Part of the price gains at the beginning of the month were neutralized by the Petrobras crisis, with the March/21 contract in its last trading week. The month of February was a period marked by moderate highs this year and compared to the historical average for the period, as well as by stability against May/21 in its monthly averages. This asset had its first fifteen to twenty days of February marked by strong bullish pressures from the supply gap between Brazil and India. The former is at its peak in the off-season, and the second with a still slow development of its internal production, which also faced logistical problems.
Even so, the end of the month was marked by the influence of the sharp increase in hydrated ethanol prices in the Brazilian domestic market, which put at risk even the maintenance of export contracts signed in the last few months. However, in the last week of February, the Petrobras crisis ended up neutralizing part of this bullish movement for hydrated ethanol, so driving away an important support basis for sugar in view of its recent short-term tops. The result was the neutralization in monthly averages of the most significant gains in the last week of February.
In general, with the premature harvest of the new Brazilian season, the market turns again to the seasonality of its fundamentals, with India developing a record crop, between 33 and 35 million tons, and Brazil’s Center-South entering its new season with the outlook for a supply of 40 million tons. Therefore, the trend for prices must be more negative for the coming few months, in line with the negative slope of the future price curve. Moreover, there is a strong logistic risk for exports, with the early shipments of the new crop from the Center-South coinciding with the delayed shipments of the new soybean crop.
In this context, in February, the average closing price of the May/21 contract on the New York exchange was 15.96 cents. In comparison with the same month of the previous year, there was an increase of 8.58% over the average of 14.70 cents. In the margin, prices fell by 0.10% from the 15.98 cents trading average seen in January. Expanding the analysis scope, we can see that the average price of February this year was 3.15% above the average price for this period for the last five years, which is currently around 15.48 cents.
In the previous month, current prices had been 3.25% higher than the average of the last five years for the period, which until then also fluctuated by 15.48 cents. As a result, the average price for the last five years between January and February showed stability, while the May/21 price level ended up decreasing by 0.10% in the margin. Therefore, price levels got closer to the historical average.
For February, SAFRAS & Mercado had estimated prices around 15.00 cents, which was 6.04% below the effective average price of 15.96 cents for the period. For the month of March, SAFRAS & Mercado expects prices to be around 16.80 cents, which must mean a 40% annual increase, a 5% increase in the margin, and an 18% increase over the five-year average price for the same period.