“This is the assessment from the world’s largest sugar trader, where consecutive years of deficits, climate damage to important crops, and logistical bottlenecks resemble the situation in 2010 and 2011 when prices reached decades-high levels.
“Current conditions are alarmingly similar,” said Mauro Angelo, CEO of Alvean, the trading company controlled by the Brazilian firm Copersucar.
The company expects a sixth consecutive year of supply deficits, with a drop in production in India expected to reduce global sugar stocks. To make matters worse, Brazil is experiencing a repeat of port congestion from the early 2010s, leaving the world under-supplied.
“Rainfall in India has been poor, and water reservoirs are extremely low, so the next crop may be even worse than the current one,” Angelo said in an interview with Bloomberg News.
India is not expected to export in the current marketing year, a shift from two seasons ago when shipments reached 11 million tonnes. This means the global market relies on Brazil, Angelo said. It also makes prices extremely sensitive to issues like rains that threaten to interrupt sugarcane harvesting or delay sugar loading onto ships.
Sugar is already piling up at Brazilian ports, with the country’s infrastructure at the limit of its capacity.
Giant soybean and corn crops that cannot be transported by dry rivers and streams in the north of the country are competing for space with sugar at ports and railways in the southeast, while recent heavy rains have increased the waiting time for ships to load.
Alvean’s CEO believes that logistical issues likely prevented Brazil from shipping at least 1 million tonnes of sugar in October, a loss that the country is unlikely to compensate for in the coming months. This is because crowded ports will not have the capacity to handle extra volumes, and soon a new soybean crop will occupy storage space.
With low stocks in countries that depend on imports to meet demand, Angelo sees the risk of supply chain disruptions.
“Buyers have been delaying orders and only buying what is necessary in recent months. The increasing involvement of governments in purchases and reductions in import taxes are important signs of tight stocks,” he said. “The entire system is under stress.”