Brazilian sugar premiums rise on logistical bottlenecks

Santos — Logistical inefficiency to export raw sugar is raising market concerns about possible delays to deliver the sweetener to end consumers within June, encouraging some trading houses to raise premiums for named berths.

Brazil has been playing an import role in lowering the global sugar deficit for 2019-20 (October-September) by maximizing its sugar production in the first months of the crop, an usual aspect, however the logistical bottlenecks can hamper that flow.

Since mid-May, sugar traders have been suggesting higher bids for named berths, to lower their exposure to a long queue of vessels at Rumo terminal, shed 16/17, which showed a waiting time to berth of 29 days on average, according to Unimar shipping agency.

S&P Global Platts assessed raw sugar for June shipment at 23 points premium to the front-month New York No. 11 sugar futures contract on Thursday, a spike of 19 points from May 11 when June shipment became the front-month assessment.

While in the standard trading terms for 1-2 safety berths, bids for June shipment were heard at 22 points premium to the July (N) future contract, there were buyers indicating 30 points premium to any berth, excluding Rumo, aiming to guarantee that the vessel would sail within June.

The Brazilian sugar line-up as of Thursday showed named vessels were expected to export 2.59 million mt up until July 17, from which 67.3% or 1.74 million mt was declared to Rumo 16/17.

Copersucar and Tiplam terminals showed an average time to berth at 10 and 13 days, respectively.

Considering the daily loading rate at Rumo terminal shed 16/17 at 40,000mt, the terminal would need 43 days to export the total sugar declared, given all goes well in terms of weather.

On Wednesday, the strength in the July-October (N/V) spread in the New York No. 11 sugar futures contract, shifting from a carry of minus 18 points in the average since May 1, to an inversion of plus 3 points, just supported the perspective of a strong fundamental demand in the prompt shipment.