May 30, 2019 / 2:13 PM / 3 months ago

UPDATE 2-Brazil's Copersucar sees sugar trade flow reaching equilibrium in 2nd half

(Adds comments from director regarding Alvean venture)

By Marcelo Teixeira

PIRACICABA, Brazil, May 30 (Reuters) - Brazil’s Copersucar, the world’s largest sugar merchant, expects global trade flow of the sweetener to reach equilibrium between supply and demand in the second half of 2019, which could lead to a price recovery, a top company official said on Thursday.

Lower sugar production in some of the main producers, such as Brazil and Thailand, will erase a surplus of 9.9 million tonnes seen in the end of the 2017/18 global crop, whose season lasts from October to September, according to Copersucar’s strategy director, Tomas Caetano Manzano.

In a presentation at a sugar conference organized by research company Pecege, Manzano said he is positive about the current sugar market and forecast higher average raw sugar prices in 2019 than last year. “Prices should react positively later this year, as supply and demand are more balanced,” the director said.

Copersucar is partnered with Cargill Inc in the 50-50 sugar trading venture Alvean, the world’s leading trader of raw sugar. The Brazilian company also controls the U.S.-based ethanol trading company Eco-Energy.

Discussing ethanol, which is mostly made from sugar cane in Brazil, Manzano said hydrous ethanol this year continued to eat into gasoline’s share of Brazil’s light-vehicle fuel market.

Gasoline consumption decreased by 9% in 2018 in Brazil compared with the previous year, Manzano said, adding that he expects a further decrease this year for the oil-based product.

Ethanol prices are currently substantially lower than gasoline at pumps in Brazil’s larger fuel-consuming states.

Copersucar works with more than 20 associated sugar and ethanol companies in Brazil, overseeing sales of their combined production.

The director said Copersucar reduced the amount of sugar it delivered to Alvean from the last Brazilian crop, since it diverted the lion’s share of the harvest to ethanol production due to better returns.

“Alvean’s overall sugar trading book remained basically the same, but, of course, they had to source elsewhere the sugar that they didn’t get from us,” Manzano told reporters after his presentation at the seminar.

Manzano said ethanol is currently giving mills a return equivalent to a hypothetical sugar price of 13 cents per pound.

Raw sugar was quoted at 11.84 cents per pound mid-session at New York’s ICE exchange on Thursday. The price would have to rise to prompt Brazilian mills to start changing their production strategies which continue to rely heavily on ethanol.

Copersucar sees mills in Brazil allocating 35% or 36% of cane to sugar production in the new season, similar to last season, Manzano said. (Reporting by Marcelo Teixeira Editing by Chizu Nomiyama and Jonathan Oatis)

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