Better outlook to this year

Firm domestic and international sugar prices bring positive perspectives to the beginning of 2008. In Brazil, values should be superior to those practiced in 2007, marked by low levels. A total recovery, however, will probably happen only in 2009, when the supply is expected to be better adjusted to the demand.

According to the latest International Sugar Organization (ISO) report, the global sugar surplus in the 2007/08 crop (from Oct/07 to Sept/08) should reach 11.14 million tons, based on a total supply of 170.3 million tons and on a demand of 159.2 million. India will take most credit for this increase, becoming the major global sugar producer, producing until 33 million tons.

For the 2008/09 global sugar crop, new forecasts published by the Morgan Stanley (investment bank) show that the total should have a deficit of 1.6 million tons, due to the lower Indian production, especially. For the 2009/10 crop, the deficit could reach 5.5 million tons. The International Sugar Organization (ISO), on the other hand, forecasts a deficit inferior to 1 million tons.

Regarding the Brazilian 2008/09 sugarcane crop, the Sao Paulo Sugar Cane Agroindustry Union (Unica) forecasts an increase of 21 million tons in the Center-Southern region, totaling 446 million tons - 30 new mills will start to operate. The percentage allotted to the ethanol should keep higher over the sugar, with the mix above than 50 percent for the fuel.

The domestic sugar demand should remain increasing. In 2007, the Brazilian consumption raised 7 percent, far higher over the last years' averages, of roughly 2 percent. For 2008, it is estimated an increase of 4 percent.

In the international market, Brazil should keep supplying the demand from some countries of the Middle East. Another potential market is China. At the same time, there are still some barriers to the Brazilian market expansion, like the high maritime freight and the increase of the production in some Asian countries.

During the first fortnight of January, Brazilian sugar prices kept increasing. The CEPEA/ESALQ Index for crystal sugar (Sao Paulo state) averaged 24.80 reals or 14.17 dollars per bag of 50 kilos on Tuesday, Jan 15th, raising 3.8 percent in Real over Dec 28th. The support came from the international market, which also remained moving up. Among other factors, the higher demand from countries like China and Indonesia boosted the stock exchanges.

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