By Marcelo Teixeira

NEW YORK (Reuters), -Mr. Louis Dreyfus, a global commodities trading expert, projected Wednesday that Brazilian cane mills would divert more sugarcane from ethanol production to offset high energy prices. The result will reduce world sugar supply.

Enrico Biancheri, Dreyfus’ sugar director, stated at the Citi ISO datagro sugar conference in New York (April 7) that Brazil’s center south (CS) sugar mills will produce just 29 million tonnes of sugar. This view would fall below analysts’ expectations.

Biancheri explained that at the current price, there is a global shortage of sugar due to Brazil’s ethanol-oriented crops. Biancheri also stated that sugar prices need to go up to compensate for ethanol to encourage an increase in production.

Brazil’s mills can adjust their cane allocations to sugar and ethanol depending on the market. High energy prices led to expectations that sugar mills would switch some of their cane to ethanol. But Dreyfus thinks this shift is more dramatic.

StoneX, a U.S. brokerage and analyst, predicted on Tuesday that Brazil CS-mills would produce 33.9million tonnes of sugar. That’s close to 4 million tonnes more than Dreyfus estimated.

Biancheri claimed that the ethanol sale is currently providing mills an equivalent financial return to 20.18 cents/pound. The price of sugar was 18.54 cents/lb on Wednesday at ICE (NYSE:).