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Brazil sugar exports to see smoother sailing than soy
March 20, 2013 / 7:23 PM / 5 years ago

Brazil sugar exports to see smoother sailing than soy

* Sugar production yet to start in force over cane belt

* Sugar demand not focused like soy

* Trucks still a weak spot for sugar exports

By Reese Ewing

SAO PAULO, March 20 (Reuters) - Sugar will likely flow out of Brazil with less trouble than the country’s record soybean crop now clogging roads and ports, thanks to a longer export season and less concentrated demand, traders and analysts say.

Brazil’s stature as a top provider of the world’s sugar, coffee, soybeans, corn, orange juice, beef and poultry would be even more impressive if not for its notorious transport infrastructure through which these commodities are stuffed every year, to be sure.

Never has Brazil been about to produce so much sugar -- 40-plus million tonnes. It will be the origin of half the world’s exports of the sweetener. And trucks, railways and ports will be the Achilles heel of any commodity coming from Brazil this year.

But ships coming to load sugar will not suffer the month-long delays they did in 2010, analysts said. Nor will they face the chaos now confronting Brazil’s soy exports.

Threats from Chinese traders to cancel as much as 2 million tonnes of Brazilian soybean exports due to congestion in the local ports has pushed down prices for soy and will be weeks of head ache for soy traders and shippers.

Unlike soybeans, Brazil is not the only main supplier of sugar to the world at the moment.

“Buyer countries are holding big sugar stocks and demand is not focused,” said Thaisa Colombo, head of Commcor’s sugar desk for the past six years. “I doubt there will be problems moving sugar like we saw in the past.”

After Brazil’s real strengthened against the dollar up to early 2012, other producers of sugar, such as Thailand, India and Russia became competitive, raised production and even exports in some cases. When ships reached a lineup of 100 vessels in 2010, Brazil was the only major global supplier of sugar from May through September.

Brazil’s cane harvest is also quite spread out.

Mills are only now beginning to crush the main center-south cane crop that is pushing a record 600 million tonnes, and not a moment too soon. They will need every day of the rest of this year to harvest such a massive crop.

“If it rains (during the dry season), mills may only reach 570 million tonnes of cane,” said Pedro Mitzutani, vice president of Brazil’s largest sugar producer Cosan S.A. .

The bulk of the soy harvest, now half finished, will unfold in four months, stressing the country’s grain infrastructure. The world is also short on soy due to droughts over the past season in North and South American producers.

The next six months will by all accounts be challenging logistically for any Brazilian exporter. The record sugar output will be 6 percent bigger than last year; the record soy crop will be 24 percent bigger; and exports of the record corn crop have doubled to more than 20 million tonnes over the past year.

If that is not enough to tax the country’s roads, railways and ports, consider President Dilma Rousseff’s recently announced decree that will reform regulations for the country’s port terminals. It has electrified the port unions, which have already held warning strikes and are planning open ended ones.

Rains over the dry season were also a problem for exports of sugar in 2010. When the ports are wet, loading of sugar stops. Cosan’s logistics arm Rumo is building a cover for its sugar terminals but it will not likely be ready until late this year.

And then there are the trucks. Brazil enacted a law that requires truck drivers to rest for at least 11 hours a day, as well as take breaks after every four hours of driving. This has created a dearth of truck capacity as the farm sector harvests record crops. Freight rates have climbed 25 percent to 70 percent depending on the corridor.

Luckily, sugar exporters such as Cosan and sugar and ethanol group Copersucar S.A. have capacity with the local railway operators that can help alleviate their dependence on the trucking industry.

“I don’t see problems with sugar at the ports,” said Plinio Nastari, president of sugar and ethanol analyst Datagro. “The trucks will be the weak point.” (Reporting by Reese Ewing; Editing by Marguerita Choy)

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