Fitch: outlook for Brazilian sugar and ethanol is stable

Sao Paulo / BR. (fr) The outlook for Brazilian sugar and ethanol is stable for 2013, supported by improved capital structures, an expected Brazilian sugarcane crop recovery, increased flexibility to adjust production between sugar and ethanol, and inventory management, according to a new Fitch Ratings report. «The stable market fundamentals are based on profitable prices, which are in turn supported by robust global sugar demand and still low inventories levels. Increasing demand for ethanol in Brazil is also positive for pricing fundamentals», said Renata Pinho, Director.

Fitch Ratings expects average international prices for sugar to remain at 0,20 USD per pound over the next twelve months, compared to average 0,23 USD per pound for the last three harvest periods. When combined with a weaker Brazilian real, the projected price level should result in reasonable returns for companies with low to average cost structures.

Fitch estimates relative stability in domestic ethanol prices for 2013 regardless of any gasoline price increase and assuming the maintenance of ethanol blending at the current level of 20 percent. Record sales of passenger vehicles with over 80 percent mix of flex fuel technology should continue to support strong local demand for ethanol.