Brazil's impact on the world sugar market: An overview and challenges for the industry

This paper reviews Brazil's rapidly increasing role in the world sugar market and the future challenges held for the industry. Brazilian sugar exports have surged by over 600% since the early 90s, raising the country's share in the world trade from the then 6 % to 45 % now. In addition, perceived low production costs as well as booming demand for cane-based ethanol have set the ground for the industry to expand at an unprecedented rate. With this increasing role in the world sugar market came a significant rise in the volume of foreign direct investment in the sector. Currently foreign investors own 20 mills in the country crushing around 30 mln tonnes of cane. But a series of fresh new challenges have been in the focus of investors in the Brazilian sugar industry in the recent months. The paper analyses the implications of lower prices for sugar export revenues, in particular when expressed in BRL. It highlights the need for Brazil to seek greater export market diversification in light of an increasing level of self-sufficiency of the most traditional importers. It assesses the problem of domestic logistics bottlenecks and finally it describes some of the several barriers preventing a faster development of the international trade of fuel ethanol, seen as an important driver of the industry's future growth.