Aracruz sees $951 mln fair value derivatives loss

SAO PAULO, Oct 3 (Reuters) - Brazilian pulp producer Aracruz (ARCZ6.SA)(ARA.N) said late on Thursday its foreign-exchange derivatives would cause a loss of 1.95 billion reais ($951 million) at current market prices.

The company said in a securities filing that despite the fair value loss, the contracts caused cash gains of 25 million reais in the third quarter.

Fair value, also called mark-to-market or FAS 157, requires companies to value assets based on what they could fetch in a market transaction.

Aracruz said the foreign-exchange derivatives have an average 12-month maturity and the contracts are marked to market on a monthly basis.

Aracruz and poultry processor Sadia were among the first Brazilian companies to take a hit from currency derivatives, announcing massive trading losses last week.

Sadia (SDIA4.SA) booked 760 million reais in losses from foreign exchange positions and Lehman Brothers Holdings Inc (LEHMQ.PK) bonds.

Large exporters such as Sadia and Aracruz use derivatives to lock in exchange rates so they can better plan their operations.

Aracruz said it holds a $538 million long position in dollar futures at the BM&F commodities and futures exchange. The long dollar contracts have an average price of 1.91 reais per dollar. Brazil's currency, the real (BRBY) weakened 0.7 percent on Friday to 2.035 per dollar.

Aracruz shares plunged 13 percent shortly after opening on Friday. The stock sank nearly 17 on Sept. 26 when the company said losses with the derivatives exceeded limits set by management, without disclosing details. (Reporting by Elzio Barreto, editing by Gerald E. McCormick)