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Increase In Ethanol Puts Pressure On Sugar Price

14 October 2010

BRAZIL – An increase in demand for sugar and lowered international estimates are driving inflation fears, experts have said.

According to Agrimoney.com, crop economists have said that cane prices are in a "perfect storm", as more of the yield is used to produce alternative fuels, thereby further putting pressure on production totals.

Thomas Kujawa from Sucden Financial said: "We are going to see more ethanol coming out of Brazil ... That means less sugar than there would have been."

The US Environmental Protection Agency is expected to raise the ratio of ethanol to petrol that forecourt fuel producers can legally include in their supplies, from its current maximum of ten per cent to 15 per cent, placing a higher premium on grain alcohol.

Supply fears have also been driven by Brazilian sugar producers "buying back" hedges, an indication that this year's harvest may not result in significant yields from this point forward.

Last week, Agrimoney.com reported that concerns over extremely wet weather in Australia's sugar growing regions had caused agricultural agencies to lower their estimates for the country's output.

TheCropSite News Desk



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