change@ (Repeats earlier story for wider readership with no change to text)
SAO PAULO, Jan 15 (Reuters) - Brazilian sugar mills are considering increasing their raw sweetener output at the expense of ethanol for automobile fuels after sugar futures surged to a two-year high this week, analysts said this week.
Raw sugar futures for March delivery in New York have climbed 9.1% since Jan. 2 after news of output declines in producers such as Thailand raised supply concerns amid an expected global deficit for the 2019/20 crop year that started in October.
Willian Hernandes, a partner at FG/A, a consultancy that advises mills in Brazil's sugar belt on their commercial strategies, said the price jump has mills considering changes to their production mix, or the amount of sugar cane a plant will dedicate to raw sugar versus ethanol, once the Brazilian crop season begins in April.
Brazilian mills will post an all-time low production mix for sugar this season with only 34% of the cane used to produce the sweetener with the rest going to ethanol as demand and prices for the biofuel have increased.
Hernandes cautioned that the current raw sugar price at 14.32 cents per pound is not quite enough for mills to start switching. However, higher prices could incentivize mills to sell futures to lock in the gains and shift their production mix.
"There are 10 million tonnes that would be sold in New York if prices hit 15 cents (per pound)," he said, referring to the futures contracts, at 112,000 pounds per contract, that are used by the mills to hedge their prices.
Fabio Meneghin, a sugar and ethanol analyst at Agroconsult, said the recent gains may lead some mills to make and sell more sugar, but only "the ones that are closer to the ports, served by good roads and the rail line in Sao Paulo state."
For there to be significant changes to industrial strategies in the upcoming season, prices would have to rise further, he said.
Other analysts also believe that prices will need to be much higher than 15 cents per pound to compel mills to reduce their ethanol output in favor of raw sugar.
"The sugar-ethanol parity was 15.45 cents on Tuesday," said Michael McDougall, managing director at broker Paragon Global Markets in New York, referring to the price sugar should be to reward mills at same level as their ethanol sales.
"And the ethanol market in Brazil is very liquid. The mill gets paid in three days, while sugar pays in 45 days, so mills would need a premium over that parity to switch to sugar," he says. (Reporting by Marcelo Teixeira; Editing by Christian Schmollinger)