SAO PAULO - Heavy rains lashed Brazil's main sugar exporting terminals for a seventh day on Monday, clogging operations as a large volume of sugar waits to be shipped abroad and helping to drive sugar prices to a two-and-a-half-year peak.
Rains are also hampering harvesting in the main center-south cane belt, fueling market expectations for the first global sugar deficit in six years. Brazil's weather was a main factor behind sugar futures' intraday rise to a peak of 19.42 cents per pound on Monday.
After a very dry April, which boosted an early start to a record 2016-17 crop, above-average rains late in May and in June are forcing ships to wait much longer than normal to load sugar at Brazilian ports, bringing the risk of supply shortages for some refiners.
Cumulative rains so far in June are triple the amount that would normally fall over Sao Paulo state coastal area.
Data from SA Commodities show there are 29 ships waiting to load sugar in Santos compared to 15 at this time last year. Sugar waiting to be loaded amounts to 1.4 million metric tons versus 400,000 metric tons a year ago, according to SA Commodities.
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"It is hard to load the ships under rain so delays are mounting," said Isadora Lopes, a commercial manager at shipping company SA Commodities, in Santos.
Reuters shipping data showed that bulk sugar carrier Clia approached the Brazilian coast around May 9 to load 74,000 metric tons of sugar for French commodities trader Sucden. It only berthed at Rumo's terminal on Sunday.
"Infrastructure was already insufficient. You add to that an early start to a record crop, better returns for sugar exports due to a weak currency and on top of everything the rainy weather," said Alex Bahov, a Santos-based lawyer who oversees shipping contracts.
According to him, shippers are subjected to daily fines going from $2,000 to $12,000, depending on the contract, when vessels stay more time than planned.
PRICES REACTING
Datagro's chief analyst Plinio Nastari said on Monday that mills lost four harvest days in the second half of May and should lose more in June.
"But it is still premature to say that mills will not be able to process the whole crop," said Nastari.
He said port congestion was more of a sign of strong demand for Brazilian sugar at a time of production problems in other important sugar makers, rather than a problem caused only by the weather.
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Luiz Mendonça, a trader at Marex Commodities, believes the market is looking ahead and reacting to the expected large global deficits both for this year and next.
"It is still too early to estimate any possible losses in production," he said.
Copersucar, the world's largest sugar cooperative, which manages a large private terminal in Brazil, said its operations were running according to plans.
Rumo, a transport company controlled by Brazil's Cosan SA Industria e Comercio, a partner of Royal Dutch Shell in leading sugar producer Raízen, did not have an immediate comment on the situation at its terminal in Santos.
