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Brazil Sugar Exports Seen More Profitable Than Domestic Sales

Exports of sugar from Brazil, the world’s largest producer of the sweetener, are more profitable than domestic sales for the first time since October, according to Cepea, a University of Sao Paulo research group.

Sugar exports were on average 4.2 percent more attractive than sales in the domestic market last week, Heloisa Lee Burnquist, an analyst at Cepea, wrote in a report yesterday. That was the first time shipment profits beat the internal price since the week of Oct. 17 to 21, she said.

“Quotes in the international market have been pushed up by speculation regarding a possible decrease of sugar supply in the short-run,” Burnquist wrote. “The market is still facing the consequences of lower Brazilian production.”

Sugar cane output in Brazil’s Center-South, the nation’s main producing region, fell for the first time in a decade in the current 2011-12 season. Output through Feb. 1 totaled 493.5 million metric tons, down 11 percent from a year earlier, according to industry group Unica. Most of the harvest has already been completed, Unica said on Feb. 14.

Sugar supply may be 20 percent lower than at the same period last year, Burnquist said in the report, citing unidentified traders. Raw sugar traded on ICE Futures U.S. in New York has climbed 8 percent so far this month.

Further gains may be capped as Brazilian producers now have more incentive to export. Raw sugar for March delivery was 0.97 cent a pound more expensive than May-delivered sweetener by 4:44 a.m. in New York, down from this year’s high of 1.46 cents a pound on Feb. 23, data on Bloomberg show. The March raw sugar futures contract expires tomorrow on ICE Futures U.S.

“Rumours that Brazil Center-South mills are releasing stocked sugar for export previously intended for the domestic market has dampened the near March-May somewhat,” Nick Penney, a trader at broker Sucden Financial Ltd. in London, wrote in a report e-mailed yesterday.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

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