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Brazil ethanol to set world sugar price floor

15 January 2008

SAO PAULO - Brazilian cane mills are currently earning more from ethanol sales than sugar, and international sugar buyers will have to match or better the price of the biofuel if they want spare product later this year, economist Plinio Nastari said on Monday.

Nastari, the president of Datagro consultants who spoke at the Reuters Global Agriculture and Biofuel Summit in Sao Paulo, said global sugar prices will correct in 2008 as the world turns to Brazil to cover the expected fall in India's sugar output in 2008/09.

"World sugar prices will correct later this year to at least FOB ethanol prices (in Brazil)," Nastari said.

He estimated that free-on-board ethanol prices were currently being quoted at prices equivalent to sugar at 12.1 cents/lb. The ICE March sugar contract SBH8 traded at 11.5 cents a pound on Monday after a surge that began in early December. Through November, prices had languish below 10 cents.

"In the short-term, India's sugar production will fall by 8 million tons later in 2008," Nastari said. "At that time the world will start turning back to Brazil as its marginal sugar supplier and mills will start adjusting their mix to make more sugar, but only once prices have improved."

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Source: Reuters

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