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| Strong currency weakens Brazil's sugar might-Cosan |
| SAO PAULO, 11.11.2010 |
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| Wed Nov 3, 2010
* Brazilian real has firmed 6 pct since end of June
* Brazil center-south crush seen up slightly next season
* Global sugar surplus seen down to 4 mln T, up next year (Adds details)
By Inae Riveras
SAO PAULO, Nov 3 (Reuters) - The strong appreciation of its local currency has stripped Brazil, the world's top exporter of sugar, of its long-held title as the lowest-cost producer, sugar and ethanol giant Cosan said on Wednesday
Carlos Murilo Barros de Mello, Cosan's (CSAN3.SA)(CZZ.N) commercial sugar director, told a company event in Sao Paulo that the strong real has raised costs in dollars -- the currency in which sugar exports are priced -- for the industry in Brazil, the world's No. 1 sugar producer.
He did not say which country has the lowest costs of production in dollar terms, but listed South Africa, Thailand, China and India as competitive producers.
He added that Brazil was now the second lowest-cost producer, despite its dominance in production and global market share in sugar, which is now trading close to 30-year highs. [ID:nLDE6A21NO]
However, other countries lack the space to expand production in the way Brazil can, he added, and international sugar prices are still high enough to stimulate expansion in Brazil's productive capacity.
ICE sugar futures SBc1, now trading around 29 cents a lb, have climbed back from 14 cents a lb in May, bringing them close to the 30-year highs they reached in February.
De Mello said that sugar futures must be above 20 cents a pound to stimulate new green-field cane projects in Brazil that will be needed in the coming few years to keep up with local ethanol and international sugar demands.
The existing larger cane milling projects in Brazil's center-south, however, were competitive with sugar prices at or above 18 cents a lb.
The Brazilian real BRBY has appreciated more than 6 percent against the dollar since June, making it the most overvalued major currency in the world, according to Goldman Sachs.
President-elect Dilma Rousseff, who was elected on Sunday, said the overvaluation of the real would be one of her main concerns upon entering office in January.
GLOBAL SURPLUS
Cosan, the world's largest cane sugar and ethanol group, also said that the 2010/11 global sugar surplus would fall to 4 million tonnes from 7 million tonnes seen earlier this year.
De Mello attributed the fall to lower outputs from Brazil and other producer countries. Brazil's main center-south cane crop suffered from exceptionally dry weather from April through September that has reduced output expectations for this crop under harvest and the next.
He added that if rains return to more normal patterns, as they appear to be in Brazil at least, the global sugar surplus should rise again to around 8 million tonnes in 2011/12.
Cosan said that Brazil's 2011/12 (April-March) center-south cane crush would reach 576 million tonnes compared with 570 million this season. (Writing by Reese Ewing; Editing by Alonso Soto and Jim Marshall)
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