Brazil millers claim current sugar prices are limiting production growth

Brazilian millers said that the current reference price for raw sugar is not high enough to justify investments in new plants and that marginal gains from production adjustments in existing plants are nearing their limit.

The sugar demand is growing at a rate of 2% annually, but production has been affected by factors like climate change and policies that blend biofuels with gasoline in India. This has led to a tight balance between supply and demand on the market.

Rodrigo Penna de Siqueira is the chief financial officer of Jalles Machado, one of Brazil's largest sugar companies.

Siqueira stated that prices must rise and remain high for a longer period of time to enable new investments. He made his comments at a conference in Sao Paulo organized by the investment bank BTG Pactual. Others executives held similar views.

The capacity of Brazil to produce more sugar is reaching its limit, said Renato Juniqueira, Vice President at Adecoagro. Adecoagro operates three mills throughout Brazil.

Brazilian mills made investments over the past two years in order to increase their sugar mix or to be able to divert more cane sugar to sugar production, and therefore make less cane-based alcohol.

According to FG/A, changes in sugar mixture resulted in an additional sugar production capability of 2.6 millions tons in Brazil.

Executives said that there are limits to what can be achieved in existing plants.

Pierre Santoul of Tereos Brasil, the head of Tereos Brasil, stated that any additional sugar production capacity is likely to come from sugarcane and not sugar beet.

India's second-largest sugarcane producer is not expected to increase sugar production because cane juice will be diverted to ethanol for its blending program. This will cause the global sugar market to remain tight.

He said: "We have a positive view of prices going forward." (Reporting and editing by Aurora Ellis; Marcelo Teixeira)

(source: Reuters)