Jul 14 / Lívea Coda

Sweet rebound, sour risks

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"Sugar prices rebounded on technical and demand signals, easing concerns over ethanol diversion in Brazil and possibly reducing Chinese buying interest. Despite this, fundamentals remain rather bearish, and macro risks, like new U.S. tariffs and BRL devaluation, could pressure the market. Northern Hemispheres good prospects, particularly India’s developments adds further pressure to long-term contracts."

Sweet rebound, sour risks

  • Sugar prices rebounded, supported by demand signals and technical indicators.

  • Fundamentals remain bearish, with stock-to-use ratios starting to rebuild, limiting the short-term possible upside beyond 17–18 c/lb.

  • The U.S. tariff announcements boosted the dollar, driven by heightened inflation expectations. Combined with strong labor market data, this has shaken monetary easing expectations. However, uncertainty still pressure inflation value, which remains bellow previous years’.

  • Ethanol diversion fears in Brazil eased as prices rose above 16 c/lb, especially in São Paulo; marginal shifts may occur in Goiás and Mato Grosso.

  • Chinese buying could slow down amid higher prices, while India’s strong monsoon and planting suggest production recovery and possible export pressure next season.

Sugar prices staged a recovery during the week, supported by demand-related news (Pakistan and Philippines), the latest Unica report, and broader fundamentals suggesting the dip to 15.5 c/lb may have been an overreaction. Technical indicators such as RSI and MACD have shifted, pointing to a more bullish trend. Notably, raw sugar prices climbed back above the 38.2% Fibonacci retracement level for the first time since June, potentially signaling renewed buying interest. However, fundamentals remain weaker than in the past three to four seasons, with stock-to-use ratios beginning to rebuild. While we agree that prices should be trading at higher levels (at least 17-18c/lb), there are clear limits, making a return to 2023–2024 highs unlikely.

Image 1: Fibonacci Retracement Levels (c/lb)

Source: LSEG, Hedgepoint

Looking ahead, the macroeconomic landscape will be a key driver. This week, U.S. President Donald Trump issued tariff notices to 23 countries, with rates ranging from 20% to 50%. The immediate effect on the dollar index was upward. The inflationary perspective, coupled with the strong labor market data released the week prior, shaken expectations of monetary easing, adding support the U.S. currency in the short-term. As a result, the dollar held firm, ending the week at 97.9, with a week-over-week change of 0.8%.

Image 2: MACD and RSI levels

Source: LSEG, Hedgepoint

In contrast, the BRL weakened due to the high tariff imposed on Brazil, and the fact that the US accounted for 12% of Brazilian exports in 2024, retreating to the 5.57 level on Wednesday and to 5.54 by week’s end, after market digested the announcement. However, the combination of tariffs and policy uncertainty has heightened market risk perception regarding the US. This could place additional pressure on the dollar index over the medium to long term, keeping it below levels seen in previous years and potentially impacting the broader commodity market and supporting BRL valuation.

Image 3: New Tariffs to take place on August 1st

Source: LSEG, Hedgepoint


While tariffs have limited impact on the sugar market, a devaluation of the BRL could be seen as bearish for sugar, as it may encourage higher export volumes from Brazil. This trend affected the sweetener’s momentum, losing some of its gains by Thursday. However, most of the 2025/26 crop has already been priced, limiting the impact of currency movements on the sweetener’s short-term contract, which moved back to 16.57 c/lb by Friday.

The recent recovery in raw sugar prices is particularly relevant. Earlier concerns about a shift from sugar to ethanol in Brazil’s Center-South have eased, especially after prices rebounded above 16 c/lb and the São Paulo state hydrous parity. While some marginal adjustments may still occur in Goiás and Mato Grosso, their combined share of cane volume is around 13%, and they already operate with a lower sugar mix, limiting their impact on 25/26 aggregated mix.

The rebound in sugar prices has made the sweetener a little less attractive to Chinese buyers, who had been active since May, taking advantage of previously low prices. While this doesn’t rule out further imports, Chinese buyers, known for their cautious approach, may choose to delay new purchases, especially as crop prospects in the Northern Hemisphere continue to improve.

Image 4: Key Indicators (compared to Thursday close 16.26 c/lb)

Source: Bloomberg, LSEG, Hedgepoint


The monsoon has progressed well across India, and water reservoir levels remain healthy. The country has reported higher planting compared to last season and is expected to see a recovery in sugar production. However, export volumes remain contingent on government decisions and may only be authorized later in the season. While we maintain a conservative export estimate of 500 kt, there is potential for volumes to reach up to 1.5 Mt, an outcome that would contribute to an even more bearish outlook for the global sugar market, adding pressure to Mar/26 contract.

Image 5: Advance of Southwest Monsoon (2025)

Source: Indian Meteorological Department

In Summary

Sugar prices rebounded on technical and demand signals, easing concerns over ethanol diversion in Brazil and possibly reducing Chinese buying interest. Despite this, fundamentals remain rather bearish, and macro risks, like new U.S. tariffs and BRL devaluation, could pressure the market. Northern Hemispheres good prospects, particularly India’s developments adds further pressure to long-term contracts.

Weekly Report — Sugar

Written by Lívea Coda
livea.coda@hedgepointglobal.com
Reviewed by Laleska Moda
laleska.moda@hedgepointglobal.com
www.hedgepointglobal.com

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