Sugar Rises for Second Day on Ethanol Outlook; Coffee Also Gains

(Businessweek) – Sugar climbed for a second day on speculation millers in Brazil, the world’s largest producer, will make more ethanol when this year’s harvest starts in about April. Coffee also advanced.

The so-called ethanol parity, the level at which producers in Brazil favor making the biofuel at the expense of the sweetener, will probably be at 20.5 cents a pound by the time the crop in the center south, the country’s main growing areas,“gets into full swing,” London-based broker Marex Spectron Group said in a report e-mailed yesterday. That is 13 percent more than sugar closed in New York yesterday. A possible cut to ethanol taxes in Brazil would allow the biofuel to rise further, German researcher F.O. Licht said yesterday.

“In Brazil, ethanol blending is moving back to 25 percent into gasoline and on top of that the Brazilian government may reduce ethanol taxes as of April, which will favor ethanol production,” Julien Benichou, an agriculture derivatives broker at Starsupply Renewables SA in Nyon, Switzerland, said today by e-mail. “Also the Brazilian real is getting stronger which will not help Brazilian exports.”

White, or refined, sugar for May delivery climbed 0.3 percent to $517 a metric ton by 9:32 a.m. in London on NYSE Liffe. Raw sugar for May delivery gained 0.4 percent to 18.15 cents a pound on ICE Futures U.S. in New York.

In the U.S., ethanol demand is improving and production isn’t keeping up because of a “tight corn balance,” Benichou said. That may mean that the U.S. will import Brazilian ethanol made from sugar cane in the next few months, he said. Any rally will be capped because of sales by producers, he said.

Cocoa for May delivery fell 0.1 percent to 1,386 pounds ($2,105) a ton in London. Cocoa for May delivery rose 0.6 percent to $2,068 a ton on ICE.

Robusta coffee for delivery in May gained 0.1 percent to $2,124 a ton on NYSE Liffe. Arabica coffee for delivery in May advanced 0.1 percent to $1.468 a pound on ICE.