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Swiss-based trader Andre & Cie, formerly one of the world's top five grain traders, became the latest casualty this month when it filed for court protection. But it had already wound up its loss-making sugar unit early last year.

``People are nervous about the trading environment. They're worried about high overheads, slow sales and a credit crunch from banks,'' said a French sugar trading manager, noting that the number of sugar trade houses has halved over 20 years.

Traders said that two or three other sugar trading operations were also in serious difficulty.

Trading margins were squeezed when world sugar prices plummeted below five cents a lb to 13-year lows in April 1999 due to oversupply and slack demand. Even Brazilian millers, the world's lowest cost producers, were losing money.

Collapsing prices encouraged buyers to default and pick up cheaper bargains, while in deregulated markets it proved virtually impossible for trade houses to gain compensation, analysts said.

Another major trading casualty was the Singapore unit of Bangkok-based G. Premjee Ltd, one of Asia's oldest commodity trade houses. It closed its London sugar trading desk in November 1999 and was put under judicial management the following year.

But analysts pointed out that sugar trading is only a sideshow to grains and oilseeds.

``Trade house problems are often not sugar-driven,'' said one London sugar analyst.

However, notable sugar trading casualties in recent years include U.S.-based Carnikow Rionda Sugar Trading Inc and Germany's Metelmann & Co. GmbH.

In February 2000, London-based ED & F Man (quote from Yahoo! UK & Ireland: EMG.L), one of the world's oldest commodity traders, sold its loss-making agricultural business to focus on financial services.

COOPERATIVES PROMINENT

On the production side, cooperatives are becoming more prominent as difficult economic conditions force publicly owned companies to seek more profitable sectors.

``With liberalisation, investors are less willing to take so much risk especially if markets are very volatile,'' Helmut Ahlfeld, managing director of German commodity analyst F.O. Licht, told Reuters.

Cooperatives are more likely to take a long term view and tolerate short to medium-term losses than companies which are quoted on stock exchanges and pressured to pay regular dividends to fickle shareholders.

The EU's largest sugar producer, Germany's Suedzucker, is controlled by farmer cooperatives and has been expanding into eastern Europe in anticipation of the EU's expansion eastwards.

France's cooperative Union des Sucreries et Distilleries Agricoles (Union SDA), the country's third largest sugar producer, expanded into the Czech Republic and Slovakia in the 1990s.

Late last year it formed a joint venture with Brazil's Cosan and French trade house Sucden. Last month it took a majority stake in a cane refinery in France's Indian ocean island of Reunion.

``The advantage of being a cooperative is that we have stable shareholders - farmers - who take a long term view,'' Philippe Pelzer, Union SDA's head of communications told Reuters.

Commenting on Union SDA's strategy, Pelzer said, ``Brazil is the world's most competitive sugar producer. World prices are better now and we are increasing our (cane) sugar and alcohol areas.''

The sugar industry in Brazil, the world's largest producer and exporter, is controlled by cooperatives and by family owned businesses.

Since Brazil's sugar and alcohol industry was liberalised in early 1999, foreign investors have been moving in, even though the sector is still saddled by massive debts.

PUBLIC PRODUCERS RETREAT

In contrast to co-ops, major publicly-owned sugar producers, such as Britain's Tate & Lyle (quote from Yahoo! UK & Ireland: TATE.L) and Australia's CSR Ltd (Australia:CSR.AX - news), are scaling back loss-making sugar operations.

Tate last year sold Bundaberg, the third largest cane sugar miller in Australia, to Belgium-based Societe Financiere des Sucres.

In the U.S., where domestic prices fell last year to historic lows, Tate is selling its loss-making Western Sugar Company to the Rocky Mountain Sugar Growers Cooperative.

According to the American Sugar Beet Association, some 90 percent of sugar beet factories in the U.S. could either be cooperatives or close to becoming co-ops by the end of 2001.

In Australia, CSR Ltd is selling six sugar mills to focus on its building materials business. Bidders include the Australian CANEGROWERS, a cooperative representing about 6,000 cane farmers.

In a weekly sugar report, German commodity analyst F.O. Licht forecast that Australian sugar production could be fully controlled by cooperatives or family-owned businesses, compared with less than 50 percent in early 2000.