The physical sugar market had a month of February again marked by advances in the sales of crystal sugar with up to Icumsa 150 on the average of the interior of São Paulo, where emergency purchases from industries ended up being the fundamental support vector to new sales occurred during the cane off-season in Brazil’s Center-South.
Therefore, the strong supply shortage of new product in the face of new demands, even though they are isolated in the short term, made the everyday physical market more volatile than observed during the course of the year. Another important point is the prospect of low availability of supply for the coming few months, not only for the first quarter, but also for the remainder of the second third quarter of this year. The volume of sugar committed in forward business by mills and exporters reached 12 million tons still at the end of February, which accounted for nearly 63% of the 19 million tons expected to be exported this year. Therefore, still in March, a month before the start of the official calendar of the 2020/21 season in the Center-South, the buyer’s market in theory has to find a much lower supply availability for the commodity, which maintains the price level supported in the short term.
In this context, in February, the average trading price of a 50-kg bag of sugar with up to Icumsa 150 hit BRL 77.73 in Ribeirão Preto. In comparison with the same month of the previous year, there was an increase of 13.63% over the average of BRL 68.41. This was an increase well above the average of the year, which has fluctuated close to the level of 10.74%. Between January and February, the average annual gain rose by 2.88%, changing from 7.86% to the current level of 10.74%. Slightly below the gains in the annual comparison, at the margin there was an appreciation of 5.44% when compared with the trading average of BRL 73.72 in January 2020. The 5.44% growth of the February margin was in line with the margin growth of 5.64% in January. Expanding the analysis scope, we see that the average price of February this year is 6.75% above the average price for this period during the last five years, which is currently around BRL 72.82.
In the previous month, current prices had been 1.90% below the average of the last five years for the period, which until then hovered by BRL 75.15. As a result, the average price of the last five years between January and February showed a devaluation of 3.11%, in sharp contrast to the high observed in the monthly comparison and at the margin, where current prices showed significant gains. With this, we can interpret that there was a divergent behavior between the price line and its historical average for the period, with the former advancing more than 5% at the margin, and the latter decreasing 3% in the short term. For February, SAFRAS & Mercado’s expectation was that prices would be around BRL 75.00, which was 3.52% below the effective average price for the period, at BRL 77.73. For March, SAFRAS & Mercado expects prices to be around BRL 79.00, which must account for an annual increase of 17.04%, a rise of 1.63% in the margin, besides staying 22.56% above the five-year average for the same period.