Sugar continued with gains in the physical market

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Falling demand from industries ends up preventing sugar from advancing more significantly. Larger production in the 2022/23 season must limit new earnings. The most recent data on average sales of crystal sugar with up to Icumsa 150 in the Brazilian domestic market, for December 2021, still show a pattern of gains for average sugar sales, supported by the longer off-season after a previous season of record losses. Despite this, the intensity of the upward movement has been ever lower in the short term, with December presenting advances of only 1.17% in the margin, against more than 5% gains in the previous month. Year-over-year gains were also smaller, of 27%, which contrasts with the average of 30 to 46% seen in previous months.

In fact, the physical market of crystal sugar has apparently found a peak at the level of BRL 155 per 50 kg bag since the end of November and observed throughout the month of December. What is behind this movement of earnings saturation is the decline in the demand from processing industries, and most of which have already signed their supply contracts for January and February 2022, in some cases even for March and April. Despite this, as the current off-season is one of the longest on record, the market, although without demand, has managed to remain firm. The problem is that the next 2022/23 crop tends to have some recovery, with widespread rainfall on cane fields in the Center-South since the end of October 2021. Therefore, a greater supply from next season, from April onwards, tends to keep prices under negative pressure until the end of the first quarter of 2022.

In this context, analyzing the historical comparison with already deflated data, we can see that, in December, the average trading price of a 50-kg bag of sugar with up to Icumsa 150 was BRL 155.11 in Ribeirão Preto. In comparison with the same month of the previous year, there was an increase of 27.62% over the average of BRL 121.54 per bag, already deflated. In the margin, there was an appreciation of 1.17%, well below the 5.51% high registered in the previous month when we compare the average of BRL 153.11

observed in November 2021. Expanding the analysis scope, we see that the average price of December is 47.51% above the average price of this period for the last five years, already deflated, which is currently around BRL 105.15.

In the previous month, current prices had been 51.08% above the five-year average for the period, which until then fluctuated by BRL 101.48. As a result, the average price for the last five years between November and December showed an appreciation of 3.62%, above the advance observed in the margin, where current prices increased by 1.17%.

For the month of December, SAFRAS & Mercado expected prices to stay around BRL 155.00, which was 0.07% below the effective average price of BRL 155.11 for the period. For January 2022, SAFRAS & Mercado expects prices around BRL 156.00, which should mean an annual gain of 38%, an advance in the margin of 0.5%, and an increase of 69% over the five-year average price in the same period.