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Brazil’s Sugar Export Profit Seen Dropping as Local Price Rises

Sugar exports from Brazil, the world’s biggest producer of the commodity, were less profitable last week as local prices climbed, according to Cepea.

Shipping the sweetener was 8.8 percent more advantageous than selling it in the domestic market, the University of Sao Paulo research group said in a report yesterday. That compares to an advantage of almost 12 percent a week earlier. Local prices for crystal sugar climbed 5.8 percent to 58.52 reais ($28.90) a 50-kilogram (110 pound) bag in the week ended July 20, it said.

“Prices of crystal sugar in the Brazilian spot market soared last week,” Heloisa Lee Burnquist, an analyst at Cepea, wrote in the report. “The increase is attributed to the firm behavior of mills in Sao Paulo, which was based on the export parity to determine prices of domestic trades.”

Exports have been more profitable than local sales for seven weeks, according to Burnquist. Raw sugar traded on ICE Futures U.S. in New York has climbed 13 percent so far this month as rains delayed harvesting and shipments from Brazil. Dry weather in India, the second-biggest producer, has also caused concerns about a drop in production there in the 2012-13 season.

Sugar output in Brazil’s center south, its main growing region, fell 29 percent to 6.7 million metric tons from the start of the 2012-13 season through the end of June compared with a year earlier, according to data from industry group Unica. India’s monsoon, which brings more than 70 percent of its rain, is set to be less than normal in the whole season for the first time in three years, according to D.S. Pai, head of long- range forecasting division at the weather bureau there.

Drier weather

Drier weather in Brazil over the past week has helped accelerate harvesting and shipments. The amount of sugar waiting to be loaded onto vessels at Brazil’s main ports dropped to 2.6 million tons as of yesterday, down from 2.9 million tons on July 20, Santos, Brazil-based consultancy SA Commodities said in a report e-mailed yesterday.

“Mills in Sao Paulo are finally crushing without extended halt periods,” Cepea’s Burnquist said, referring to the number of times mills had to stop crushing because of rainfall.

Sales of sugar in Brazil’s domestic market last week were 35 percent more profitable than anhydrous ethanol, the kind used to blend into gasoline, and 55 percent more advantageous than hydrous ethanol, used in flex fuel cars, Cepea said. Both the sweetener and the biofuel are made from sugar cane.

Crystal sugar, used in Brazil’s domestic market, has an International Commission for Uniform Methods of Sugar Analysis level of between 130 and 180, according to the Cepea website. A lower level corresponds to a higher degree of whiteness. Refined sugar traded on NYSE Liffe calls for an ICUMSA level of 45.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.

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