Huge sugar discount spurs Brazil cane millers to stockpile

viernes 15 de agosto de 2014 17:17 GYT

By Chris Prentice and Reese Ewing

NEW YORK/SAO PAOLO Aug 15 (Reuters) - Forward sugar prices are at their biggest premium to cash in nearly five years, prompting mills in Brazil and Thailand, the world's top producers and exporters, to hoard sweetener and keeping pressure on prices.

Brazil's biggest operators, Louis Dreyfus Corp's Biosev SA, Cosan SA and Sao Martinho , disclosed data this week that showed they are holding about 1.2 million tonnes of sweetener, significantly more than last year. They also said they are withholding nearby sales.

The discount of the front-month raw sugar contract to the second-month on ICE Futures U.S SB-1=R spiked as wide as 1.97 cents a lb on Friday, its biggest since December 2009.

The strategy by the producers is not unusual when prices are weak and supplies are plentiful. World prices have buckled under the weight of four straight surplus years. Benchmark ICE raw sugar futures on Friday hit a six-month low of 15.82 cents a lb.

A wide contango when forward prices garner a premium to cash encourages sellers to hang onto stocks, if the spread is high enough to cover financing and storage costs.

Bruno Lima, manager for sugar and ethanol at INTL FCStone in Campinas, Brazil, says the stockpiling has extended to Thailand, the world's second-biggest exporter.

He estimates inventories in Brazil hit 6.5 million tonnes by the end of July, 1.5 million tonnes more than a year earlier.   Continuación...