December was a period of reinforcement of the negativity seen in the fourth quarter of 2024 regarding the current driver contract, March/25, of raw sugar on the New York Stock Exchange. This asset had average trading prices of around 20.61 cents, down 4.80% in the margin from the average prices of the immediately previous month, together with a decline of 12.04% YoY, in addition to being 4.20% below its five-year average for the same period. Both the annual comparison and the five-year average were corrected by inflation, with their nominal prices brought to present values.
Basically, the March/25 prices reflected in December the overlapping of several fundamental drivers of the sugar market. In Asia, production increased in India (from 33 to 35 mln tons), China (from 9.8 to 11 mln tons) and Thailand (from 8 to 10 mln tons) between the 2023/24 and 2024/25 seasons (the current one). In Europe, we have firm sugar production patterns that should triple the continent’s exportable surplus during the new 2024/25 crop from 100 to 300 thousand tons.
In Brazil, we have an increase in the cane crop in Brazil’s Center-South, which is expected to grow from 603 to 620 mln tons between the 2024/25 and 2025/26 seasons, based on a significant increase in rainfall seen one month before the start of the region’s rainy season. In addition, in Asia, India is investing heavily in expanding the production of ethanol made from corn and several other grains, which will free up a larger portion of cane for sugar production.
On the demand side, there are patterns of consumption limits, and China expansion of its domestic production, which ends up slowing down its demand for sugar from other international sources such as Asia and Brazil. Therefore, Safras & Mercado warns that the current downward trend in raw sugar in New York, in addition to having started in November and continued through December 2024, is also expected to continue in the first quarter of 2025.
In this sense, we project average prices for the March/25 contract in January of around 20 cents in the first half of the month and 19.00 cents in the second. This level could be lowered to 18.00 cents in February. The continuity of the Asian crop during this period will more than compensate for the decline in the Brazilian crop, while Asia is at the peak of its new 2024/25 crop, Brazil’s Center-South will be at the peak of its cane off-season before the new 2025/26 season begins in April, with a surplus already estimated at a minimum of 620 mln tons of cane for the Center-South region.
In the previous month, Safras & Mercado had projected average prices for December 2024 in the range of 20.00 cents, which ended up being 2.98% below the effective average prices of 20.6 cents in the period.
For January, Safras & Mercado estimates average prices for March/25 at around 19.50 cents, which, if confirmed, should account for a 5.40% decline in the margin, compared to the average prices seen in December, as well as a 13% decline from the prices seen at the same time last year, besides being 3% lower than the five-year average prices for the same period, once again considering both the annual comparison and the five-year average, with prices corrected by inflation in the United States and brought to present values, without considering the nominal prices of the time.
