RPT-UPDATE 2-Brazil's Cosan sees tighter 2015 sugar market, firmer prices

jueves 6 de noviembre de 2014 14:13 GYT

(Repeats to additional customers)

SAO PAULO Nov 6 (Reuters) - Brazilian sugar and ethanol producer Cosan expects prices for sugar to rise in 2015 and supplies to turn tighter, ending several years of oversupply, the company's chief executive, Marcos Lutz, said on Thursday.

Approaching the final weeks of the 2014/15 crushing season, Cosan has hedged 18 percent of its expected sugar output of the 2015/16 crop. And the prices it has locked in are superior to those it has secured for sugar now in stock, Lutz said.

Although high levels of hedging by sugar producers is often interpreted as a sign markets are prone to fall, the level of hedging on the futures market that Cosan has done for next year's crop seems to show a more bullish sentiment for sugar.

By comparison, heading into 2012 when sugar prices were forecast to fall from a multi-year high in 2011, Cosan had locked in prices for more than 80 percent of its expected sugar output as a hedge against weakening prices.

Lutz added the spread between October futures prices and March futures last quarter prompted the company to hedge most of this crop's sugar output now in warehouse, locking in gains as the 2014/15 season crushing comes to a close.

The company said in its third quarter earnings report on Wednesday it had amassed stocks of 1.58 million tonnes of sugar from the current crop, 45 percent greater than last year on Sept. 30, on expectations prices will improve.

"It more than compensates us to pay the cost of carriage for product in stock for a few months," Lutz said, referring to the spread between recent spot prices and March futures.

Lutz said the company had fixed nearly all the sugar in stock at an average 42.74 reais for a 50-kg bag equivalent, after converting the international price into local currency terms.   Continuación...