
Sugar market stalls amid policy uncertainty and bearish fundamentals
"Sugar prices stayed flat last week, with weak fundamentals and selling pressure capping gains. Oil’s rise from Middle East tensions had limited impact on sugar, as Petrobras’ pricing policy restricts ethanol’s upside. The sugar/hydrous parity hit a two-year low, but mills are locked into a high sugar mix for 2025/26. The delayed E30 rollout now expected in July softens ethanol demand, reinforcing a bearish outlook for both markets. With geopolitical risks and policy uncertainty, funds remain cautious, awaiting stronger signals before shifting positions."
Sugar market stalls amid policy uncertainty and bearish fundamentals
- Raw sugar prices remained flat, with weak fundamentals and selling pressure limiting any upward movement.
- Geopolitical tensions boosted oil futures, but Petrobras’ pricing policy muted ethanol’s response, weakening sugar’s support. There needs to be an actual cost pass-through to induce a stronger response.
- Despite sugar/hydrous parity hitting a two-year low, the sweetener remains in advantage. Additionally, mills are locked into a high sugar mix for the 2025/26 season, limiting flexibility.
- The ethanol blend transition from E27 to E30 was pushed to July, compared to our initial expectations, easing some of the pressure on ethanol stocks.
- With policy uncertainty and geopolitical risks, funds remain hesitant to adjust sugar exposure.
Sugar had another quiet week, with prices moving sideways and no big changes in the market’s fundamentals, which still point to a bearish outlook. Prices have been failing to sustain any gain as each rally attempt is met with selling pressure, ending the week at 16.1 c/lb on June 20, a weekly variation of -0.2%. The market awaits more relevant news, suffering from weakening spreads and no strong signs of demand as the July contract approaches expiry. Even though oil prices rose during the same week (+3%), given the entry of the US in the Israel-Hammas-Iran conflict, it wasn’t enough to lift the market.
Although the sugar/hydrous parity has dropped to its lowest level in over two years, a move that could be seen as somehow supportive for sugar, there are two key factors to keep in mind. First, the market’s reaction was mostly based on expectations, when it comes to the ethanol side of the equation. Under Petrobras’ new pricing policy, any rise in international energy prices doesn’t automatically translate to higher domestic fuel prices. Political decisions play a big role, which means gasoline prices at the pump could limit how much ethanol prices can rise. During the PPI era, when domestic fuel prices closely tracked international markets, the correlation between crude oil and hydrous ethanol (B3) was +56 points. Since the policy ended in May 2023, that correlation has reversed to –65 points, highlighting a significant decoupling—excluding currency effects in this analysis.
Image 1: Major oil-related headlines versus crude (USD/bbl - left) and hydrous (BRL/cbm - right) correlation

Source: LSEG, Hedgepoint
Image 2: Anhydrous stocks (‘000 m³) – Base Case

Source: UNICA, MAPA, SECEX, ANP
Image 3: Anhydrous stocks (‘000 m³) – One month delay

Source: UNICA, MAPA, SECEX, ANP
In Summary
Weekly Report — Sugar
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