Trade houses see consolidation in Brazil sugar sector

Wed Nov 28, 2012 1:05pm EST
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* Number of Brazil raw sugar traders doubles since 2008

* Sustained higher sugar price could spur consolidation

By Sarah McFarlane and Stephen Eisenhammer

LONDON, Nov 28 (Reuters) - Consolidation in top sugar producer Brazil's sugar sector is expected after trade houses have mushroomed in recent years, traders said on Wednesday.

The number of raw sugar traders in Brazil has more than doubled since 2008 with newcomers including international traders Olam, Wilmar and Bunge competing with longer standing players such as Cargill and Louis Dreyfus.

"We've seen a real proliferation of trade houses in the last five years," said Ben Pearcy, chief development officer and managing director sugar and bioenergy for agribusiness giant Bunge.

"There are many players today and there's not the economics to support the number of players."

Many of the trade houses have invested in mills but traders said Brazil had been a tough market in recent years after low cane volumes in successive seasons.

Adverse weather, such as droughts and frosts, and a lack of husbandry cut yield potential in centre-south Brazil and the lack of throughput was a fixed cost burden.   Continued...