A global surge of sugar mill closings is on the horizon after years of falling prices, tightening margins, and global surpluses. After billions of dollars have been funneled into the global sector, Bunge, Ltd. has signaled it is planning to sell its Brazilian sugar milling business after benchmark sugar prices fell to a three year low in July. In Brazil, the world’s top sugar producer and exporter, according to the country’s cane industry group Unica, as many as 50 of the 330 sugar mills may not reopen in the next season. Production costs in many areas exceed the market price, in part because governments have supported prices the mills must pay to cane growers. In China domestic sugar prices are $880-$890 per ton, or double the global price because of government price support for cane and beet farmers. The fall in sugar prices has become so concerning that banks have stopped lending working capital to mills causing delays in crushing. Going into 2014/15 these conditions could mean a significant decrease in sugar production and lead to increasing consolidation within the sector that would give those left the benefits of economies of scale.
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