Discounts for Brazilian raw sugar are on the downswing

Tag : Brazilian Sugar

Discounts for Brazilian raw sugar are on the downswing as Russiaand Middle East destination refineries compete for Brazilian sugar,thus increasing prices, said Antonio Augusto Duva, soft commoditiesmanager of BNP Paribas bank.

Discounts are the price differences negotiated between New Yorksugar futures and the spot sugar market in Brazil. Brazil raw sugartends to price much lower than New York futures.

On the ethanol side, floods in the U.S. and the high cost of cornethanol has blenders and traders, including ethanol operations atbanks like Morgan Stanley Capital Partners, buying up Brazilianethanol these days.

Traders at a French multinational sugar and ethanol exporter saidthat demand has risen "to another level this week when it comes toethanol."

"Prices for Brazilian ethanol at the ports have risen by 10%because of demand. You have all these U.S. blenders who havemandates to fill, and corn ethanol is costing them too much money,"a French trader said.

Duva from BNP Paribas said that a gallon of corn ethanol was goingfor around $2.90 per gallon compared to a gallon of Braziliansugarcane ethanol at $1.87.

"You can throw on that 54-cent tax on ethanol and we still come outcheaper," Duva said. The U.S. charges a $0.54 import duty onBrazilian ethanol.

The trader from the Sao Paulo company said that new business forimmediate delivery was complicated because storage tanks at themain ethanol export terminals in the south, southeast and northeastare full to the rims, most of it all heading for the Caribbean orto the U.S.

"Physical demand for ethanol has heated up this week. Everyone iscalling for prices and shipping details," he said.

Floods in the U.S. midwest have complicated transportation mattersfor ethanol producers. That also had blenders rushing to inquireabout Brazilian ethanol this week to make up for what they mightnot get from the midwest.

With ethanol paying around $0.03 more per pound equivalent insugar, ethanol is where the action is this week in Brazil.Actually, ethanol has been where the action is in Brazil'ssugarcane business for some time, with less and less sugar beingmade from the crop.

However, a record 500 million metric ton sugarcane crop is sure topump a lot of excess sugar into the market. Out of all the foodcommodities on the rise, sugar still remains low and volatilebecause of the fundamentals of supply and demand. There's still alot of sugar to be had in world markets and Brazil is by and largethe number one supplier.

In the futures market Tuesday, "black box" investment funds whoaren't concerned with the fundamentals of supply and demand sentJuly sugar futures up 54 points to $11.60 per pound on the ICEFutures U.S. exchange.

In Brazil, speculators and traders bought October sugar futures inNew York Tuesday, helping to push prices up 46 points to $12.86 perpound on the ICE.

"Specs are buying and farmers are selling futures as the physicalmarket for sugar is improving. The market is getting much better,both in the physical and in the futures," said a broker at HencorpCommcor.