Brazil sugar losing competitiveness-Kingsman

Tuesday, 22 November 2011 00:44 - - {{hitsCtrl.values.hits}}

SAO PAULO (Reuters): Brazil is losing its competitive advantage as a sugar producer because of rising costs, creating opportunities for beet growers like Russia and reducing world sugar trade, a senior analyst said Sunday.

Jonathan Kingsman, managing director of consultancy Kingsman SA, told Reuters that Brazil, the world’s number one sugar producer and exporter, now produced sugar at a cost of 18-22 cents a lb, up from around four cents a lb in the 1990s.

“The biggest problem for Brazil is the increasing costs,” Lausanne-based Kingsman said in an interview.

“At 18-22 cents, a number of different producers and importers become competitive (against Brazil), particularly as they already have fairly high (import) tariffs, for example in Russia,” he added.

“What we are getting is a revival of beet sugar production behind these high tariff walls. And these origins are now competitive with Brazil.”

Another increasingly competitive origin is Thailand, the world’s number two 2 sugar exporter, which has been expanding its productive capacity, building mills, and is expected to crush more than 100 million tonnes of cane this year.

“Even a country like France, a beet producer, is actually quite competitive (with Brazil) at current world prices,” Kingsman said.

Brazil’s booming economy, strong real currency and rising wages, contributed to its higher cost base. Brazil’s lower than expected sugar output this year has also raised milling costs.

Kingsman said that other importers would expand their domestic industries if their costs were cheaper than Brazil.

“What we are seeing is that as the cost of production in Brazil goes up, so people (countries) are producing sugar more cheaply for themselves, and you get a contraction in world sugar trade.”

Even though Brazil’s competitive advantage has eroded, Brazil produces high quality sugar and global sugar consumption is rising, so Brazilian sugar will find homes, said Kingsman, who was visiting Sao Paulo for Brazil Sugar Week.

Brazil Sugar Week brings together hundreds of industry leaders at a series of conferences and seminars culminating in a trade dinner off Santos port on Thursday.