Porto Alegre, October 18th, 2022 – The Brazilian physical sugar market spent September marked by a new decline in the monthly trading averages of crystal sugar with up to Icumsa 150 in the interior of São Paulo. Crystal sugar fell 23% this year and 3.88% in the margin (compared to the month earlier), even though it was 13% above the five-year average for the same period, with all historical comparisons corrected by inflation. Basically, September was marked by the reduction in demand from purchasing industries, which have adopted a strategy of reducing their purchases as much as possible before entering the market more intensively in October and November, as a way of anticipating the extra demand for food and beverage planned for the end of December with the end of year festivities.
Moreover, the market has also shown an increase in the availability of supply on the part of mills, which have directed a greater percentage of cane for sugar production. It is true that much of this additional share for the commodity has gone to VHP sugar due to strong purchases in the Brazilian market since the increase in sales registered between June and July. Yet, crystal sugar has been preferred in production over ethanol, which has faced problems in recovering domestic demand. Even so, SAFRAS & Mercado warns that, although domestic demand has been short in September, external demand has shown signs of reaction.
This is evidenced by the increase in export premiums paid in Santos for crystal sugar with up to Icumsa 150, which started in September at around USD 93.00 a ton and ended the same month oscillating at BRL 111, with mills asking for premiums of up to USD 115.00 for immediate shipment. As for the physical market, SAFRAS & Mercado had estimated average prices for September at BRL 133.00 per 50 kg, which ended up 7.21% above the level of BRL 124.06 actually seen over the month. For October, SAFRAS & Mercado’s expectation is BRL 126 a bag, with a 1.57% increase in the margin but still falling by 24% over the year. The recovery in domestic demand together with the proximity of the off-season amid the rain affecting cane plantations of the Center-South must form this scenario for the first levels of recovery of bag price, which, at the month’s high, can go back to BRL 130.00 at the end of October, although the monthly average remains at the level of BRL 126.00 per bag.
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