Bloomberg News

Sugar Rises as Brazil’s Millers May Make Ethanol; Coffee Falls

February 11, 2013

Sugar rose in New York, rebounding from five sessions of declines, on speculation millers in leading global producer Brazil will direct more cane to making ethanol at the expense of the sweetener. Coffee fell.

The so-called ethanol parity, a level at which millers favor making the biofuel rather than sugar, may rise to 19.75 cents a pound if Brazil cuts taxes on ethanol, Marex Spectron Group said. That is 8.3 percent above the price of raw sugar for March delivery traded in New York. The share of cane directed to sugar production in the 2013-14 season may be 44 percent to 45 percent, the London-based broker estimates. That would be down from 49.6 percent in the current period, data from Unica showed.

“If prices remain below the parity during the peak of the center south Brazil harvest period (say June to September), then the mix could fall to about 44 percent to 45 percent and thus ‘lose’ some 4 million tons of sugar production,” Paul Bannister, head of sugar brokerage at Marex Spectron, said in a report dated today, referring to the price of sugar.

Raw sugar for delivery in March added 0.6 percent to 18.25 cents a pound by 6:29 a.m. on ICE Futures U.S. in New York. White, or refined, sugar for delivery in May rose 0.4 percent to $497.80 a metric ton on NYSE Liffe in London.

Brazil plans to reduce taxes on ethanol to boost production and use of the biofuel, Trade and Development Minister Fernando Pimentel said in an interview with Valor Economico newspaper last week. Raw sugar, which fell 39 percent in the two years through 2012, is down 6.5 percent in 2013 as supplies are set to outpace demand by 11.5 million tons in the year started in October, according to Lausanne, Switzerland-based researcher Kingsman SA, owned by McGraw-Hill Cos.

“The forecast surplus could now be about half of what it was,” Marex Spectron’s Bannister said.

Arabica coffee for delivery in March dropped 0.2 percent to $1.408 a pound on ICE. Robusta coffee for delivery in March slid 0.8 percent to $2,106 a ton on NYSE Liffe.

Cocoa for delivery in May fell 0.7 percent to $2,212 a ton in New York. Cocoa for delivery in March gained 0.1 percent to 1,443 pounds ($2,264) a ton in London.

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 at ccarpenter2@bloomberg.net.


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