Crystal sugar falls 7% YoY in June in the physical market

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     Porto Alegre, July 2, 2024 – The physical crystal sugar market was marked in June by lower prices in both the short and medium term. The average sales of a 50-kg bag in June hovered around BRL 134.81 for crystal sugar with up to Icumsa 150, down 7.43% from the same time in the previous year (with prices already adjusted by inflation) and 2.04% from the previous month.

     The comparison vector was only positive against the long-term average, of 5 years, in the same period (also corrected by inflation), although with a moderate increase, bordering on stability, at 0.74%.

     In this sense, we can observe that the month of June was a negative period for crystal sugar prices both in the short and medium term, together with minimal gains on the long-term average, which was still a negative vector, as from January to April current crystal sugar prices in the physical market were usually 4% to 5% above their 5-year average.

     In the previous month, SAFRAS & Mercado had estimated average prices of BRL 134.00 per 50-kg bag in June for crystal sugar with up to Icumsa 150, down 0.60% from the effective average of BRL 134.81 for a 50-kg bag in the period.

     For the estimated average for July, SAFRAS & Mercado expects prices of around BRL 136.00 per 50-kg bag, which should represent gains over the June average of 0.88%. Despite this, in the annual comparison, against the prices already corrected by inflation, there should be a decline of 1.33%, together with an increase of 11.88% compared to the 5-year average in the same period. On the one hand, current June prices appear to be depreciated due to the expansion (albeit moderate) of cane crushing for the new 2024/25 crop.

     The cane crushing season in the Center-South usually reaches its productive peak in the month of July, which should keep the sugar supply on the rise this month. Even so, SAFRAS & Mercado projects slightly higher prices for this period. This should happen given the market’s concerns about the effects of practically no rain in the cane fields of the Center-South between the beginning of the second half of April and the end of June.

     Furthermore, the Inmet’s maps of accumulated and projected rainfall for July and August show the continuity of the scenario of low rainfall volume with water deficits between 10 and 50 mm over most cane fields in the Center-South. Therefore, SAFRAS & Mercado expects that the crushing peak of the current 2024/25 crop will be reached in July (usually in the second half of the month) with strong levels of quality loss in cane fields, which should generate a strong negative impact on cane productivity standards.

     As a result, even though the crop is statistically at its production peak, the cane to be processed in the second half of the year will have very low quality standards, negatively impacting the production of derivatives, including the volumes of crystal sugar in the physical market. Therefore, even with the crop reaching its peak, prices should have clearly solid upward support even before it begins to seasonally decline in its processed cane volumes from August onward, when the current season approaches its end, in December.

     It is too soon to indicate an earlier-than-normal end to the current crop, especially when we take into account that the maps of accumulated rainfall forecast for September project the return of rain over the cane fields of the Center-South, even if moderately. This could slow down the crushing pace and lead to improved conditions in the cane fields to be reaped at the end of the year, leaving a larger crushing window for mills that choose to resume crushing after the brief recovery period for cane fields between October and November, then with thirty days of cumulative rainfall.