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21.06.2007

Brazil Sugar-Slow harvest start, ethanol drive sugar

By Reese Ewing

SAO PAULO, May 24 (Reuters) - The slow start to Brazil's
center-south sugar cane harvest and mills' focus on producing
ethanol at this stage have driven up export premiums for raw
sugar, traders said on Thursday.

Brazil's center-south cane harvest started two weeks later
than it did last season due to the poor sucrose yields from the
early harvested cane fields. This was in part due to the heavy
rains in December and January.

More recently, heavy rain over the past two days in the
center-south has halted harvesting operations. Not only does the
rain make the sucrose levels in the cane fall and muddy the
fields for trucks and mechanized harvesters, but it makes
burning of the fields nearly impossible.

About 70 percent of Brazil's cane harvest is manually cut,
so the fields must be burned to clear the dense foliage before
the cutters can gain easy access to the stalks.

Somar meteorologists said weather will clear for the next
few days and temperatures will fall sharply in the next 48
hours, which will help to concentrate sucrose levels in the
cane. But more widespread rainfall is due to stop harvest again
early next week, Somar said.

"Premiums have come up a lot since last week," said a
medium-sized sugar trader in Rio de Janeiro. "There isn't much
by way of business in the raws market right now, although there
was some in whites for June delivery earlier this week."

The trader reported export business at $75 a tonne for 150
ICUMSA crystals on Monday but premiums have fallen slightly
since then.

A 50-kg bag of white sugar was quoted at an average price of
27.06 reais on the domestic market on Thursday, down from a week
ago when the same bag sold for 28.51 reais and two weeks ago at
30.56 reais, analysts Cepea/Esalq said.

The average price of raw sugar has been falling steadily
since December.

Brazil's Cane Industry Association Unica reaffirmed the
forecast for the current center-south cane crop at 420 million
tonnes, up from 371 million the season before.

"The question now is whether we will be able to get to all
the new cane before the rainy season comes and ends the
harvest," said Antonio de Padua Rodrigues, Unica's technical
director.

Last year, mills left about 6 million tonnes of cane in the
field for this year as they were well into the rainy season in
January.

Unica officials also said on Thursday that the government
should announce soon that the national mix of ethanol blended
into gasoline will return to 25 percent from the current 23
percent.

Mills have been focusing larger portions of the cane harvest
on ethanol production due to better returns than on sugar. This
has helped to support sugar prices. But prices on the cane-base
fuel have been falling sharply of late.

The government lowered the mix to 20 percent early last year
when ethanol prices rose and supplies were short. It raised the
mix to 23 percent later in 2006. The mix fluctuates between 20
and 25 percent.

Brazilian center-south (C/S) and northeast (N/E) very high
polarization (VHP) raws differentials (bid/offer) in points per
pound against New York Board of Trade Futures (NYBOT):

White sugar premiums/discounts are against against NYBOT
futures in dollars per tonne. 45/100/150 International
Commission for Uniform Methods of Sugar Analysis (ICUMSA)
varieties:

MAY 24 SHIPMENT BID OFFER BASIS
C/S VHP PROMPT +37 -- points JULY NYBOT
C/S VHP JULY +20 +25 points JULY NYBOT
C/S 150 JUNE +$71 +$73/T (traded $75)JULY NYBOT
$1 = 1.97

MAY 16 SHIPMENT BID OFFER BASIS
C/S VHP PROMPT +10 +20 points JULY NYBOT
C/S VHP JUNE/JULY +10 +15 points JULY NYBOT
C/S 150 JUNE +$72 +$74/T traded JULY NYBOT
$1 = 1.956

SUGAR NEWS - REUTERS