Brazilian elections 'to spur sugar price revival'

Brazil's elections, besides the "sudden death" to cane volumes, offer late-year hope for a revival in sugar prices, in opening the way for a rise in fuel values which would divert more cane to making ethanol.

Plinio Nastari, president of Datagro, backed expectations of an early finish to the cane crushing season in Brazil's Centre South region thanks to damage to the crop from a persistent rain shortfall, a dynamic which many commentators have said should support sugar values.

"Cane crushed in October to December last year will not be ready for harvesting this year," he said.

"We are going to have a crop with a sudden death, with a sudden reduction in crushing in cane around September."

Mr Nastari restated a forecast that the Centre South, which accounts for 90% of Brazil's cane and sugar output, will produce 560.5m tonnes of cane in 2014-15, which started in April, down from 596m tonnes last year,

Sugar output will fall to 32.3m tonnes from 34.29m tonnes last season.

'Nonsense policy'

However, Brazil's elections will act as a support to sugar values too, in heralding an end to the government's "nonsense policy" of limiting gasoline prices, currently at levels 18% below world levels, in a drive to control inflation, with knock-on effects for ethanol values too.

This "distortive" regime "is the main reason for the crisis in Brazil's cane industry", which has seen 66 mills close since 2008, Mr Nastari told the Sugar and Ethanol Summit in London.

"Brazil has become dependent on imports of gasoline, which is quite odd," given its potential for cane-derived ethanol.

With the elections out of the way, a "gasoline price correction is expected to happen", which will open the way for higher prices of ethanol and, in turn, sugar.

"We see a correction in the price of ethanol first. Sugar will follow ethanol," he said.

Indeed, ethanol, as first to see price rise, will attract an increased proportion of cane in 2015-16, taking share from sugar, which is currently proving unexpectedly popular for mills, in part thanks to ideas of higher values ahead.

'Completely unsustainable'

Mr Nastari acknowledged that it was not a certainty that, after October's election, the next government will allow gasoline prices to rise.

But he termed the current policy as "completely unsustainable", an opinion supported by Luis Pogetti, president of Copersucar, the Brazilian sugar giant responsible for some 140m tonnes of cane processing a year.

"Everyone in Brazil" expects a change, Mr Pogetti told the conference, adding that the policy was a "problem" for Petrobas, the state backed oil group which is forced to swallow heavy losses thanks to the discount of Brazil's regulated gasoline price compared with the international average.

"It cannot survive without some correction in price," he said.

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