Brazilian Sugar and Ethanol Producers Rally on Demand Outlook

Brazil’s sugar and ethanol producers rallied in Sao Paulo trading, led by Sao Martinho SA, as industry forecasts that demand will exceed supply sent the price of the sweetener to the highest level since 2006.

Sao Martinho, Brazil’s second-biggest publicly traded sugar and ethanol producer, surged 15 percent to 15.98 reais, the highest price since Oct. 14. Cosan SA Industria & Comercio, the country’s biggest, gained 7.6 percent to 15.22 reais. Acucar Guarani SA added 3 percent to 2.75 reais.

Global sugar demand will exceed output by 7.8 million metric tons in the current year, almost double the previous estimate, as farmers harvest smaller cane crops in Asia, the International Sugar Organization said. The estimated deficit in the year through September is up from a February forecast of 4.3 million tons, Sergey Gudoshnikov, the ISO’s senior economist, said in an interview before an industry conference in New York.

“Tighter supplies will pressure sugar prices and that will translate into higher margins for Brazilian producers,” said Januario Hostin Jr., who oversees the equivalent of $35 million at Leme Investimentos in Florianopolis, Brazil. “The outlook for sugar prices is more favorable.”

Sugar rose as much as 1.7 percent in New York trading.

Rising production in Brazil, the world’s largest sugar grower, is being overwhelmed by declines in India, the world’s biggest consumer of the sweetener. The deficit helped fuel a 29 percent rally in raw-sugar prices this year to the highest since 2006, as India becomes a net importer of the commodity for the first time in three years.

source: bloomberg