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Brazil Sugar, Ethanol Market Agonized Over Dollar, NY Prices
By Mr Ethanol | May 15, 2007
FX Street:
Local traders on Brazil’s sugar and ethanol market agonized Tuesday over two simultaneous shocks: New York sugar prices plunging to their lowest point in two years and the weakest U.S. dollar rate against the Brazilian real since 2001.
Most traders agreed they were bracing themselves for still-lower New York sugar prices and dollar rates in coming weeks.
“It’s like standing in front of a train,” said Antonio Augusto Duva, the manager of the soft commodities desk at the Sao Paulo office of French bank BNP Paribas.
Growing pessimism about a world sugar glut - not least within leading producers Brazil and India - sparked a sell-off on Tuesday in New York Board of Trade sugar contracts. The July contract plummeted 46 points to end at 8.65 cents a pound, while October dropped 41 points to 9.00 cents.
To make matters even worse for Brazil, the world’s leading sugar and ethanol exporter, the U.S. dollar on Tuesday ebbed below the psychologically important 2-reals-to-the-dollar level to BRL1.98 per dollar.
In one day, the Brazilian currency gained 1.4% against the dollar. So far this year, the real has climbed about 7% against the dollar, after rising nearly 9% in 2006.
“It’s terrible,” said Eduardo Correa, the commercial manager of a key Brazilian sugar and ethanol group, Equipav. “At these levels, we’re well below costs of production - and Brazil is the world’s lowest-cost producer of sugar too.”
Local traders generally added that they had been expecting the fall in New York sugar prices and the Brazilian real for weeks.
“We all knew this was coming - I’ve been saying this for weeks,” one Sao Paulo trader said.
Read more: Effects On Brazil’s Market
Topics: Brazil, Ethanol, Market, Money, Negatives, News |
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