Brazil slow to respond to high sugar prices - ISO

SAO PAULO Oct 20 (Reuters) - Brazil's response to high sugar prices will likely be slower than other countries as mills are already running at near full capacity and have reduced investments in expansion after the credit crunch, the International Sugar Organization (ISO) said on Tuesday.

Peter Baron, executive director at the ISO, said output in Brazil for now will also be limited by cane yields, which have been hurt by a wetter-than-usual weather this year.

"Many mills in Brazil are presently unable to expand to take advantage of high world prices. This is because they have debt loads," said Baron, who attended the second day of Datagro analysts' sugar and ethanol conference in Sao Paulo.

Debts among Brazilian mills have reached a estimated record $22 billion, Baron said, adding that while banks resumed lending to the sector after the freeze in the second half of 2008, this has been only to groups with good balance sheets.

"In general, investments in Brazil's sugar and ethanol industry have slowed and the sector has been through a healthy consolidation," he said.

Citing analysts Datagro, Baron said 15 new projects were confirmed to come online in 2010/11, compared with an average of 26 new mills in each of the previous three years.

India's response to the spike in sugar will be faster than Brazil's mainly because of the country's steep drop in production in past years. He said Indian growers will grow "much more cane" in 2010/11.

Several important exporting nations, such as Thailand, are showing signs of responding to high prices. Moreover, "an export supply response" will also take place in smaller net exporters such as Australia, Guatemala and South Africa, Baron said. (Editing by Marguerita Choy)