SUGAR SUPPLY CONTRACTS IN BRAZIL

How to Successfully Trade with a Sugar Supplier in Brazil: Key Considerations for Importers

98% of buyers who express interest in trading with Mello Commodity are not ready to buy. There's a significant difference between wanting to buy and being ready to buy. If you are an importer of Icumsa 45, 150, 200, or Brown Sugar VHP 600-1200 and aim to secure a sugar supply contract with Brazil, preparation is crucial.

For every 100 potential buyers, only 3% are truly in a position to finalize a purchase. To avoid wasting time and to prevent frustration from failed negotiations, it’s essential to ensure your company is fully prepared before entering talks.

Sugar Suppliers in Brazil

At Mello Commodity, while we can’t speak on behalf of all sugar suppliers and exporters in Brazil, we can guarantee that none of the six sellers we represent will negotiate without a solid contractual guarantee. This critical guarantee is an SBLC (Standby Letter of Credit), a requirement that removes 98% of buyers from the negotiation process because it must be issued by a bank in the TOP 50 globally.

SBLC and MT103: Contractual Requirements for Sugar Supply Contracts Contracts with Mello Commodity for wholesale sugar supply require: - Payment Terms: A Standby Letter of Credit (SBLC) equivalent to one month's supply, with a validity of 1 year and 1 day. The SBLC must be irrevocable, unconditional, transferable, and divisible. It must be issued by a TOP 25 bank.

- MT103 Payment: Payment is executed via MT103, a SWIFT message sent by the buyer’s bank to the supplier’s bank after shipment documents are confirmed.

Why the SBLC Matter

s An SBLC from a local bank, even if it is the largest in your country, won't suffice unless it is from a TOP 25 global bank. Many buyers get frustrated searching for alternatives or spending months trying to negotiate with brokers for an SBLC. This process can take a year or more without success.

What Is the Cost of an SBLC?

Typically, the cost to issue an SBLC is 2% of the guaranteed amount. Let’s break it down: - Example: A contract for 300,000 metric tons/year, with monthly deliveries of 25,000 metric tons.

- Negotiated price: USD 460.00 per metric ton.

- One month’s supply: 25,000 metric tons x USD 460.00 = USD 11,500,000 - SBLC issuance cost: 2% of USD 11,500,000 = USD 230,000.

This guarantee is renewed monthly for the duration of the contract, typically 12 months.

It’s important to note that the SBLC is not the financial instrument used for the actual payment, which is done via MT103. The SBLC is only invoked if the buyer fails to make the agreed payment.

SWIFT MT103: How Payments Are Made The

SWIFT MT103 is a standard message used by banks for international wire transfers. In the context of a sugar contract, payment is initiated only after the supplier's shipping documents are confirmed by the buyer's bank. If the buyer fails to issue the MT103, the supplier can then claim the SBLC.

Bilateral Guarantees in Sugar Contracts

Both the buyer and the seller are protected in a wholesale sugar contract. The seller is also required to issue a 2% Performance Bond of USD 175,500, ensuring the buyer’s security. A Performance Bond guarantees that the seller will fulfill the terms of the contract. If they don’t, the buyer has the right to claim compensation.

Performance Bonds are provided through an insurance company, which monitors contract fulfillment and ensures the delivery process goes as planned.

1Preparing for a Successful Transaction Before you begin negotiations with a sugar supplier, consult with a TOP 50 bank. Ask about the requirements for issuing an SBLC, the necessary documentation, costs, and processing time. This preparation is vital for a smooth and efficient transaction in the competitive world of sugar mills and international sugar trading.

By understanding the contractual requirements, payment processes, and guarantees involved, you'll position yourself among the 2% of importers who are genuinely ready to buy and benefit from secure, reliable sugar suppliers.

This way, your company will be able to prepare to start trading.We hope we helped with this information.If you have any questions? Talk to our team at WhatsApp Comercial:Mr. Elias Pedrosa da Silva +55 21991295296Ms. Jacimara da Silva +55 21976723023

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