Sao Paulo, Sept 15 - A rising U.S. dollar could trim an expected recovery in world sugar prices as exporters would benefit from a higher return in the local currency, Brazil's largest sugar and ethanol group, Cosan, said on Friday.
The U.S. dollar on Thursday climbed to one-year peaks against the euro and a basket of major currencies amid escalating fears of a global economic slowdown.
Cosan had predicted a rise in sugar and ethanol prices for the coming years due to higher production costs in Brazil. The company had said current prices were too low to stimulate higher output to meet rising world demand.
Brazil is the world's largest sugar and ethanol exporter.
"We have two ways to get there (having a higher return). Either through a recovery in prices or through what has been going on, which is a strenghtening in U.S. dollar," said Paulo Diniz, Cosan's director of finance and investor relations.
Traders and analysts expected a more balanced supply and demand on the international sugar market in the coming year as the world moves toward a deficit after two years of surpluses.
Cosan on Thursday posted a net loss of $29.3 million for the quarter from May to end July, after a net profit of $1.2 million in the same period of 2007.
The company's results already had been hit last year by low prices, the appreciation of the local currency against the U.S. dollar and rising costs.
Diniz told reporters in a conference call he sees ICE sugar futures above 14 cents per lb "in the long term" but added this may not be reached due if the dollar keeps getting stronger against other currencies.
The benchmark October raw sugar contract at the ICE was at trading at around 12.4 cents per lb on Friday.
Production costs in Brazil have risen in recent months due to higher labor costs, the appreciation of the local currency against the U.S. dollar and the poor quality of cane crushed so far this season.