Sugar Rallies as Warehouses at Brazilian Port of Santos on Fire

(Businessweek) – Sugar jumped to the highest in almost a year in New York after warehouses that store the sweetener in the Brazilian port of Santos were struck by fire.

A blaze started at the facilities in the country’s biggest port at about 6:15 a.m. local time today, according to Codesp, the port managing company. Fire affected depots 20, 21 and 6, all owned by Copersucar SA, a spokesman for Codesp said by phone from Santos today. One of the depots has storage capacity of more than 100,000 metric tons, said the spokesman, who asked not to be identified citing company policy.

“We are going into the tail end of the Brazilian crush and production there has already been affected by rains,” Kona Haque, an analyst at Macquarie Group Ltd. in London, said by phone today. “This is another problem they didn’t need and we could lose up to 300,000 tons. Speculators had already started to buy and the bullish news will fuel that short-term bullishness further,” she said, referring to the fire.

Raw sugar for delivery in March rose 4.7 percent to 19.9 cents a pound in New York by 8:13 a.m. It gained as much as 6.1 percent earlier today, the most for a most-active contract since September 2011, to touch 20.16 cents, the highest price since Oct. 22. Refined, or white, sugar for delivery in December rallied as much as 4.6 percent in London.

Rains earlier this year in Brazil’s center south, the main growing region in the world’s biggest producer, already reduced output, according to Sao Paulo-based industry group Unica. Production there will total 34.2 million tons in the 2013-14 season that started in April, down from a previous forecast of 35.5 million tons.

Potential Disruption

“We could potentially live with 300,000 tons less because of the global surplus, but the main issue is how long these warehouses and surrounding parts of the loading terminals will be out of action and how it will disrupt port operations,” Haque said.

Copersucar was the seller of 83 percent of raw sugar delivered on ICE to settle the October futures contract, according to two people with direct knowledge of the transaction.

The Brazilian trading company and producers’ cooperative delivered sugar for 24,279 contracts, said the people, who asked not to be identified because the sale was private. That’s equal to about 1.2 million tons.

The total delivery was a record 29,344 contracts, exchange data showed. Each contract represents 112,000 pounds.