Brazilian sugar and ethanol prices remained firm this week, with strong demand from the export market and the limited offer of products on the local market, traders said on Friday.
Sugar prices this week returned to their highest level since April. A benchmark 50-kg bag of 150 ICUMSA crystals, tax included, returned to 50 reais on Friday after approaching that level last week.
The dry weather in Brazil's center-south may affect the output of the cane crop, some traders said, which was contributing to the bullish trend in prices. Activity on the spot export market remained heated, with Russia as the lead buyer.
Export premiums turned to discounts this week but that was simply the result of the expiration of the July futures contract in New York and the switch to October as basis. Traders said the market is working with a 25-point discount under October but those buyers are bidding as low as 40 points under.
"The premiums market is a bit slow from the switch in contract. It will be slow for awhile to make the adjustment," a trader at an international trade house said. The line-up of vessels to load sugar from Brazilian ports grew to 47 this week, compared with 39 last week, Williams's shipping agents said.
Locals received with optimism India's announcement that it would restrict white sugar exports until March 2007. This lent hope that Brazilian whites could take over the open share on the whites market.
The effects of this announcement are still being considered. Only six mills in the center-south have the capacity to produce white refined (ICUMSA 45), a product that is exclusively exported. "Apparently the decision hasn't had such an impact, but it had some positive impact on the futures," said another trading house.
These levels have not been seen since April when the center-south cane harvest was just getting underway. "I think that it will remain at these levels next week too," Ivan Buena from trader NovaFox said.
Exports of ethanol from the center-south hit a record in June, the Sao Paulo Cane Industry Union (Unica) said. Shipments reached 420 million litters, up from the record of 330 million of June 2005.
Traders said new business in ethanol was limited, however, as port infrastructure were at full capacity. Anhydrous ethanol exports were stable at $550 a cubic meter (1,000 liters) FOB Santos. Hydrous was $500.