RIO DE JANEIRO, Brazil, Oct 19: Domestic sugar prices rose to record levels as millers chose to sit on stocks as world prices on Friday hit 13-month highs and the real currency weakened compared with a week ago.

The benchmark domestic spot price quoted the University of Sao Paulo reached 34.68 reais per 50-kg bag on Thursday, up 45 per cent from a year ago.

It’s already higher than the world market and people are talking about it going to 40 reais next week, said a trading manager, noting that it had already traded at that level in the northeastern state of Pernambuco.

There’s a lot of sugar around but we can’t get the millers to sell it. Their warehouses are full of 150s (ICUMSAs), added the manager.

The International Commission for Uniform Methods of Sugar Analysis (ICUMSA) measures the degree of whiteness — the lower the number, the higher the degree of whiteness.

Wholesalers, who normally buy from millers, were said to be short of cash as a result of a banking credit squeeze provoked by the weakness of the real.

End users, such as major soft drinks companies, were forced to purchase directly from millers and had to pay “fat prices,” according to traders.

In addition, many millers were reluctant to commit themselves until after the Brazilian presidential election runoff on Oct. 27.

Frontrunner Luiz Inacio Lula da Silva of the leftist Workers’ Party commands a wide lead some 28.5 per cent ahead of the ruling coalition candidate Jose Serra.

The real was trading around 3.875 to the dollar on Friday, having depreciated about 40 per cent since the start of the year due to investor fears that Lula would mismanage the economy and make it more difficult to service the country’s $260 billion public debt.

Millers don’t need cash. They prefer to sit on stocks ... it’s like sitting on dollars, said a trader.

As a result, the market was quiet — well bid but lacking offers.

Cash differentials were little changed with benchmark 150 ICUMSAs for Nov/Dec shipment from the center-south region bid on Friday at $9 a tonne under LIFFE December futures.

100 ICUMSAs were unavailable and unquoted while 45 ICUMSAs were scarce with October last trading at $15 a tonne over, while November was at $10 over and December at $3 over LIFFE futures for shipment from the northeast.

In the raws market, Oct/Nov very high pole (VHP) sugar from the northeastern port of Maceio was quoted at 35/45 points (bid/offer) over CSCE March futures.

VHP shipments from Recife were quoted about 10 points lower reflecting the vessel draught restrictions and higher freight costs at the port.

As the northeastern cane harvest speeds up, the center-south harvest is slowing down with around 80 per cent of an estimated crop of 260 million to 260 million tons of cane already cut following a long spell of hot, dry weather in main producer Sao Paulo state.

However, traders said that cane crushing in Sao Paulo’s southerly neighbor Parana could continue into December as there had been more rain there and there was still a lot of cane to be cut.

Raw sugar in cents per lb against New York’s Coffee, Sugar and Cocoa Exchange (CSCE) benchmark futures contract.—Reuters