Cargill considering expanding its Brazil sugar operations

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Photo by Darrell Hoemann/Midwest Center for Investigative Reporting

The Cargill facility in Paris, Ill., on Dec. 9, 2014.

Cargill’s Black River Asset Management LLC is discussing the possibility of expanding the Minnesota-based agribusiness company’s sugar portfolio by buying two Brazilian sugar and ethanol mills.

The mills are owned by the Ruette family of Antonio Ruette Agroindustrial Ltda.

According to Cargill’s website, the company already oversees sugar cane milling, sugar and ethanol production operations in Brazil via non-consolidated joint ventures with Cevasa and SJC Bioenergia. Cargill also reached an agreement with Copersucar in August 2014 to form Alvean, an equally shared venture split between two of the world’s top sugar traders.

Reuters reported on Sept. 17 that Brazil’s sugar cane industry is in its worst crisis in history.

The Sao Paulo-based mills, which like much of the local cane sector have struggled with heavy debts, can process around 3.7 million tonnes of cane a year.

If sealed, the deal would be the first in several years involving a large commodities trader in the battered sugar and ethanol sector. Companies such as Bunge Ltd. have been trying to find buyers for their mills for years but have been unsatisfied with offers.

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Bloomberg Business also reported on the sugar dealings on Sept. 17.

Cargill’s interest in expanding its sugar capacity in Brazil coincides with the prospect of prices recovering from its longest slump since at least 1962 as the global market heads into its first supply shortfall in five years. Also, domestic mills are seen benefiting from Brazilian real’s slump as it makes their exports more competitive. The real, which has slumped 32 percent this year amid the worst recession in 25 years, led world losses Thursday.

The U.S’s largest closely held company operates three Brazil sugar-cane mills through joint ventures with a total crushing capacity of 10.5 million metric tons, according to the company’s website. Ruette’s mills, which are in the main producing state of Sao Paulo, can process as much as 3.7 million tons of cane.

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