Sugar price favors trade with Arabs

After five years of lower levels, price of the commodity is rebounding and is influencing Brazil’s exports to the Arab market. And it should continue on an upward path.

International sugar prices are likely to stay buoyant in months to come, and that will help export revenues from Brazil to Arab countries. In August, the product carried significant weight in the increase of Brazilian sales to the region. “It will remain high”, says José Carlos de Lima Júnior, partner of consulting firm Markestrat, on the price of the commodity in the next twelve months. Lower supply and low stock levels are the main causes of the high price, according to the expert in agribusiness.

Sugar had been registering low prices for the last five years, but rebounded in September of last year, after India announced that it would have a lower than anticipated output of the product in the market. The Asian country is one of the world’s largest exporters of the commodity and decided that it would channel 75% of the four million tons that it planned to sell the global market in the 2015/2016 crop to the local market.

In addition to this, production was facing discouragement due to the low prices of the last few years. Countries that also produce biofuels from sugar cane directed investments to it. This lower output reduced stock level and brought prices back up. Plus, some Asian countries had climate and crop problems earlier this year, says Lima Júnior. These factors, says the consultant, are leading him to believe that prices will remain high for some time.

The lower output by traditional suppliers from the sugar global market also opens up new export possibilities to Brazilian plants. “Brazil will meet the demand of the market”, says the partner at Markestrat. That’s what happened with the Arab countries, which increased in 127%, to 1,000 tons, their purchases of Brazilian sugar in volume in August. This surge increased revenues in 195% to USD 380 million.

Foreign sales of the commodity overall by Brazil are also increasing. From January to August, exports of raw sugar generated USD 4.8 billion to the country, an increase of 31.5% over the same period of 2015. In August only, the expansion was of 88.6% to USD 822 million. With refined sugar, Brazilian companies had revenues of USD 1.2 billion in the year, an increase of 12%. In August, sales of refined sugar generated USD 307,800 for a 178% increase.

Sugar had steep declines in price in New York stock market in the last few years. It was 33.8 cents of a dollar per lb in January 2011 and fell to 10.64 cents of a dollar per lb in August of last year. Early in September 2016, it had already rebounded to 22.89 cents per lb.

ANBA News

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