Bloomberg News

Brazil’s Sugar Exports Are Even More Profitable Than Local Sales

July 10, 2012

Sugar exports from Brazil, the world’s biggest producer, are even more profitable than domestic sales because of delays in overseas shipments, according to Cepea, a University of Sao Paulo research group.

Exports of the sweetener were 10 percent more profitable than domestic sales last week, up from 7.3 percent a week earlier, Cepea said in a report yesterday. Raw sugar on ICE Futures U.S. in New York rose 5.9 percent last week while domestic prices fell 1.5 percent, Cepea data show. Rain delayed shipments in Brazil while dry weather in India, the second biggest producer, may curb its crop prospects.

“In the international market, prices continued increasing, partly influenced by delays of sugar shipments at Brazilian ports,” Heloisa Lee Burnquist, a Cepea analyst, said in the report. “Another reason is the delay of rains in India.”

In the domestic market, buyers are seeking lower prices even with limited sugar available, she said. Some mills have accepted lower prices “due to the need to make cash flow.”

Above average rains in May and June resulted in sugar output in Brazil’s center south, the country’s main growing area, falling 28 percent to about 4.9 million metric tons through June 15, according to data from industry group Unica. Since June 1, rain in India was 25 percent below the 50-year average, the government estimates.

Drier weather conditions in the past two weeks have been favoring harvesting in the state of Sao Paulo, Burnquist said. Sugar stockpiles are low because most of the sugar produced is exported or delivered under pre-signed contracts, she said.

Sales of sugar in Brazil’s domestic market last week were 26 percent more profitable than anhydrous ethanol, the kind used to blend into gasoline, and 48 percent more advantageous than hydrous ethanol, used in flex fuel cars, Cepea said. Both the sweetener and the biofuel are made from sugar cane.

“The widening gap between hydrous and anhydrous product can partly be explained with the growing demand for the latter in the United States,” German researcher F.O. Licht GmbH said in a report yesterday.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net


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