SAO PAULO (Reuters) – Sugar market players will need to closely monitor developments in the oil market to assess future price developments for the sweetener, as the correlation between the two has strengthened since the changes in the market Brazilian fuels, analysts said Monday.
The state-controlled oil company Petróleo Brasileiro SA, or Petrobras, has been adjusting gasoline and diesel prices almost daily since July on a new pricing policy that follows fluctuations in the international oil market.
As a result, gasoline prices have risen nearly 20% in Brazil since then, widening the price gap with cheaper ethanol and prompting factories to produce more biofuel to meet growing demand, and less sugar because the two products compete for the raw material.
The large price gap helps factories increase ethanol prices while remaining competitive with gasoline, which also pushes up sugar prices locally.
“Gasoline is increasing, ethanol is following this rise and so is sugar,” Plinio Nastari, chief analyst at consultancy firm Datagro, said on Monday on the sidelines of a conference he organized before the Brazil Sugar Dinner on Thursday. .
“The sugar market will have to take this correlation into account, because it is very strong now,” said Michael McDougall, expert in the soft drinks market.
Brazil is the largest producer and exporter of sugar, with nearly 40 percent of the world market, and any change in the production mix with factories producing more ethanol and less sugar will impact sweetener supplies. in the world.
According to Cepea / Esalq, an agricultural market research organization at the University of Sao Paulo, local ethanol prices have increased weekly for the past five weeks, while its crystal sugar price index has risen. from 52.3 reais per 50 kg bag 30 days ago to 58.7 reais now.
McDougall cited the current prospects of a firm oil market in the coming months, due to OPEC production cuts and the lack of new exploration projects, as favorable to sugar, as this could keep prices and demand for Brazilian ethanol at a high level.
Report by Marcelo Teixeira