Brazil’s Sugar Export Profitability Rises as Local Price Falls

(Bloomberg) – Sugar exports from Brazil, the world’s largest producer, were more profitable last week as domestic prices dropped while the harvest advanced, according to Cepea, a University of Sao Paulo research group.

Shipments of the sweetener were about 11 percent more advantageous than sales in the domestic market, up from 6.9 percent the previous week, Cepea said in a report yesterday. Local prices for crystal sugar, which accounts for 68 percent of all the sweetener sold within Brazil, declined 3.1 percent in the week ending Sept. 28 to 47.28 reais ($23.30) a 50-kilogram (110 pounds) bag, according to the report.

Sugar output in Brazil’s Center South, the country’s main growing region, rose 14 percent to 3.14 million metric tons in the first half of September, according to data from industry group Unica. Mostly dry weather has allowed the harvest to advance after rains in May and June delayed the crop there.

“Crystal sugar prices traded in the spot market in Sao Paulo decreased in almost all September,” Heloisa Lee Burnquist, an analyst at Cepea, wrote in the report. “Advances of crushing activities of sugar cane in Sao Paulo state and the low demand of part of purchasers have led to this scenario.”

In the international market, raw sugar futures climbed 1.7 percent in the week ended Sept. 28 on speculation that rain would return to the center south and disrupt harvesting again. Prices also gained as demand in India, the world’s biggest consumer, may be higher than initially thought.

“A potential shortfall in the Brazilian crop owing to weather and downside to Thai production, combined with recently reduced estimates of Indian production and higher Indian consumption should keep prices supported,” Deutsche Bank AG said in a quarterly report e-mailed today.

Domestic Market

Sugar sales in the domestic market were 25 percent more profitable than anhydrous ethanol, the kind used to blend into gasoline, and 32 percent more advantageous than hydrous ethanol, used in flex-fuel cars, Cepea said. Both the sweetener and the biofuel are made from raw material sugar cane.

Crystal sugar has an International Commission for Uniform Methods of Sugar Analysis level of between 130 and 180, according to the Cepea website. A lower level corresponds to a higher degree of whiteness. The refined variety traded on NYSE Liffe calls for an ICUMSA level of 45.

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.