Porto Alegre, June 4th, 2024 – The Brazilian physical crystal sugar market was marked in May by major lows in its average trading prices. These declines were more concentrated in the second half of the month than in the first one and clearly aligned with the seasonality of the period, with the evolution of the 2024/25 crop.
The detail is that there are two distinct directions of negative pressure on crystal sugar prices in the physical market. The first is that, through the evolution of the 2024/25 cane crop, sugar prices in New York are negatively pressured through the increase in the supply of VHP. The point is that the negatively pressured VHP also directly influences the prices of the domestic equivalent of crystal sugar.
The result is that in the comparison of exports, VHP sugar does not appear to be that advantageous, keeping mills with some level of preference for crystal sugar with Icumsa 150 to 180, even though the domestic market of such sugar does not have the same scale as the VHP.
It is interesting to remember that this reasoning is valid for the surplus of VHP export contracts. Another negative externality of this movement is the increase in the availability of crystal sugar supply on the physical market in a scenario in which seasonality would already be high with the progress of the cane harvest.
The second negative drive on sugar prices comes from the climate in the Center-South. The lack of rain is in line with the seasonality of the period, since from April to October the region is exactly in the low rainfall season. However, 2024 has had the peculiarity of having zero rainfall volumes from the beginning of the second half of April until the end of May.
Furthermore, the Inmet’s accumulated rainfall maps for June and July keep showing the volumes of precipitation predicted for cane fields in the Center-South at zero, which keeps the harvest at an accelerated pace and the availability of supply increasing, reinforcing the downward pressure about prices.
In this sense, the average crystal sugar price in the physical market showed significant lows in the margin (compared to the immediately previous month) and in the annual comparison, respectively at -5.56% and -7.30%, even though it was 2.81 % above the 5-year average in the same period. Both the 5- and 1-year average comparisons are corrected by inflation. In the previous month, SAFRAS & Mercado had estimated average prices for crystal sugar in Ribeirão Preto at around BRL 144, which was 4.64% above the effective average for the period.
For June, SAFRAS & Mercado projects average prices for crystal sugar at the level of BRL 134 per bag, with a projected decline of 8% for the year and a reduction in the margin of 2.6% compared to the average seen now in May, in addition to a positioning 9.5% above the 5-year average in the same period.
SAFRAS & Mercado warns that the pattern observed in the annual comparison is high in the first quarter but has been low in two-thirds of the second quarter of the year, leaving the outcome relatively balanced, even though the accumulated average of the first five months of 2024 is 0.23% higher than the average corrected by the inflation for the first five months of 2023.
Regarding the comparison in the margin, when we analyze current prices against the immediately previous month, the situation is more diffuse, with periods interspersed between ups and downs in average prices in the first five months of 2024, even though, in the accumulated average of the year, the scenario is negative at 1.83%.
Analyzing the behavior of the ratio between current prices and the 5-year average in the same period, we have a total predominance of gains in the first five months of 2024, although the values from the previous five years have all been adjusted by inflation, which keeps the annual accumulated average high.
Copyright 2024 – Grupo CMA
