SUGAR: Jump in Brazil Gas to Drive Sugar Production Estimates Lower
Brazil's Petrobras raised their domestic gasoline prices by 19%, and that provided significant support for the sugar market as that should strengthen Brazilian ethanol demand prospects. Petrobras has kept their prices at comparatively low levels since the Russian invasion of Ukraine began in late February while global energy prices were surging higher. As a result, their bringing gasoline prices more in-line with global levels should make ethanol even more competitive with gasoline. Most Center-South mills are idle until 2022/23 cane harvesting starts up, but this should result in a larger portion of their crushing shifting from sugar production over to ethanol production.
A sizable pullback in energy prices from their multi-year highs has weighed on the sugar market this week and with gasoline prices sliding further to the downside late yesterday, the market could remain choppy. Energy prices appear to have regained their footing early in today's action, and that should provide carryover support to the sugar market.
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MARKET IDEAS
The Petrobras gasoline price hike should give a badly-needed boost to Brazilian ethanol demand, and that can help sugar maintain upside momentum late this week. Near-term support for May sugar is at 18.84, with 19.76 and 20.26 as resistance.