Cosan, Sao Martinho Plunge on Limits to Sugar Cane Planting

Cosan SA Industria & Comercio, the world's biggest sugarcane producer, fell the most ever in Sao Paulo trading after Sao Paulo limited the area that could be planted in Brazil's biggest sugar- and ethanol-producing state.

Cosan dropped 15 percent to 12.60 reais at 1:04 p.m. New York time, the steepest drop since shares began trading in 2005. Sao Martinho SA, Brazil's second-biggest publicly traded sugar and ethanol maker, tumbled 11 percent to 15.80 reais, the lowest since shares began trading last year.

``Plans by these companies to expand was almost all here in Sao Paulo'' state, said Peter Ping Ho, analyst at Planner Corretora. ``Now if they want to expand they may have to go to other states, which means costs will be higher and will need more investment for greenfield projects.''

The government of Sao Paulo state, which accounts for 60 percent of Brazil's sugar and ethanol output, is limiting sugar- cane planting to reduce the impact of the industry's expansion on air, water, soil and forests. Sao Paulo state government announced a ban on sugar-cane planting in 6.7 million hectares. It also plans to restrict the planting in the Ribeirao Preto cane-hub.

Earlier this year, the government suspended environmental licenses for new mills for 120 days to better assess the industry impact on the environment.

Acucar Guarani SA, the Brazilian unit of French sugar cooperative Tereos, dropped 10 percent to 4.50 reais. Sugar fell 3.2 percent, the most this month.

source:Bloomberg