This is because the arrival of the 2022/23 crop in Brazil’s Center-South is in itself already a bearish vector that has influenced prices since the second half of April. This influence should be even greater in May, not only because there will be more mills in activity in this period (90% of those that will be working in the current season) but also because the mix of mills is already much less focused on ethanol than what is observed in the first movements of the crop. With this, even though the average in New York has presented gains of 22% YoY and of almost 3% in the margin, this does not mean a lasting scenario, quite the contrary. For May, SAFRAS & Mercado expects a decline in the average price from the current level of 19.60 to 17.50 cents, which will bring a bearish scenario in the margin of just over 8%, together with an annual increase year much less intense than that the one seen in April, of 9%.
Dry weather in the Center-South cane-producing regions, from the beginning of April to the end of the first week of May, will contribute to accelerating growth in the supply of sugar, while in India shipments have shown a strong increase with extra sales of 1 million tons in view of higher prices seen reached in April, but which will have their effects felt in the market at least until May. The appreciation of the dollar against other international currencies, due to the expectation of a sharp increase in the US interest rate, is another vector of negative pressure on the prices of all agricultural commodities, including sugar futures, which also contributes to the formation of this bearish scenario. This will certainly reverse the scenario of intensification of annual gains, which, to a large extent, also occur as a result of a statistical loading that took into account last year’s lower prices.
SAFRAS Latam