Raw sugar surges to one-year high as fire hits Brazil port

Published online: Oct 23, 2013
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Raw-sugar futures jumped to the highest in almost a year after a fire left four injured and six warehouses "totally compromised" at the biggest port in Brazil, the world's largest producer and exporter.

A blaze that is now under control started at the port of Santos at about 6:10 a.m. local time, affecting the six depots owned by Copersucar SA and destroying 180,000 tons of raw sugar, the Sao Paulo-based company said in statements Oct. 18. Copersucar didn't say when it plans to resume sugar loading at the port terminal, or how long it will take to rebuild the affected facilities.

"In a preliminary assessment, Codesp informs that all the affected facilities in the accident are totally compromised," Santos-based Codesp, the state-controlled operator of the Port of Santos, said in an e-mailed statement.

Copersucar, the world's largest sugar trader after Minneapolis-based Cargill Inc., shipped 5.12 million tons of the sweetener in the crop year 2011-12 that started in April, according to information on its website.

Copersucar's sugar cargoes that are on the road heading to the Port of Santos have been diverted to a neighboring terminal controlled by a Cosan SA Industria & Comercio unit, Sao Paulo-based Cosan said in a separate statement.

Slower Harvesting

Sugar gained 11 percent in New York last month, the most since July 2011, as rain will mean reduced output in Brazil's Center South, the country's main growing region, according to Sao Paulo-based industry group Unica. Dry periods will be short and infrequent over the next 60 to 75 days, slowing harvesting and exports, Celso Oliveira, a meteorologist with Somar Meteorologia, said this week.

"One estimate is it could take up to six months to get operational in some form again so the impact on the delivery and next year's harvest will be felt," Michael McDougall, head of Brazil desk at Newedge Group in New York, said by e-mail.

Raw sugar for delivery in March rose 2.6 percent to settle at 19.5 cents a pound on ICE Futures U.S. in New York at 2 p.m. Earlier, prices gained as much as 6.1 percent to 20.16 cents, the highest for a most active contract since Oct. 22.

Copersucar trades sugar and ethanol from 47 mills, including Virgolino de Oliveira SA and Aralco SA Acucar & Alcool. Virgolino's $300 million of 2018 securities rallied 2.7 cents to 77.4 cents. Aralco's $250 million of 2020 bonds rallied 0.7 cents to 73.9 cents on the dollar.

Santos Depots

Fire affected depots 20, 21, VI, XI, XVI and XXI, according to the Codesp statement. The terminal's facilities have the capacity to store 300,000 metric tons of sugar, Guilherme Pena, a spokesman for Copersucar, said in a telephone interview from Sao Paulo.

Ten ships were scheduled to load sugar at Copersucar's terminal at Santos from yesterday through Nov. 3, Isis Markarian, a market assistant at Santos-based SA Commodities and Unimar Agenciamentos Maritimos, said by telephone today. The ships were scheduled to load 38,000 tons of white sugar and at least 340,000 tons of raw sweetener, according to Nicolle de Castro, a business analyst at the company.

"The main issue is how long these warehouses and surrounding parts of the loading terminals will be out of action and how it will disrupt port operations," Kona Haque, an analyst at Macquarie Group Ltd. in London, said.

Copersucar was the seller of 83 percent of raw sugar delivered on ICE to settle the October futures, two people with direct knowledge of the transaction said Oct. 1. The ICE delivery totaled a record 1.49 million tons, and Louis Dreyfus Commodities took all of the sweetener.

Eleni Androulaki, a spokeswoman for Louis Dreyfus, declined to comment on how the fire will affect deliveries.

Global Surplus

About 398,659 raw-sugar contracts changed handed on ICE today. That would be the highest aggregate volume for futures since January 2008. Trading was more than triple the average in the past 100 days, according to data compiled by Bloomberg.

Through yesterday, prices fell 47 percent since reaching a 30-year high in 2011 as farmers from Brazil to Australia boosted output, resulting in a record global surplus of 10 million tons last season, according to the International Sugar Organization in London. For the current season, supplies will top demand by 2 million tons, according to London-based Czarnikow Group Ltd., which traded 2.4 million tons of raw sweetener last year.

Refined, or white, sugar for delivery in December gained 1.5 percent to $513.80 a ton on NYSE Liffe in London, after reaching $529.40, the highest since March.

Source: www.bloomberg.com