* Number of Brazil raw sugar traders doubles since 2008
* Sustained higher sugar price could spur consolidation
By Sarah McFarlane and Stephen Eisenhammer
LONDON, Nov 28 Consolidation in top sugar
producer Brazil's sugar sector is expected after trade houses
have mushroomed in recent years, traders said on Wednesday.
The number of raw sugar traders in Brazil has more than
doubled since 2008 with newcomers including international
traders Olam, Wilmar and Bunge
competing with longer standing players such as Cargill
and Louis Dreyfus.
"We've seen a real proliferation of trade houses in the last
five years," said Ben Pearcy, chief development officer and
managing director sugar and bioenergy for agribusiness giant
"There are many players today and there's not the economics
to support the number of players."
Many of the trade houses have invested in mills but traders
said Brazil had been a tough market in recent years after low
cane volumes in successive seasons.
Adverse weather, such as droughts and frosts, and a lack of
husbandry cut yield potential in centre-south Brazil and the
lack of throughput was a fixed cost burden.
"Fragmented Brazilian industry structure will definitely
provide fertile possibilities for mergers and acquisitions,"
said Stefan Uhlenbrock, analyst with F.O. Licht.
However, Bunge's Pearcy noted that many of Brazil's large
players' immediate focus was on improving their own operations.
"Consolidation always takes more time than you think. What
we've seen in grain and oilseeds is that it sometimes takes an
external factor," said Pearcy, referring to the price rises in
grains and oilseeds which helped spur consolidation.
Traders said that the role of trade houses in the sugar
market had become increasingly blurred as they evolved from
their traditional role which included delivering commodities
from surplus to deficit areas, to also producing commodities and
investing along the supply chain.
Jonathan Drake, head of sugar at trade house RCMA, noted
logistics had been a good starting point for traders getting
into the Brazilian sugar market.
Global sugar deals in recent years include the world's
largest listed palm oil company Wilmar's purchase of Australia's
largest sugar miller, CSR's Sucrogen, and German sugar
producer Suedzucker buying a stake in British commodities trader
Speaking at the International Sugar Organization's seminar
in London, international commodities trader Louis Dreyfus's
global head of sugar Jacques Gillaux asked whether the growth in
the number of Brazil sugar traders could lead to consolidation
to around five or six players.
"If we had significantly higher sugar prices to stay... the
stress on working capital needs may shrink the field," said
"If it happens in a period of high prices maybe highly
capitalised trade houses will be best positioned."