The movement in prices highlights the global shortage of the sweetener after climate problems reduced production in important global producers last year. “In addition to the firm position of the mills in relation to prices, prospects for a smaller supply of sugar on the global market continue to support prices in Brazil,” said Cepea/Esalq in a note published earlier this week.
Datagro projects a global sugar supply deficit of 8.26 million tons in 2016/17. Prices in the domestic sugar market are causing cancellations in some export contracts. Some mills are paying the costs to cancel contracts with trading companies, preferring to sell sugar locally.
According to a senior trader at a major international sugar trading company operating in São Paulo, export contracts totaling around 300,000 tonnes had been canceled so far in the current harvest in central-south Brazil, as companies are reaching agreements best in the domestic market. But the operator, who asked not to be identified because he is not authorized to speak publicly about the matter, did not consider the amount relevant given the expected exportable volume from central-southern Brazil this year, close to 25 million tons.
“These cancellations happen every year. Sometimes more, sometimes less, and for different reasons,” he said.
