In January the Brazilian physical sugar market was marked by sharp lows in average trading prices of crystal sugar with up to Icumsa 150 in Ribeirão Preto. The average price of BRL 134.27 was 3.27% lower than in the previous month, as well as 15.87% lower than in the same period of the previous year, already corrected by inflation. In spite of this, in the long term, the average sales managed to be 13.50% higher than the trading pattern of the last 5 years in the same period, also corrected by inflation. However, from the short to the medium term, the pattern was clearly negative, as the demand from purchasing industries was very weak in January. Buyers were strongly withdrawn in the short term, avoiding entering the market due to the off-season peak.
This posture was reinforced by a high level of supply on the part of buyers during the months of November and December, the final period of supply for the new crop before the start of the off-season. As a result, purchasing industries do not need to renew or expand sugar supply contracts, at least in January. The perspective is that buyers must return to the market in a more significant way only from the end of February. It is during this period that the first mills will be on the market to start earlier than normal the crush of the new crop, 2023/24, which will allow a gradual increase in the supply of new sugar while generating downward pressure on the sugar volumes left from the previous season’s stocks.
SAFRAS & Mercado expects that between the last week of February and the first of March, 15 mills will return in advance to the crushing process of the 2023/24 crop. Out of a total of 260 mills expected to start operating in the new season, this number represents only 5.7% but it will already guarantee buyers some initial comfort to resume the process of acquiring new volumes, allowing a moderate price reaction. In December, SAFRAS & Mercado maintained the expectation of average prices for January at BRL 140 per bag, which ended up 4.27% above the average of BRL 134.27 seen in the period. For February, SAFRAS & Mercado estimates an average of BRL 136 per 50-kg bag of crystal sugar with up to Icumsa 150, with average expected gains of 1.29% in the margin but losses of 10.72% YoY.
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