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Sugar, ethanol prices to rise in 08/09 - Cosan

SAO PAULO, July 31 (Reuters) - Average prices for sugar and ethanol will likely rise in 2008/09 compared with last season, but not more than 15 percent, Brazil's largest sugar and ethanol group, Cosan CSAN3.SA, said on Thursday.

“(World sugar) prices have to adjust as there was a shift in Brazil’s production costs and the world market depends on Brazilian imports. It will have to pay for an expansion of Brazil’s production,” Financial Vice President Paulo Diniz said.

He said supply and demand on the international sugar market would likely be more balanced this coming year as the world moves toward a deficit after two years of surpluses.

Cosan faced a 33 percent drop in sugar prices last season, while ethanol prices fell 20 percent compared with the previous year, considering average prices in exports and domestic sales.

The company posted a net loss of 47.8 million reais ($30 million) in the 2008 fiscal year (May-April), after a profit of 357.3 million reais in 2007, due mainly to low prices, rising costs and the appreciation of the local currency against the U.S. dollar.

“Despite the recent sharp increase in sugar prices in the futures market, there are still significant discounts in the physical market,” Cosan said in its quarterly financial report.

“Thus, although we are optimistic regarding price trends throughout the 2009 fiscal year, we do not expect either sugar or ethanol prices to climb by more than 15 percent,” it said.

After a record cane crush of 40.3 million tonnes in 2007/08, up 11.5 percent from the previous crop, the company expects an increase of more than 5 percent in the current crushing season, which officially began in May.

Higher volumes and prices should lead to a 15 percent rise in net operating revenue over the 2.7 billion reais in 2007/08, but the coming year’s net losses are still expected to deepen by more than 15 percent, the company said.

Cosan S.A. is a subsidiary of Bermuda-registered Cosan Ltd CZZ.NCZLT11.SA. (Reporting by Inae Riveras; Editing by Walter Bagley)

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