The sugar market saw a January marked by a decline in crystal sugar premiums when comparing their prices with the average prices of anhydrous and hydrated ethanol, all of which are traded on the physical market and converted into reals per 50-kg bag of crystal sugar equivalent with up to Icumsa 150. Basically, January was a period of high average prices observed for both anhydrous and hydrated ethanol, which contrasted sharply with the declines seen in the trading prices of crystal sugar.
During this period, anhydrous ethanol dropped by 7.7% and hydrated ethanol by 4.7% when comparing the averages between December 2024 and January 2025. Meanwhile, the average prices of crystal sugar on the physical market followed the opposite path, with a 3.9% decrease in their trading averages for the same period. The result was a reduction in crystal sugar premiums against ethanol on the physical market from 82% to 53%. The sharp decline of 29% in a single month was due to the combination of these two factors that diverge in the price trends between the two products.
Last month, SAFRAS & Mercado expected average premiums of around 82% for crystal sugar against ethanol, which turned out to be far from the actual data for the period. The difference was centered on the unexpected lows in crystal sugar prices in the middle of the off-season, which reflected not only the reduction in supply, which had a background of high stocks at mills, but also the decline in the demand from industries. This greater-than-expected decline in demand resulted in lower physical market prices, which caused an exponential reduction in sugar premiums against ethanol.
SAFRAS & Mercado expects this scenario to repeat itself for February, with a sharp decline in crystal premiums, which should fluctuate at around 48%, down 4.9% from the current crystal premiums in January. Basically, our market expectations show signs that anhydrous and hydrated ethanol prices should fall by 0.63% and 0.91%, respectively, from January to February.
In the meantime, average crystal sugar prices in the physical market should fall by 2.46%, with the direct result of this being a new reduction in the premiums for crystal sugar against hydrated ethanol to around 48%. If this trend is confirmed, this will be the lowest level of advantage in crystal sugar prices against ethanol in the last 7 months. Before this, only July 2024 was marked by premiums of 39% for crystal sugar against ethanol, which, in the following month, in August, fell to 53% and then to 70%.
In SAFRAS & Mercado’s view, the key to the issue of lower sugar premiums is the sharp reduction in the purchasing demand from food and beverage processing industries. This reduction in demand lies behind the low prices for crystal sugar, even with the seasonality of the off-season. As a result, sugar prices have fallen, taking with them the premiums for hydrated ethanol. Ethanol, in turn, has been highly demanded on the physical market due to its competitiveness levels compared to gasoline.
