forecasted low ethanol margins and sugar prices for its Food & Industrial Ingredients, Americas division.

Shares fell 3.41% to GBP7.92 (US$15.45) this morning after Tate & Lyle forecasted that higher corn costs and lower gasoline prices would mean that 2007 ethanol margins are expected to be substantially lower than those achieved in the current financial year for the division.

The company said that ethanol sales represent a small proportion of Food & Industrial Ingredients, Americas' overall sales. Sweetener, food and industrial ingredients margins are expected to be higher during the company's 2007 calendar year.

Tate & Lyle said its Food & Industrial Ingredients, Americas division has substantially completed the negotiation of its 2007 calendar year sales contracts, but that there was a small loss in sweetener volume as it sought to increase margins in a rising corn market at the end of the negotiating period. 

The company also said it seems unlikely that any recovery in sugar pricing will occur during the 2007 calendar year, and that negotiations for the surrender of its beet sugar quota at Eastern Sugar were ongoing.

The pricing round for Food & Industrial Ingredients, Europe is at an early stage, the company added, with "satisfactory progress" being made to recover higher raw material and energy costs so far.