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The Multi Million Ton Myth – Brazilian Sugar Scams

Sugar buyers are often warned about scams in the sugar industry. Because this is such a large industry, and because there are so many dealers and brokers, not to mention buyers, sellers, and mills in the world, it can sometimes be difficult to gage what is a good, safe deal, and what is not.

Much of the sugar trading process is designed to provide reassurance and proof that both the buyer and the seller are acting in good faith. Normally in order to conduct a successful sugar trade, a buyer must submit a letter of intent, followed by banking details which allow the seller to conduct a soft probe of the buyer’ s accounts and ascertain whether or not funds really are in place to cover the cost of the trade, then a contract must be signed and a stand by letter of credit ( or bank guarantee) supplied which serves as guarantee that the buyer will perform. The guarantee is usually an amount equal to several months worth of shipments, and can be drawn upon if the buyer does not pay. The seller normally provides a soft quote, then a firm corporate offer, as well as a proof of product, and a performance bond ( 2% of the total value) in the form of a letter of credit or bank guarantee. The seller must also sign the contract which is agreed upon by both parties, and it is the seller’ s responsibility to have the sugar shipment inspected by independent SGS inspectors before it leaves the port. These inspection certificates are normally required in order for the seller to obtain payment.

As is fairly obvious even from that brief and simplified description, the sugar trading process has safeguard after safeguard built into it, yet still there are instances where buyers can scammed. This most often occurs when buyers get greedy, and seeing offers for large amounts of sugar at rock bottom prices leap at the chance to get a deal. The fact of the matter is that sugar is normally traded on the international market at a fairly fixed price, and discounts are rare. There are two red flags that should prompt any buyer to be wary, and those are heavily discounted sugar, and inordinately large amounts of sugar.

Buyers should be aware that it is not only unscrupulous brokers who sometimes claim to have access to sugar that does not exist, sometimes a mill will claim to have large amounts of sugar that they simply do not have. Scam offers often claim that the sugar is a result of a canceled order, or is simply a ‘ bargain’ offer. Buyers flock to take advantage of these offers, but then find that the proof of product ( POP) is not forthcoming, or worse, a fraudulent POP has been issued.

Buyers need to know the market in which they are buying, and understand it before they start trying to buy sugar. Brazil is the largest exporter of sugar in the world, but most of this sugar is VHP raw sugar. If you are trying to purchase ICUMSA 45 sugar, you should be aware that relatively small amounts of ICUMSA 45 sugar are produced in Brazil, and the bulk of this sugar is made for existing buyers. There is no such thing as an order of 70-100 million tons, so do not be fooled. If an offer seems substantially better than the bulk of other offers on the market, it is highly likely that it is a scam offer.

If you need large amounts of sugar, be prepared to secure these in advance. Most buyers who require large amounts of Brazilian sugar have deals which may last for a year or more, and involve multiple smaller shipments over a period of time. Brazilian sugar is also heavily traded on the futures market, and it may be possible to secure a deal for sugar which has yet to be produced, or even planted. Most of the ICUMSA 45 produced in Brazil is secured in this fashion, so be prepared to make a long term commitment if you are serious about securing an ongoing and reliable sugar supply.

The good news is that sugar prices have been trending downwards for some time now, however since Brazil has begun using sugar to produce Ethanol fuel, a lot of it will be used in that manner and there will be less of it to go around. Future sugar secured at today’ s prices could prove to be a good investment if the price of sugar rises again in the coming years.

Essentially, buying sugar is like making any other major purchase. Buyers need to do their research and be realistic about what is on offer. Most people wouldn’ t try to buy a Lamborghini Countach that was advertised for $ 50.00, because they would be aware that a car normally worth over $ 100, 000 just isn’ t going to be sold for $ 50.00. The same logic applies to sugar trading. At the time of writing, sugar prices are currently around ten cents per pound. Therefore, offers selling sugar for four cents a pound are likely to be scams. It is quite easy to obtain data on the current price of sugar, one simply needs to consult the Intercontinental Commodities Exchange ( ICE) , formerly known as the NYBOT.

Whether buyers are acting independently, or using the services of a broker, they need to do the necessary research to understand whether or not they are getting a good deal, and whether or not deals proposed to them are likely to be scams. Most sugar scams are not perpetrated by mastermind criminals using advanced technology. Most of them are fairly simple to see through as long as the buyer has their wits about them, only enters into reasonable deals, and takes all due care to see that documentation is authentic.

As a buyer, your success at securing a reliable sugar source is largely in your own hands. Yes there are scammers out there, but there are also a great many honest sellers, brokers, and mills who will contribute to the success of your operations rather than cheating you out of your hard earned dollars. Seek out reliable suppliers and brokers in the same fashion you would seek out any other kind of business partner, and don’ t waste time chasing after impossible deals which will only result in disappointment, and sometimes even financial ruin