Sugar prices rise 13% yoy in april in physical market


    The physical sugar market had a month of April marked by important advances in annualized terms in the negotiations of crystal sugar with up to Icumsa 150 on the average of the interior of São Paulo. Besides the surprise with the advances in the annual comparison, this market segment was also marked by very weak lows in the margin, almost nearing stability, in a movement different from that observed in all other cane derivatives such as anhydrous and hydrated ethanol and sugar on the New York Stock Exchange.

    The very weak decline in the margin and strong gains YoY, while all other derivatives showed sharp lows, occurred due to the resurgence in demand and reduction in supply availability. On the demand side, we have the effects of social isolation measures that did not result in a slowdown in the consumption of food goods. This behavior was different from that of fuels, which, except for diesel oil, had a strong decline in consumption, seen still in March.

    Besides a stable and even rising demand, many sugar-consuming industries were already planning to resume their purchases in the face of the start of the official calendar of the new 2020/21 season in the Center-South, and these mills avoided signing supply contracts during the off-season. On the supply side, we have a scenario in which mills are more focused on fulfilling export contracts with VHP sugar than the manufacture of other by-products. Usually, most cane is destined for VHP sugar and hydrated ethanol. The latter, however, has found high levels of reduction in the demand at the pumps, which has resulted in a 50% decline in turnover.

    On the other hand, exports of 12 million tons with future delivery closed until February this year, in view of expected shipments of 19 million tons up to then, kept mills preferentially focused on the production of this kind of sugar. Therefore, crystal sugar with up to Icumsa 150 has found a relative decline in the availability of supply even in a scenario in which the production of hydrated ethanol has been sidelined, which helps the scenario of relative price support.

    In this context, in April, the average trading price of a 50-kg bag of sugar with up to Icumsa 150, based in Ribeirão Preto, was BRL 77.15. In comparison with the same month of the previous year, there was an increase of 13.87% over the average of BRL 67.75 per bag. This was a rise moderately above the year’s average, which has fluctuated near the level of 12.87%. Between March and April, the average annual earnings increased from the level of 12.54% to current 12.87%. Below the gains in the annual comparison, in the margin, there was a 1.58% decline from the trading average of BRL 78.39 observed in March 2020. The decrease of 1.58% in the margin in April was clearly below the margin growth seen in March, of 0.84%. Expanding the analysis scope, we see that the average price of April this year is 10.58% higher than the average price for this period during the last five years, which is currently around BRL 69.77.

    In the previous month, current prices were 11.85% below the five-year average for the period, which until then fluctuated by BRL 70.08. As a result, the average price of the last five years between March and April dropped 0.45%, in sharp contrast to the advance observed in the annual comparison, in which current prices showed significant gains of almost 14%. So, we can interpret that there was a convergent behavior, but of different proportions between the price level and its historical average for the period, with the former decreasing by 1.58% in the margin and the latter decreasing by 0.45% in the short term. For April, SAFRAS & Mercado expected prices of around BRL 75.00, which was 2.79% below the effective price average of BRL 77.15. For the month of May, SAFRAS & Mercado expects prices around BRL 74.00, which must mean an annual increase of 8.10%, a 4.08% decline in the margin, and a 13.67% high over the average price of the last five years for the same period.