Porto Alegre, May 23th, 2022 – Advantage of crystal sugar with Icumsa 150 fell from 15% to 8% from March to April in the Brazilian physical market.
This behavior occurred in the face of broader gains in the margin for anhydrous and hydrated ethanol against slight highs observed for crystal sugar prices in the physical market. March was a period of sharp decline for crystal sugar premiums, with crystal sugar with up to Icumsa 150 traded in the physical market over the prices of anhydrous and hydrated ethanol, also converted into values equivalent to a 50-kg bag of crystal sugar. Basically, the level of premiums fell by less than half between February and March, going from 44.09% to 15.04%. The strong decline of more than 28% from one month to the other occurred in the face of significant gains in the prices of anhydrous and hydrated ethanol in reals per liter compared to moderate lows observed for crystal sugar in reals per 50 kg bag in the same period.
April was a period marked by a strong reduction in the premiums for crystal sugar with Icumsa 150 over anhydrous and hydrated ethanol in the physical market. The decline was strong, by almost 7% in the margin, with premiums falling from 15.55% to 8.52% in April. This advantage level of crystal sugar was also 5.5% below the SAFRAS & Mercado estimate for the period, which was 14.02%. Basically, the reason for the strong reduction in the premiums for crystal sugar from March to April was the sharp hike observed in the measurement of both anhydrous [+3.9%] and hydrated ethanol [+13.8%] in a context in which the average price of crystal with up to Icumsa 150 showed much less intense advances of 2.4% in the margin.
The first half of April in the ethanol market was marked by a sharp rise in domestic prices due to the increase in gasoline and short-term demand from distributors. At the other end, crystal sugar showed a limited high compared to the start of the new crop in Brazil’s Center-South at a time when the buying end has not yet more directly resumed its short-to-medium term renewal of supply contracts. The divergence in prices between ethanol, which surged, and sugar, which plummeted, was the main reason for the halving of sugar premiums in the margin between March and April.
For the month of May, SAFRAS & Mercado expects a resumption of the strengthening of these premiums for crystal sugar to 12.49%. This should occur in the face of losses to be observed more intensely for anhydrous ethanol, by 2.5%, and for hydrated ethanol, by 7.24%, due to much more controlled losses of crystal sugar, which should retreat only 1.5%. Therefore, there must be even greater reflections of the seasonality of the period on ethanol than sugar. Although the latter should fall in the short term with the increase in supply, it must find strong growth in demand from the processing industries that must slow down sugar losses to the point of promoting a strong recovery in its short-term premiums against ethanol.
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