In Latinamercan markets, there has been an increase in the production volume of sugar and a higher productivity. This is due to the positive impact of the new variety of sugar cane used in its growth, together with the techological upgrade in all the productive chain. Sugar cane plantations demanand high levels of working force and investment is needed. As long as costs remain under control, it is a favorable business for exportation since a big deal of international markets operate with subsides.

At the beginning of year 2006, the international price of sugar, taking as reference the Contract Nº5 of London for white sugar, showed an increase of 22.55% in relation to the end of the previous year, as we can see in the following chart:

• 12/30/2005……………U$S 342.50 a Tn.
• 01/03/2006……………U$S 341.50 a Tn.
• 01/10/2006……………U$S 346.10 a Tn.
• 01/26/2006……………U$S 420.00 a Tn.
• 01/31/2006……………U$S 430.00 a Tn.

This strong increase in prices, which has reached an overall figure of 41.22% between December and January, had been already forecast in the future contracts mentioned in the November report. Current future contracts seem to forecast a slowing down trend, assuming a price of U$S 443.80 for May, U$S 442.60 for August, and U$S 442.90 for October.

The strong increase has its reason in the impulse of the process occurred in Brazil, the first world producer and exporter of sugar, encouraged by the rise in oil prices. The boost in sales of automobiles with a “flex-fuel” engine, which can use indiscriminately gas or alcohol, already exceeding the 70% of cars sold in that country, brought a higher increase than expected in the internal consumption of alcohol. In order to match this increase in demand, that deplete the internal stocks of alcohol, the usage of this key raw material, sugar cane, was devoted to the production of alcohol instead of sugar, balancing in this way the rise in the consumption of this fuel. (Source: SAGPyA, 2006).

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