Porto Alegre, March 31th, 2025 March was a period marked by a new devaluation in the average trading prices of crystal sugar with Icumsa 180 to 150, based in Ribeirão Preto in the physical market. During this period, the average sales fluctuated around BRL 135.39/50-kg per bag, down 8.04% YoY, 3.49% in the margin (compared to the previous month), and 6.17% from the five-year average in the same period. Both the annual and 5-year comparisons are with present values, adjusted by inflation.
SAFRAS & Mercado warns that March was the second consecutive month of declines in the annual comparison, as well as in the 5-year average. In the short-term comparison, in the margin, sugar has had three consecutive months of devaluations, with lows registered in January, February and March. The slowdown that encompasses the short and medium term is, to a certain extent, counterintuitive, given that the Center-South region is close to the peak of the off-season (which runs from December to March).
However, prices have been lower across the cane-producing regions of the Center-South, not due to supply from mills, but rather due to demand from purchasing industries. Analyzing the period of high volatility in the short-term market during the cane off-season and the high sensitivity of prices to any sporadic increase in purchases, these industries end up avoiding as much as possible any exposure to the physical market during this period.
The monthly demand of purchasing industries for the off-season period has been met by the formation of intermediate stocks by the industries themselves so that they can have their needs met throughout the off-season without having to enter the spot market with very high price levels. Another detail is that these intermediate stocks have actually been formed by industries in their own facilities and not in mills.
Mills have even taken a completely opposite stance toward the formation of stocks of volumes already sold. It is not uncommon for mills to pressure their buyers to quickly withdraw their loads, avoiding very long storage periods that exceed 15 days. Once negotiations are completed, the mills exert strong pressure to have the sugar removed from their warehouses as soon as possible.
In the view and market monitoring of SAFRAS & Mercado, this is the origin of the downward movement in the physical market prices of crystal sugar in the first quarter of 2025, almost in the entire off-season (because in December price movements were upward). However, from now on, SAFRAS & Mercado estimates an improvement in prices effectively due to the return of demand from purchasing industries.
This is because, once the off-season is over, the availability of processed cane and produced sugar will grow again. With this increase in supply, purchasing industries will once again feel comfortable returning to the short-term spot market to make new purchases. This is why SAFRAS & Mercado estimates an improvement of 1.19% in the average prices expected for April in the physical market compared to March, which should go from BRL 135.39 to BRL 137.00 per 50 kilograms.
This will obviously be a timid upward movement but the beginning of a new trend of gains that should be observed by crystal sugar in the physical market throughout the second and third quarters of the year. Firstly, because the cane crop, which began in April and was started earlier by more than 60 mills in March, should initially bring a high load of ethanol production.
The average production mix of mills over the first four fortnights of production generally ranges between 70% and 100% for ethanol. It is only with the remaining 30% of cane (when there are any leftovers) that sugar production is carried out, although VHP production is prioritized to meet export contracts. Only in last place comes the crystal sugar supply, which should only be back to normal in May.
