Brazilian state oil company Petrobras approved a new fuel pricing policy for gasoline and diesel that will sharply lower costs for motorists, it announced on Tuesday, ditching a more market-based policy in favor of greater flexibility to smooth price swings. That will likely increase the price gap between ethanol and sugar to the highest level in 12 years. The new pricing system scraps a so-called fuel import parity policy that more closely aligned prices at the pump with the oil market and exchange rates. Petrobras also said it will cut gasoline prices by 12%, which will push ethanol prices even lower.
“Mills are already max sugar. They cannot go max plus,” a U.S.-based sugar broker told Reuters, referring to mills’ intention to use as much of this year’s sugarcane to produce sugar as the price hovers around the highest in 11 years.