Brazil Raw Sugar Trades at Discount as Surplus Approaches

Buyers of raw sugar from Brazil, the world’s largest producer, are getting a discount for the sweetener loading from August at ports in the country’s main growing region as a forecast surplus approaches.

Raw sugar for loading at ports in the center south in August was at a discount of 0.15 cent to 0.2 cent a pound to the price of the July contract on the ICE Futures U.S. exchange in New York, according to Swiss Sugar Brokers. The sweetener for September was at a discount of 0.4 cent a pound, the Rolle, Switzerland-based broker said in a report dated yesterday.

Rains this month and last delayed harvesting and shipments, pushing the expected surplus forward. Sugar output in the center south fell 19 percent to 1.96 million metric tons in the second half of May, according to industry group Unica. Sugar for July shipment is trading at a premium of 0.25 cent to 0.4 cent a pound to the exchange price on limited supplies for immediate delivery, data from the broker showed.

“The surplus estimation from different trade houses continues almost unchanged,” Naim Beydoun, a broker at Swiss Sugar Brokers, said in the report. The surplus will come in the third quarter, “which has been lending some support to July cash values,” he said.

The global sugar surplus in 2012-13 will be 8.4 million tons, up from 7.8 million tons estimated for 2011-12, according to London-based Czarnikow Group Ltd., which traded sugar in 90 countries last year. Global sugar production will be 1 million tons higher than previously forecast at 176.8 million tons for 2011-12, according to German researcher F.O. Licht GmbH.

Delivery on ICE

Sugar for August onward is at a discount as traders believe that the July premium is the result of a short-term tightness, “and the surplus would be hitting the market in August rain or no rain, whether we are having a million-ton delivery or not,” Beydoun said.

The raw sugar delivery on ICE may be more than 1 million tons when the July contract expires at the end of the month, Beydoun said. Two traders are expected to receive the sugar, he added.

Raw sugar for October delivery rose 0.6 percent to 19.86 cents a pound by 10:36 a.m. in New York.

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