Porto Alegre, December 22 th, 2022 – The 2021 statistical loading continues to exert pressure on 2022 prices of sugar in New York. Hedging by mills and exporters in India raises prices exponentially in November. The international sugar market had a month of November marked by sharp highs against the March/23 contract, the current driver of the New York Stock Exchange. This contract had two episodes of a graphic movement which ended up boosting prices to levels above 20 cents at the month’s highs. Much of this movement stemmed from purchases of short positions in the futures given the need for hedging by mills and exporters in India, which is in the first weeks of the new 2022/23 crop. Despite a still conservative reading by the United States Department of Agriculture (USDA) and the Indian Sugar Mills Association (ISMA), SAFRAS & Mercado warns that the country is heading toward a second season of record production in the current season.
Therefore, any upward movement with the New York futures in November must be corrected between December 2022 and January 2023, when India’s current crop will be at its productive peak and with high levels of domestic supply and exports. In the meantime, the off-season in Brazil’s Center-South will be ending its first half with high volumes of rainfall. Weather maps show expected volumes between 230 and 260 mm in December and January, which will further reinforce the expectation of expanding supply in the new 2023/24 season in the Center-South. SAFRAS & Mercado estimates the crush at 565 mln tons of cane in the 2023/24 crop, against 545 mln tons in 2022/23.
With this, the gains achieved by the price averages of the driver contract in New York in November must be reversed in December and January by the overlapping of all these vectors. Thus, the November monthly average of 19.37 cents is likely to drop back to around 18.00 cents in the coming few months. With this, the patterns of double-digit YoY declines will likely be back, despite a brief deceleration from these low levels seen in October and November. In addition, the evolution in the margin (compared to the immediately previous month) must become negative again, contrary to the two respective 4% increases that were observed in October and November.
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