Raw-Sugar Premium Rises as Much as 37% in Brazil, Broker Says

The premium buyers are prepared to pay to obtain raw-sugar in August from top producer Brazil climbed as much as 37 percent in four days, data from Swiss Sugar Brokers showed.

Raw-sugar for loading in August at the port of Santos, Brazil’s largest, is at a premium of 1 cent to 1.3 cents a pound above the price for the October contract on ICE Futures U.S. in New York, the brokerage said in a report dated yesterday. The premium was 0.95 cent a pound on July 20, it said in a report that day.

“The cash premiums keep holding firm and trading even higher in some cases,” Naim Beydoun, a broker at the Rolle, Switzerland-based company wrote in a report e-mailed today.

Cash premiums are rising as some producers who sold to trade houses buy back supplies as they try to ensure they have sufficient stocks to fulfill contracts in the face of declining crop estimates, and on short-covering by traders, Beydoun said. Short-covering involves making purchases to close out bets on lower prices.

Raw-sugar has climbed 21 percent in New York over the past month on concerns that the crop in Brazil will be smaller than initially estimated. Industry group Unica lowered its harvest estimate to 533.5 million metric tons of cane on July 13, down from a previous projection of 568.5 million tons.

Brazil is still overestimating how much cane it will reap, according to brokerage ICAP do Brasil, which forecast the cane harvest at 520 million tons. Sao Paulo-based consultancy Canaplan also said the harvest would be about 520 million tons.
Crystal Sugar Premium

The premium for crystal sugar, which accounts for 68 percent of domestic sales in Brazil, is also climbing, Swiss Sugar Brokers said, adding that supplies of white, or refined, sugar were also limited from both Brazil and Thailand, the world’s second largest exporter.

“Regional refineries have their sales booked until the end of September, some earmarked to European buying and others have been allocated mainly to the Iraqi and Sudanese market,” Beydoun said, adding that Indian white sugar was bought by Bangladesh, Sri Lanka and countries in East Africa.