LONDON/PARIS (Reuters) - A sharp rise in sugar prices this year has helped transform the outlook for Brazil’s sugar industry with the future now bright for a sector which suffered many closures and bankruptcies in recent years, the CEO of Louis Dreyfus said on Wednesday.
“You have very high prices, high productivity, good weather and access to cheaper financing and longer-term financing so I‘m very bullish for the sugar industry (in Brazil) going forward, very bullish,” Chief Executive Officer Gonzalo Ramirez told the Reuters Commodities Summit.
International commodities trader Louis Dreyfus has a controlling interest in Brazil’s Biosev SA, the world’s second largest cane processor.
ICE raw sugar futures rose to 23.90 cents per lb last week, their highest level in more than four years. The price of the sweetener has risen more than 50 percent so far this year.
The rebound in prices following a prolonged slump which began in early 2011 and reached its nadir in August 2015, fueled by several seasons when production outstripped demand.
Brazil cane industry association Unica has estimated that around 80 mills filed for bankruptcy protection during the slump in prices and some 70 more closed their doors.
The global sugar market is now widely expected to have a second consecutive global deficit in the 2016/17 season and stocks are shrinking.
“What we are seeing in the world today is that prices are staying at very high levels compared to where they were one year ago to make sure you force consumption a little bit lower and promote more planting in the world, basically in Brazil,” Ramirez said.
He said there needed to be a sustained period of high prices as decisions to plant sugar cane were based on expected returns over five to seven years.
Mills will also need to see the higher prices maintained before expanding.
“I think all the mills need to make a little bit of money before thinking about expanding and we all want to see sugar prices high at these levels and the evolution of demand in the world before we all jump in for expansion,” Ramirez said.
Louis Dreyfus does not need to turn to the stock market in the near term as it moves ahead with plans to find partners to bolster certain activities, starting with its fertilizer business, he also said on Wednesday.
Reporting by Nigel Hunt and Sybille de La Hamaide; Editing by David Evans; Follow Reuters Summits on Twitter @Reuters_Summits