Porto Alegre, November 8th, 2021 – Out of the 255 mills in activity in the Center-South in the 2021/22 season, 67 had already ceased operations at the end of the first half of October. Carryover stocks grow in the short term through the reduction in physical supply. October was a period of strong volatility in domestic prices of crystal sugar with up to Icumsa 150 traded on the average of the interior of São Paulo. As SAFRAS & Mercado has warned since May this year, the cane off-season started 60 days before the official calendar for a large number of mills across the country. As is widely known, this was due to the drought that affected the market between April and September 2021 and also to the three frost events in July. As a result, two mills had already ended their crushing activities in August. This number ended up increasing to 39 mills in September and to six by the end of the first half of October, totaling 67 units or 26% of the 255 mills in activity in the current 2021/22 crop in Brazil’s Center-South region.
In this sense, besides the natural reduction in the availability of new product manufactured by production units, there was also a movement towards a reduction in the availability of sugar supply by the mills that were still operating. This is because these units chose to manufacture sugar and use it to build stocks to deal with a longer off-season [see the monthly report on sugar stocks published by this consultancy]. As a result, prices in the physical market quickly reached the high of BRL 150.00 per bag at the peaks of the month. Despite this, food-processing industries ended up retreating. Therefore, given the few trades registered in October, prices ended up fluctuating much more widely, putting the October market already within the pattern of off-season volatility.
In this context, analyzing the historical comparison with already deflated data, we observe that, in October, the average trading price of a 50-kg bag of sugar with up to Icumsa 150 in Ribeirão Preto was BRL 145.31. In comparison with the same month of the previous year, there was an increase of 43.23% over the average of BRL 101.45 per bag, already deflated. In the margin, there was an appreciation of 3.56% over the average trading of BRL 140.31 observed in September 2021. Expanding the analysis perspective, we see that the average price in October this year is 55.74% above the average price for this period over the last five years, already deflated, which currently fluctuates around BRL 93.31.
In the previous month, current prices had been 57.76% above the five-year average for the period, which, until then, fluctuated at BRL 88.94. With this, the average price for the last five years between September and October showed an appreciation of 4.91%, staying in line with the advance observed in the margin where current prices increased by 3.56%. With this, we can interpret there was parallel growth between the current price line and its historical average, both with almost the same intensity.
For the month of October, SAFRAS & Mercado expected prices of around BRL 143.00, which was 1.59% below the effective average price of BRL 145.31 for the period. For the month of November, SAFRAS & Mercado’s expects around BRL 150.00, which must mean increases of 27% YoY, more than 3% in the margin, and 55% over the five-year average for the same period.