The Long Case for Sugar-Based Brazilian Ethanol Producer Cosan Limited

The long term bull case for sugar prices relates to global
sugar-based ethanol use. Sugar is attractive in absolute terms as well
as versus oil and corn prices on a 2 to 3 year view.<!--more--> It is also bullish
for Brazil. The catalyst is a rising floor under the price of energy
which increases "food for fuel" demand for sugar based ethanol.
Although the world has greatly increased its share of sugar for energy
use over the past 20 years, the levels of ethanol replacement in the US
(1.5%) and the rest of the world (0.4%) is still greatly lagging that
of Brazil (14.0%). Simply put, skyrocketing oil prices and growing
concerns over climate change will boost global demand for renewable and
cheap bio-energy, where Brazilian sugar has a 35-year track record of
economic feasability.

Cosan Limited (CZZ) is the largest producer of
sugar based bio-energy in the world and is the center of sugar based
ethanol demand stemming from its integrated companies in Brazil in
sugar production and bio-ethanol production. In October or 2007 the
company raised $1.2 bn as an IPO on the NYSE.