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High Sugar Prices Favour Brazil

11 November 2010

BRAZIL - The commodity's rising international costs should have a positive effect on the Brazilian trade balance, claims the Sugarcane, Water and Energy director at the Ministry of Agriculture.

High international sugar prices should have a positive effect on the Brazilian trade balance but should not jeopardise the country's inventories of the product, nor affect the price of ethanol – at least, not immediately. On the domestic market, however, consumers will tend to end up paying higher prices for both sugar and its products. The statements were made by the director of Sugarcane, Water and Energy at the Brazilian Ministry of Agriculture, Cid Caldas.

He explains that the high international prices were a consequence of crop failure in India. "This situation is going to help Brazil in having a more favourable trade balance. The price on the domestic market, however, will surely rise," the director told Agência Brasil, without estimating how much the increase will be.

Mr Caldas said that in 2009, the average price of a 50-kilogram sugar bag was 47 Brazilian reals (BRR; US$30). "That price was maintained up until a few months ago. However, the international scenario has driven the product's price up, and now the average price this year is BRR57 ($34) per bag."

He guarantees that there is no risk of a shortage of sugar on the domestic market but he believes that global demand will affect prices to Brazilian consumers.

He said: "Sugar is used for manufacturing several other products, such as sweets, ice cream and soft drinks, therefore the high prices may extend to other products, but not to ethanol.

"There is but a short margin for change in the allocation of cane for manufacturing either sugar or ethanol. Currently, 55 per cent is allotted to sugar production and 45 per cent to ethanol. This was set early on in the crop under the inventory financing programme. Everything is duly certified, and in addition to the two billion litres-plus in store, there are those provided for by contract."

After the failure of its sugar crop, India has become the leading buyer of sugar produced in Brazil. Out of a total of 33 million tonnes produced in 2009, 24 million were exported. From that volume, 19 per cent – or 4.6 million tonnes – were shipped to India. The second country in the ranking is Russia, which imported 2.7 million tonnes. Up until October, Brazil produced 27 million tonnes of the product, of which 19 million tonnes were shipped to foreign markets.

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