There is one previously unseen (by all but the largest buyers in which case it’s completely normal) method of buying sugar and every large 100,000mt ++ buyer buys it this way. The problem is up until now, you could not safely buy it this way, but things are changing and we’re a new kind of exporter/agent trying hard to find solutions for our customers.
Now with mills going bankrupt on letters of credit failures and a severe national bank credit crunch, this is more serious than ever before.
FACT 1: Letters of credit according to the Brazilian Mills Associations we speak to fail about 30-40% of the time.
FACT 3: No sugar is allowed to be warehoused. If the Brazillian government catches you, you pay heavy fines.
FACT 4: No ship can enter port without 1) cash deposit for the load of 1 ship OR 2) LC/BG from a creditworthy customer and highest quality banks. Credit is under so much scrutiny right now even mid-sized importers are having issues.
FACT 5: Since no ship can enter port without one of the above, we ask for that first. If the buyer has no money, there is nothing to discuss.
FACT 6: Past Documents are illeagle to provide as they violate numerous laws in Brazil and in international contract law involving data privacy in
regards to the mill, the seller/agent and the buyers information. If the documents are “sanitized”, they cannot be verified. If a buyer asks for documents and there is nothing to discuss.
FACT 7: If a buyer cannot provide proper documents on banks, payment instruments, etc or attempts to use DLC or purchased BG’s backing loans from Bank Of India or somewhere or plays any games outside the ICC rules, end of discussion. Most likely the buyer has no money and the ship will never be allowed to enter port and the price the mill is willing to quote will be too high. THIS IS WHY WE ASK FOR SO MUCH INFORMATION ON THE FRONT END OF THE TRANSACTION.
FACT 8: Basic principles of economics: Risk/Reward ratios dictate deviations in price from Supply/Demand ratios. Low risk to the mill and the price drops.
Background on all the above and our “Solution to the Sugar Industry Problem”:
When a mill accepts a long term contract, the mill must start increased labour and production costs in advance of delivering sugar each month (typically) for the next 12 months, the risks of an LC/BG to the mill are extremely high. It’s safer just to sell it to a cash buyer at 40% off or sell it for ethanol production. As an agricultural crop costs are allocated a year or more in advance based on contracts in hand. When a contract fails, the mills lose money. They lose a LOT of money. Mills have gone bankrupt on this simple fact alone.
We are fully set up to be your team on the ground in Brazil and buy sugar exactly the way the largest buyers in the world do.
We have department of agriculture and ministry of finance oversight on the funds a customer provides and once in the account in Brazil, we can negotiate with the mills just like the big players and get YOU the discount. We can’t touch the funds. They can go to a mill who certifies the order is paid in full and then our profits from the sale are released from the bank.
The ministry of finance will not allow the funds to be withdrawn until our taxes are paid. The taxes are based on the amount left after we pay for your sugar and have the mill receipts.
We are therefore regulated into a position where the department of agriculture, customs and the ministry of finance all become like one giant escrow agency.
If for any reason we cannot conclude the deal, we have no choice but to transfer the money back to your account.
We can do this for you on a small order of 100mt or a 100,000/month x 12 contract where you might pay one month or two (depending on your credit rating with the mills) and then complete the contract on an LC/BG basis as usual, BUT at the much lower price. Which of course saves you many millions of dollars.
Price to you is reduced, because you’ve removed risk to the mill. Risk to you is nothing because the only thing we can do with the money in the bank is buy your sugar or return it to you. The government will approve nothing else.
The market is changing and it’s going this direction at a rapid pace. Traditional buyers scoff at advanced payments today but in a couple years it will be completely normal and required or they don’t get to buy sugar at all!
Let us help you with our supply side strength, our ability to play many mills against each other for the best price and our ability to help you buy just like the biggest players in the market using cash to reduce your price by an amazing 30-40% on average!
We’ll take any industry standard contracts (LC/BG per ICC), but we’ll also go the extra mile to be your team on the ground in Brazil and get you the prices the big guys get.
Contact us at http://sugarexbrasil.com
firstname.lastname@example.org (container orders)
email@example.com (contracts and “your team on the ground in Brazil” orders)
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