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02.07.2007

Brazil Sugar-Local prices are lowest in 3 years


By Inae Riveras
SAO PAULO, June 28 (Reuters) - Sugar prices on the
Brazilian local market are the lowest in three years, despite
delays in harvesting and more cane going to ethanol, brokers
said on Thursday.
The increase in domestic stocks and global oversupply have
pressured sugar prices 31 percent lower since the beginning of
April, when the center-south harvest started, according to
analysts Cepea/Esalq.
"Exports of white sugar are currently more profitable than
local sales, but there's a lot of product all around here and
as we get closer to the harvest peak and companies need cash
they sell locally," said Mariana Pessini, researcher at Cepea,
adding that prices are close to production costs.
A white 150 ICUMSA benchmark 50-kg bag of sugar sold for
23.95 reais with taxes at the mill gate on Wednesday, down 9.7
percent from the beginning of June. This is the first time
prices have fallen below 24 reais since June 2003, Cepea said.
Despite the rising sugar stocks, Brazilian producers say
they are still behind on the 2007/08 crush which began three
months ago.
"There were stops (in June) because of rains, because of
(cutters') strikes... There's still a significant amount of
mills that haven't started to crush," said Antonio de Padua
Rodrigues, technical director for the Sugar Cane Industry Union
(Unica).
He said 10 out of the 19 new mills scheduled to start
operating this year haven't begun crushing yet.
Producers say that industrial yields are still low compared
to last year's. The high content of water in the cane prompts
mills to divert more cane to ethanol rather than sugar.
Normally
, this moisture reduces during the dry winter season starting
in June.
According to Unica, more than 55 percent of the crop
harvested by June 15 was used to produce ethanol, compared with
the average of 50.4 percent in 2006/07.
Export premiums for VHP raw shipments have stabilized in
the past days to around 15 points over the July NYBOT
contract.
Local sales of ethanol are still more profitable to mills
than exporting VHP sugar, brokers said. Some trading houses
decided to sell sugar contracts they had bought in NYBOT in
accordance with mills. They would then produce ethanol instead
of sugar and split the gains with the trading houses.
The biofuel prices have been stable this week. Hydrate
ethanol sold for around 650-690 reais a cubic meter (1,000
liters) with taxes, compared with 670 reais a week ago.
Anhydrous ethanol sold for 680-700 reais, unchanged.
The rise in the mandatory blend of ethanol in gasoline to
25 percent from 23 percent on July 1 hasn't had an impact on
the market, brokers said.
Some export deals have been reported this week, with
hydrous ethanol sold for $360-$365 a cubic meter FOB Santos to
the Caribbean.

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:

JUNE 28 SHIPMENT BID OFFER BASIS
C/S VHP JULY +15 -- JULY NYBOT
C/S 150 JULY +63 +68 (66 traded) JULY NYBOT
($1 = 1.922 reais)

JUNE 22 SHIPMENT BID OFFER BASIS
C/S VHP PROMPT +10 +18 JULY NYBOT
C/S 150 JUNE +63 +68 JULY NYBOT
($1 = 1.943 reais)

((Por Inae Riveras))

>SUGAR NEWS - REUTERS