Porto Alegre, September 12th, 2022 – The month of August was a period of important declines in the annual comparison for the average of the current driver October/22 sugar contract traded on ICE Futures US. This one, by dropping more than 6% YoY and almost 2.5% in the margin, only priced the decline in short-term demand originated by the strong sales volume by Brazilian mills in the months of June and July. In that period, sellers found a scenario of prices for October/22 above 20.00 cents while the dollar fluctuated above BRL 5.60. The result of this can be seen not only in the comparison with the lowest averages of August, but also with the coming months, in the averages of September and October 2022.
This is because the sales were carried out between June and July, but production and shipment have occurred since August for the first batches and will remain constant between September and October. This will also keep the line-up data for these months high, sustaining the pattern above 3 mln tons registered since early August. At the other end, we will have support from the low demand scenario in New York from buyers who are already well-supplied in the short to medium term. On a longer horizon, Asia will assume the position of originator as of October, coincidentally when the shipments from Brazil’s Center-South are completed. Therefore, foreign buyers who completed their demand between June and July this year will no longer return to the Brazilian market in the 2022/23 crop.
From this point on, Asia will not only assume the position of international originator between the months of October 2022 and February 2023, but also of the largest international producer. The recent update of CONAB’s second crop survey, carried out at the end of August, shows that the Center-South of Brazil must have a decline in its sugar supply from 36 to 30 mln tons compared to the estimates of the first and second surveys. India, however, must have its supply falling from 36.8 to 35.8 mln tons between the 2021/22 and 2022/23 international crops. In the meantime, Brazil’s Center-South will be finalizing its last shipments for the current 2022/23 crop, while the first mills to enter the off-season will start withdrawing from the market. Therefore, as the Asian crop will have a lot of available supply, prices will not necessarily decline with the earlier exit of Brazil’s Center-South from the international supply scenario.
Copyright 2022 – CMA Group