Porto Alegre, December 11th, 2023 – High stocks in the short term and resumption of crushing in the first half of November maintain supply high in the short term and mills more open to negotiations; December should have heavy rainfall, causing an exponential reduction in the availability of the commodity supply and higher prices.
November was a period marked by prices little changed compared to the trading averages of crystal sugar with up to Icumsa 150 in the physical market in Ribeirão Preto. The average trading price for a 50-kg bag of this sugar fluctuated around BRL 155.38, with gains of just 0.07% in the margin, compared to the immediately previous fortnight. SAFRAS & Mercado warns that the short-term scenario for sugar is very adverse to what is generally observed in the months of November, as this is a period when the off-season officially begins, with only a few mills still in the cane-grinding process.
However, in the 2023/24 crop, the majority of mills that started the season in April continued the crushing process at the end of November. This occurred because the current season had three rain events over the cane fields in the Center-South, which resulted in the interruptions of the cane harvest and delayed the crushing rate of 70% of mills in operation during this crop in the Center-South. Therefore, November, which was supposed to be a period when the crop should end, was a time when most of the mills were still in cane-crushing operations.
Furthermore, we cannot forget that the current 2023/24 crop is a season with a strong volume of growth in the crop, which leaves mills with large volumes of cane to be processed until the end of December. The most recent survey by SAFRAS & Mercado estimates the cane crushing for the Center-South at 580 mln tons, compared to 524 mln tons last crop, 2022/23, in an increase of 6.42% or 35 mln tons more cane in the fields. All this explains the greater number of mills operating in the market, the greater supply of sugar in the spot market, and prices with a lack of growth capacity.
The scenario was not negative in the short term because purchasing industries have been active in the market since October, forming an upward vector that helped to neutralize the downward pressure that excess supply caused in the sugar market. Moreover, crystal sugar stocks are high, with volumes of 5.08 mln tons with up to Icumsa 180 accumulated in the Center-South until the beginning of November, 16.52% higher than the volumes seen in the same moment of the previous year, besides being 14.86% higher than the 5-year average in the same period.
Despite stability in the margin (compared to the previous month) with vegetative growth of 0.07%, sugar shows more considerable gains year-over-year, of 10.09%, when compared to the inflation-adjusted average of BRL 141.13 for a 50-kg bag of crystal sugar in November 2022. This is because mills, even though they have a greater supply of crystal sugar in the short term, show a greater tendency in this crop to produce VHP to meet exports and external commitments due to attractive international prices since April this year. Therefore, compared to VHP, the supply of crystal sugar is lower in the medium term, sustaining higher prices from this perspective of comparison.
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