Brazil’s Sugar Expansion Hampered by Credit Squeeze

By Pratik Parija and Thomas Kutty Abraham

Sept. 2 (Bloomberg) -- Sugar mills in Brazil, the world’s biggest producer, are unable to increase capacity and benefit from the highest price in 28 years because of a credit crunch, the nation’s top sugar and ethanol company said.

“We don’t see major investment going into the sugar industry next year because of a lack of credit and own resources,” Fernando Vieira, international trading manager at Copersucar SA, told an industry conference today in New Delhi. “In the short term, we don’t see much increase in output.”

Stagnant production in Brazil, also the world’s biggest exporter, and a shortage in markets from India to Egypt may widen a global supply deficit for a second year. Raw-sugar futures reached the highest since 1981 in New York yesterday on concern a drought may curb output in India and excess rain will hamper the harvest in Brazil.

Brazil’s Center South, the world’s biggest sugar producing region, may turn out this year less than the 31.2 million metric tons estimated in April because of heavy rainfall, Eduardo Leao de Sousa, executive director of industry association Unica, said yesterday in an interview.

Producers in the Center South region may add between 1 million tons and 1.5 million tons of sugar-cane processing capacity in the year beginning May 1 and the nation’s overall production may not “rise much” next year, Vieira said.

Raw-sugar for October delivery rose as much as 1.9 percent to 24.85 cents a pound on ICE Futures U.S. yesterday, the highest for a most-active contract since February 1981.

To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net; Thomas Kutty Abraham at tabraham4@bloomberg.net