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65
ACTION ARA-10
INFO OCT-01 ISO-00 AGR-10 AID-05 CIAE-00 COME-00 EB-07
FRB-01 INR-07 NSAE-00 USIA-15 TRSE-00 XMB-04 OPIC-06
SP-02 CIEP-02 LAB-04 SIL-01 OMB-01 PA-02 PRS-01 /079 W
--------------------- 047158
R 281340Z APR 76
FM AMCONSUL RIO DE JANEIRO
TO SECSTATE WASHDC 3621
INFO AMEMBASSY BRASILIA
AMCONSUL RECIFE
AMCONSUL SAO PAULO
UNCLAS RIO DE JANEIRO 1602
E. O. 11652: N/A
TAGS: EAGR, ETRD, BR
SUBJ: SUGAR MARKET SITUATION
1. DURING MEETING WITH CONGEN OFFICERS, ALBERICO TEIXEIRA
LEITE, EXPORT DIRECTOR OF BRAZILIAN SUGAR AND ALCOHOL
INSTITUTE (IAA), DENIED RECENT PRESS REPORTS ANNOUNCING THAT
BRAZIL WOULD IMPORT 300,000 TONS OF SUGAR TO SATISFY DOMESTIC
NEEDS. TEIXEIRA LEITE ADMITTED THAT SUGAR IMPORTS WOULD
MAKE ECONOMIC SENSE. BRAZIL'S SUGAR CROP IS PRODUCED ALMOST
EQUALLY IN SOUTHEAST (MAINLY IN SAO PAULO STATE) AND IN THE
NORTHEAST. MAIN SHORTFALL IN 1975/76 CROP HAS BEEN IN
SOUTHEAST WHICH IS ALSO MAIN CONSUMPTION AREA. IT HAS PROVED
NECESSARY TO SHIP SUGAR FROM NORTH TO SOUTH TO SUPPLY DEMAND.
GIVEN BRAZIL'S HIGH COST OF INTERNAL TRANSPORT IT MAY HAVE BEEN
CHEAPER TO IMPORT SUGAR DIRECTLY THROUGH SOUTHEAST PORTS AND
EXPORT EQUIVALENT QUANTITY FROM NORTHEAST. (NOTE: BRAZIL DOES
MUCH THE SAME THING IN MANGANESE, EXPORTING FROM AMAPA IN THE
FAR NORTH AND IMPORTING, MOSTLY FROM GABON, IN CONSUMING
AREAS LOCATED IN THE SOUTHEAST). HOWEVER, GOB HAS DECIDED TO
CONTINUE TO TRANSFER NORTHEASTERN PRODUCTION IN SPITE OF HIGH
COST INVOLVED. SOME NORTHEAST MILLS HAVE SWITCHED TO PRODUCING
SEMI-REFINED SUGAR FOR DOMESTIC CONSUMPTION IN PLACE OF RAW
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(DEMARA) SUGAR FOR EXPORT. TEIXEIRA LEITE LEFT IMPRESSION
GOB DID NOT CONSIDER IT ADVISABLE TO IMPORT MOSTLY BECAUSE OF
POSSIBLE IMPACT ON DOMESTIC PUBLIC OPINION.
2. FOLLOWING ARE OTHER MAIN TOPICS DEVELOPED DURING MEETING:
(A) THE 1975/76 SUGAR CROP IS NOW ESTIMATED AT 5.88 MILLION
TONS (98 MILLION BAGS OF 60 KILOS), OR 1.7 MILLION TONS LESS
THAN ORIGINAL FORECAST. SOUTHEAST REGION ACCOUNTED FOR ABOUT
70 PERCENT OF CROP FAILURE. FLOODS IN NORTHEAST ARE
RESPONSIBLE FOR REMAINDER OF SHORTFALL.
(B) THE 1976/77 CROP IS ESTIMATED AT 7.8 MILLION METRIC TONS
(130 MILLION BAGS). THE IAA HAS PUSHED FORWARD THE STARTING
DATE FOR SUGAR PROCESSING FROM JUNE 1 TO MAY 1, 1976, TO SUPPLY
DOMESTIC NEEDS IN SOUTHEASTERN REGION, HOPING TO LESSEN NEED
TO TRANSPORT ADDITIONAL FROM NORTHEAST.
(C) ANNUAL SUGAR CONSUMPTION IN BRAZIL IS 41 KILOS PER
CAPITA. DOMESTIC NEEDS ARE ESTIMATED AT 4.4 MILLION TONS
BASED ON POPULATION ESTIMATES OF 107 MILLION.
(D) THE IAA SUGAR EXPORT FUND (SEE ITEM 5 OF BRASILIA A-185
OF NOVEMBER 19, 1975) USED TO MODERNIZE SUGAR INDUSTRY AND TO
SUBSIDIZE PRICE OF DOMESTIC CONSUMPTION, IS NEARLY DEPLETED.
(E) BRAZILIAN SUGAR EXPORTS DURING PERIOD JANUARY 1 TO
APRIL 22, 1976 WERE ABOUT 278 THOUSAND TONS VALUED AT ABOUT
89 MILLION DOLLARS. MOST OF THESE EXPORTS WERE MADE TO MEET
COMMITMENTS UNDER LONG TERM CONTRCTS AND ARE BASED ON AVERAGE
NEW YORK SPOT PRICE OF PRECEDING MONTH. EXPORTS WILL REMAIN
LOW DURING THE FIRST SIX MONTHS OF 1976. THEY SHOULD
PICK UP, HOWEVER, IN AUGUST OR SEPTEMBER WHEN THE 76/77 CROP
WILL BE AVAILABLE.
3. TEIXEIRA LEITE STATED BRAZIL CAN EXPORT PROFITABLY AT
CURRENT LOW INTERNATIONAL MARKET PRICES. HE BELIEVES THAT
INTERNATITNAL MARKET PRICES WILL OSCILLATE
WITHIN THE 14-18C P/LB RANGE. HE DOES NOT FORESEE POSSIBILITIES
FOR FUTURE PEAKS SIMILAR TO THOSE OBSERVED IN 1974, UNLESS
HIGHLY ADVERSE CLIMATIC EFFECTS OCCUR IN A NUMBER OF
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EXPORTING COUNTRIES. TEIXEIRA LEITE STATED FURTHER THAT WITHIN
GOB THERE WAS A MISUNDERSTANDING OF BRAZIL'S ROLE AS SUGAR
EXPORTING COUNTRY. SOME GOVERNMENT OFFICIALS SEE BRAZIL AS
DECISIVE INFLUENCE IN SUGAR. TEIXEIRA LEITE DOES NOT. BRAZIL
IS A RESIDUAL EXPORTER WITH PRODUCTION INTENDED MAINLY FOR
DOMESTIC CONSUMPTION. SITUATION IS REVERSE THAT OF COFFEE.
HE USED EXAMPLE OF SHORTFALLS IN THIS YEAR'S COFFEE AND
SUGAR CROP TO EMPHASIZE DIFFERENCES. COFFEE PRICES HAVE
SKYROCKETED WHILE SUGAR PRICES HAVE PLUMETED.
4. EMBASSY CONCURS THIS MESSAGE.
FRECHETTE
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