Brazilian sugar mill owners warn that sugar prices are limiting production expansion

Brazilian sugar millers say current raw sugar prices are not high enough to justify investment in new plants, and that marginal gains from adjustments to existing plants are approaching their limit. Sugar demand is growing at about 2% per year, but production has been hampered by factors such as climate change and biofuel blending policies, especially in India, keeping the market in a tight supply-demand balance. Rodrigo Penna de Siqueira, CFO of Jalles Machado, one of Brazil’s largest sugar groups, said that when looking at investing in a new sugar mill with a 50% sugar blend, the internal rate of return is only 9%, which is not a sufficient incentive. He stressed that prices need to rise and remain high for a longer period to allow for new investment. Siqueira made his comments at a conference organized by BTG Pactual bank in São Paulo, and other executives echoed his view. Renato Junqueira, vice president of Adecoagro, which operates three mills in Brazil, said Brazil’s ...