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How Will the Surge in Sugar Prices Affect Bunge?

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Largest producer of sugar

Bunge (BG) is a leading global sugar trader and merchandiser that holds 8%–10% of the market share. The company has eight sugarcane mills in Brazil, which have a combined crushing capacity of ~22 million metric tons as of 2015, making the company the world’s largest producer and exporter of sugar. Sugar is the third largest contributor to Bunge’s total revenue.

Bunge’s main products from this segment are ethanol, sugar, and electricity. In the first quarter of 2016, the sugarcane milling business’s performance was in line with expectations. The performance was mainly driven by higher volumes in margins in the company’s trading and distribution business. The first quarter marks the inner harvest period for the Brazilian sugarcane industry, so operating and sales figures are carried over from prior inventories. The recent surge in sugar prices owing to weather fluctuations in South America will likely benefit Bunge.

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Major competitors

The major competitors for Bunge in the sugar business in Brazil include Cosan Limited (RLOG3), Sao Martinho (SMTO3), LDC-SEV Bioenergia, and ED&F Man. Among the international competitors are British Sugar, Sucden Group, Cargill, Sudzucker (SZU), Tereos Group, and COFCO. Bunge makes up 3.0% of the VanEck Vectors Agribusiness ETF (MOO). This ETF has returned 8% in the last three months. MOO also invests in Bunge’s peers in the agriculture sector such as Archer Daniels Midland (ADM), Syngenta (SYT), and Monsanto (MON).

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