SAO PAULO – Sucden Ltd., a global sugar-trading company based in the U.K., says sugar prices are expected to rise 10% worldwide as Brazil, the world's largest producer, reduces its exports to focus on producing alcohol-based fuel from sugarcane.

Some 22%, or 328,374, of the vehicles sold in Brazil in 2004, are flexible-fuel capable, which includes a combination of gasoline and alcohol, or gasoline, alcohol and natural gas.

GM Celta now offers flex-fuel model.

Because Brazil's flexible-fuel cars are selling better than vehicles using traditional gasoline engines, future sugar contracts are expected to reach $330 a ton.

One reason flex-fuel cars are popular in Brazil is due to a 45% hike in the price of domestic gasoline in the last year. Nearly half of the domestic vehicles sold in May were equipped with bi-fuel capability.

Traditional gasoline models grabbed 43% of the market, diesel vehicles registered 5% and vehicles capable of running on alcohol alone represented 2%, the National Association of Vehicle Manufacturers (Anfavea) reported. (See related story: Brazil's Flex-Fuel Sales Thrive in May)

Industry analysts here say Brazil's exports of alcohol fuel are expected to drop to 528 million gallons (2 billion L) this year, compared with 660 million gallons (2.5 billion L) last year, owing to increased domestic demand for flex-fuel cars.