Rising sugar prices projected as credit crunch hits Brazilian ethanol capacity development

In Brazil, weaker oil prices and the credit crunch have caused delays in ethanol project finance, which have combined with strong ethanol demand to increase the chances for rising sugar prices in 2009. fundamentals remain strong, and that’s why wealthier groups are still investing in new plants,”

Jaspal Phull, research analyst at London’s Stenham Asset Management, told the Guardian,  “The main positive fundamentals are the global sugar deficit and booming ethanol demand in Brazil.” The International Sugar Organization has projected a shortfall of 3.6 million tonnes in sugar production in the 2008/09 season compared to demand, with the deficit ricing to 4/5 to 5 million tonnes in 2009/10.

Meanwhile, the Brazilian Ministry of Agriculture, Livestock, and Supply projected that 30 new ethanol production plants will be opened next year, with a direct investment of $3.7 billion.

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