Mundus Trade & Finance Group

Sugar From Brazil

Anyone even remotely familiar with the sugar industry knows that Brazil is the  largest player in the market in terms of production, technology, and expertise. Sugar from Brazil can be found quite literally around the globe, as Brazil exports around eighteen million tons of sugar to various countries every year. Brazil’s largest trading partner is the Unites States, where the bulk of its sugar exports are sold. Other major trading partners include Argentina, China, and Japan.

 Brazil produces two main types of sugar, VHP raw sugar, which is intended largely for the export market, and a smaller amount of ICUMSA 45 sugar, which is consumed locally, and a portion of which is also exported. In total, Brazil’s sugar production is in the neighborhood of thirty million tons, a quantity which can only be matched by India’s booming sugar production industry. At present, Brazil still dominates the export market, though India is continuing to increase its exports in spite of the fact that there is an 11 million ton global sugar excess predicted for the 2007/2008 period.

 Sugar from Brazil comes from Sugar Cane

Brazilian sugar comes exclusively from sugar cane, which is grown in vast fields surrounding sugar mills and refineries. The bulk of these plantations and mills are located in the center south region of the country, in the Sao Paulo region. This is a flat, fertile region which is excellently suited to many different forms of agriculture. Due to the boom in the sugar market, and also the sugar ethanol market, a great deal of this region has been turned over from coffee production to sugar cane production. The expansion has been so great that the regional government decided to suspend licenses for any new sugar mills in May 2007, pending an environmental impact report.

There are also a great deal of sugar mills located in the northern regions of Brazil, in the states of Algolas and Pernambuco. This is the traditional home of Brazilian sugar, as these were the first states to have sugar plantations planted and mills constructed by the Dutch. This region is less suited to sugar cane growth as the soil is less fertile here, and the terrain much more rough and elevated. Unlike the center south region, where sugar cane is usually harvested by machine, manual harvesters are largely used in the northern regions because the terrain is simply not suited to machinery.

 Due to the development of new strains of sugar cane, yield has been increased even in the inhospitable regions of the northern states, as the newly developed strains are much more hardy than the sugar cane which is used in many countries. This allows sugar cane to be grown in locations where it once would have been impossible to grow, and for the cane grown there to have a much higher sucrose content than would normally be expected.

Brazil’s domination of the sugar industry has not simply been achieved by turning over vast swathes of land to sugar cane growing, though this undoubtedly has happened. Attention has been given to every step of the sugar production process, from creating strains of sugar cane with much higher sucrose content than their fore bearers, to making the actual milling and refining processes as efficient as possible. Brazilian sugar mills usually employ a team of in house scientists to oversee various stages of the production process, to develop new and better production methods, and to conduct additional related research. So seriously does Brazil take the technical side of sugar production that it was the first country to take gene sequencing technology and use it to sequence the sugar cane genome.

 Buying Sugar From Brazil

Buyers wishing to purchase sugar from Brazil should be aware that there are certain logistical restrictions on purchasing sugar. Many new buyers to the market see offers for millions upon millions of tons of sugar at cut rate prices and believe that they have found a good deal. Unfortunately for them, most of the time these dream deals turn out to be nightmares.

Sugar is normally traded at a fairly fixed price, which is determined by global supply and demand, and which can easily be researched by comparing prices between several vendors, and by referring to the various commodities exchanges upon which sugar is traded. Brazilian sugar is also not normally sold in multi million ton shipments, especially not as a ’special offer’ or any other such euphemism. If one wishes to secure large amounts of sugar, one should be prepared to commit to multiple shipments over a period of months, or even a futures contract, under which a supply may be secured years ahead of time at a fixed price. The market is rather low at the present time, so contracts secured now may prove to be lucrative in the future.

 Sugar is almost always sold CIF, or Cost, Insurance, Freight. This means that the price secured will include the sugar, insurance on the sugar, and the freight on the sugar. Given current concerns regarding fuel prices, this makes futures contracts even more attractive, as prices are likely to rise substantially on freight alone in the coming months and possibly years.

 It is also worth noting once more that the bulk of sugar exported from Brazil is VHP raw sugar. This is raw sugar with a sucrose content of 99.4% or higher. It is designed for easy refining into ICUMSA 45 in the destination country, but it is not ICUMSA 45 itself. Offers for large amounts of Brazilian ICUMSA 45 sugar should therefore be viewed with extreme skepticism. A larger amount of refined white ICUMSA 150 sugar is available for export, though ICUMSA 150 is not approved for sale directly to customers in most developed countries, it may be acceptable as an ingredient in some cases.

 When purchasing Brazilian sugar, it is always wise to spend time researching the market and comparing various offers. Because sugar is traded globally it tends to be a largely homogeneous market. Offers dealing in sugar from Brazil which is offered in abnormally large amounts and/or at abnormally low prices are almost certain to be a scam.