Raizen, Wilmar plan venture to be Brazil's top sugar exporter

[NEW YORK] Raizen Energia SA and Wilmar International Ltd plan to establish a sugar venture in Brazil to rival the partnership between Cargill Inc and Copersucar SA, the nation's leading exporter this year.

The new joint venture will strengthen existing integrated production and trading operations, Sao Paulo-based Raizen, a partnership between Royal Dutch Shell Plc and Cosan SA, said Wednesday in a filing with Brazil's antitrust regulator Cade. The agency is reviewing the proposal.

The Latin American country is the world's biggest sugar producer and exporter. Singapore- based Wilmar has sugar operations in countries including Australia, Indonesia and India.

In March 2014, Cargill teamed up with Sao Paulo-based Copersucar, a cooperative of Brazilian sugar mills, to expand in global trading. Their Alvean venture in the 11 months that ended Nov 30 was the biggest exporter with 3.26 million metric tons, according to data from Santos, Brazil-based shipping firm SA Commodities. Raizen sold 3 million tons to be shipped by other companies with 1.04 million bought by Wilmar. The Singapore company sent 2.4 million tons overseas.

"You are going to see more concentration in the market," Michael McDougall, a senior vice-president for Societe Generale in New York, said in a telephone interview. "The cheap real has given foreign companies the opportunity to take a closer look at acquiring assets or investing in Brazil."

DEFICIT SWING

Analysts at Czarnikow Group Ltd and Rabobank International forecast that the global sugar market will swing to a deficit next year. Futures in New York have surged 50 per cent to 15.15 cents a pound from a seven-year low of 10.13 cents on Aug 24.

Sugar prices posted an annual drop in each of the four years ended 2014, a record slump. About 50 Brazilian mills out of 340 have closed and 10 more are expected to halt operations in the current season, industry group Unica said in a May report. The Brazilian real slumped 33 percent this year and is heading for the fifth annual drop against the dollar, the most since 2002.

In 2015, Wilmar took delivery of more than 3.5 million tons of raw sugar against expired contracts on ICE Futures US in New York. The company said on Nov 11 that its milling segment will gain from the surge in prices.

Raizen said in the filing that it focuses on production, and Wilmar is active in the export market, alleviating antitrust concerns.

Closely held Cargill, one of the biggest agriculture companies, is based in Minneapolis.

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