It is reported by Nasdaq.

The policy change announced on Tuesday, however, will have no impact to the production strategy of Brazilian sugar and ethanol producers as they start a new season since they are already planning to make as much sugar as possible, and consequently less ethanol, they said.

«Mills are already max sugar. They cannot go max plus», — said a U.S.-based sugar broker, referring to the mills' intention to use as much of this year's sugarcane to produce sugar as the price for the sweetener hovers around the highest in 11 years.

Brazil mills have relative flexibility to shift raw material sugarcane to make sugar or ethanol, depending on market prices.

Broker and supply chain services provider Czarnikow said on Wednesday the gap between prices of sugar and hydrous ethanol for Brazilian mills reached the equivalent of 11.34 cents per pound, the highest since 2011.

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% from Wednesday, which will push ethanol prices even lower.

«Of course, that cut will further reduce ethanol's attractiveness for mills, but energy prices were already falling so that was expected», — said Willian Orzari, a partner at sugar and ethanol consulting firm FG/A.

Sugar futures in New York lost some momentum after the Petrobras news, although brokers diverged on the reason.

«It had no immediate impact on sugar prices as ethanol parity remains well below current sugar prices», — said a European broker.

«The only reason I can think of as to why the market sold off was that small specs were the main driving force behind the rally (on Tuesday) and they decided to bail», — said the U.S. broker.