With the 2004-05 harvest barely over, Brazilian sugarcane producers are signing ethanol contracts for the next harvest earlier than ever, traders told Dow Jones on Wednesday.



The contracts, which vary from three to 18 months, are an indication that Brazilian sugar mills plan to continue to export ethanol in the coming harvest, despite growing domestic demand for the product.



"Ethanol exports are here to stay," said Tarcilo Rodrigues, an ethanol trader at Sao Paulo-based Bioagencia. "Millers are committed to meeting both domestic and international demand."



The three-month contracts, most of which are for delivery between May and July, are being based on current ethanol prices, which are around 930 Brazilian reals ($1=BRL2.71) per cubic meter. For longer contracts, millers and buyers are negotiating prices based on a series of factors, including gasoline and sugar futures prices.



"There are no contracts against New York, because there is still limited liquidity on the futures market," Rodrigues said.



Brazilian ethanol exports in 2004 reached an estimated 2.36 billion liters, and according to the Sao Paulo Sugar Producers Association, or Unica, they will reach similar levels in 2005.



Despite Unica projections, some observers have expressed concern that Brazil could have trouble meeting internal demand and maintaining its exports in 2005 because of growing domestic demand.



Ethanol exports are likely to decline to 2.2 billion liters in the 2005-06 season, down from 2.46 billion liters in 2004-05, according to local agricultural consultancy Datagro.



Regardless of whether Brazilian exports increase or remain flat in 2005, traders agree that the outlook for Brazilian ethanol is positive. Europe is likely to increase imports, as are Japan and China. Likewise, U.S. demand is expected to rise, despite growing domestic production.