Brazil's Cosan sees record 2008/09 ethanol exports

SAO PAULO, July 31 (Reuters) - Brazil's largest sugar and ethanol group, Cosan (CSAN3.SA), said on Thursday it expects record exports of ethanol in 2008/09 (May-April), half of which will go to the U.S. market.

The group's ethanol exports should account for 25 percent of the expected output for the season, compared with less than 20 percent in recent years, said Cosan's commercial vice president Marcos Lutz.

"This (rise in exports) is a structural shift. We are building relations with international partners in which we guarantee constant supply, relations beyond the spot market," Lutz said in a conference call with journalists.

Cosan S.A., the subsidiary of Bermuda-registered Cosan Ltd (CZZ.N)(CZLT11.SA), posted on Wednesday a net loss of 5.3 million reais ($3.39 million) for the quarter between February and April, due to falling sugar prices and rising costs, after a 164.7 million real profit a year earlier.

Brazil's center-south ethanol exports are estimated at around 5 billion liters this season, compared with 3.1 billion liters in 2007/08, due mainly to strong demand from the United States.

As the world's largest sugar and ethanol exporter, Brazil is in the middle of a record cane harvest in which mills are favoring biofuel production due to poor returns on sugar.

Cosan kept its previously announced plans to invest in ethanol plants outside Brazil but will likely wait for a definition of the U.S. import tariff before making any investment decision.

"There's a growing pressure by the American population against the ethanol tariff. So we have to be careful not to take a step that could be not that interesting in the future," said Cosan's financial vice president Paulo Diniz.

He cited as an example dehydration plants in the Caribbean. Through the Caribbean Basin Initiative (CBI) trade pact, the region is exempt of a 54-cent-a-gallon tariff on foreign ethanol imports into the U.S. market. To enjoy this advantage, various Brazilian companies built plants in the region.

They regularly send hydrate ethanol from Brazil and process it into anhydrous ethanol in countries like El Salvador and Jamaica and ship it to the United States tariff free. Today, Cosan does this kind of operation through partners.

"In a year of a (presidential) election in the United States, it is prudent to wait a little to see what's going to happen in the political scenario before taking very long term decisions," Lutz said.

After a series of mill acquisitions in recent years, Lutz said Cosan is still considering possible purchases in Brazil.

"It's wise to be very well prepared for opportunities that start to appear in Brazil, too. Mills that today are in a delicate financial situation eventually can be easy targets," Lutz said.

Cosan has recently entered the Brazilian fuel distribution sector by purchasing Exxon Mobil's (XOM.N) filling station assets in the country. (Reporting by Inae Riveras; editing by Jim Marshall)