Porto Alegre, February 14th, 2022 – Larger supply from India and Thailand along with rains in the off-season of Brazil’s Center-South put the March/22 prices in New York under a bearish inflection in the short term at the beginning of the year. As observed with physical market prices, raw sugar prices in New York had dichotomous movements between the short and long term. On the one hand, there is an increase of more than 15% year on year in January 2022 averages compared to the same time last year. On the other hand, in the margin, there is a decline of 3.87%. The annual gains are stronger due to the statistical load, given the weaker prices in the previous year, against the until then driver contract because of the effects of the pandemic crisis that were then at its height. Therefore, the advances over the year stemmed more from a lower comparison basis than an occasional market recovery.
And it is exactly the opposite of what is observed in the foreign market. Proof of this is the 3.87% decline in the margin of the averages in January in comparison with the immediately previous month. In theory, due to the off-season in Brazil’s Center-South, the market must have a strong base. But that is not what has happened. This is because in Asia the two largest origins of the region have sharply increased production. India must boost its supply from 30 to 35 mln tons of sugar between the 2020/21 season and the current 2021/22 season. Thailand must have an increase from 8 to 12 mln tons in the same period. This fundamental pressure has been constant in the market since November last year.
Although the Asian crop started in October 2021, it was only in January and February 2022 that the local crush gained strength, with the expansion of supply level reaching its height in this period. Finally, we have an off-season in Brazil’s Center-South, that, however long, has been rainy, which should provide partial recovery from the damage caused by the drought in the previous season. SAFRAS & Mercado expects the cane volume to increase from 520 to 560 mln tons between the 2021/22 and 2022/23 seasons. Therefore, in both Asia and Brazil, the fundamental scenario is of growing supply, which has justified the price lows seen until January. Moreover, SAFRAS & Mercado warns that the trend of appreciation of the dollar in the international market, resulting from the three highs in US interest rates scheduled for 2022, must further weaken sugar prices this year.