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Biosev sees higher cane output and sugar prices

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Biosev forecast better times for its cane crush volumes, after a drought-hit 2014-15, and saw potential for improving sugar prices too, but cautioned on ethanol that Brazil needs a "consistent" pricing policy.

The Brazilian-based group, which is controlled by ag commodities giant Louis Dreyfus, said that its cane processing volumes for 2015-16, on an April-to-March basis, would reach 29.0m-32.0m tonnes, an improvement on a crush of 28.3m tonnes last season which fell short of expectations.

"The 5.6% decline in crushing volume was mainly due to the severe drought that affected the state of Sao Paulo and Minas Gerais," part of the Centre South region where Biosev has part of its operations.

The concentration of sugars per tonne of cane is expected to improve too, to 129-133 kilogrammes, from 128.7 kilogrammes last year, while total output of sugars will increase from 3.6m tonnes to 3.75m-4.25m tonnes.

'Upward trend in sugar prices'

And prices of sugar itself may rise too, after a fall to six-year lows on New York's futures market, weighed by ample global supplies as well as the weakness of the real, which cuts the value in dollar terms of assets in which Brazil is a major player.

"Sugar prices… are determined in global markets based on the product's supply-demand balance," said Rui Chammas, the Biosev chief executive.

"As such, we expect demand to outpace supply as of the 2015-16 crop year, which points to a reduction in global inventories with a potential upward trend in sugar prices."

The group added that the proportion of cane diverted to sugar compared with ethanol would be "critical in determining how quickly, or slowly, the world sugar cycle is able to turn toward a positive phase".

Ethanol caution

It was in ethanol that Mr Chammas sounded a note of caution, despite the market for the biofuel proving relatively buoyant, helped by moves by Brazil to reintroduce taxes on gasoline and raise the blend rate for ethanol into transport fuel.

"Given [ethanol's] strategic relevance, the adoption of a consistent long-term pricing policy in order to assure greater transparency and predictability for companies and investors is required," he said.

Brazilian politicians have a history of curbing gasoline prices in an effort to control broader inflation, a move which depresses ethanol values, and production profits in turn.

Loss narrows

The comments came as the group unveiled a loss of R$221.7m for the January-to-March quarter, an improvement on the R$1bn loss a year before.

Revenues rose 71% to R$1.46bn.


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