Crystal sugar prices surge again in March

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        Porto Alegre, April 05, 2021 – The most recent data on monthly average prices of crystal sugar with up to Icumsa 150, practiced in the Brazilian physical market, on the average of the interior of São Paulo, showed clear support compared to historical medium- and long-term averages. The fundamental picture continued like that of the off-season, which helped sustain sales above the level of BRL 105.00 a bag at the time of greatest fragility. In the meantime, some food-processing industries came to the market to rebuild short-term stocks, reinforcing the vector of price support even in the face of a relatively low volume of sales in the period.

        Moreover, SAFRAS & Mercado warns that the beginning of the new 2021/22 crop in the Center-South will not necessarily result in a decline in prices, as many mills are strongly focused on the production of VHP sugar to meet contracts of external supply and hydrated ethanol to meet domestic demand. The current downward inflection of ethanol prices does not yet represent a risk of price lows for crystal sugar due to the reallocation of sugarcane, since the margins of mills remain high with the biofuel, which tends to maintain its demand scale.

         On the side of the stocks of crystal sugar with up to Icumsa 180, it is interesting to note that volumes are relatively high compared to their medium- and long-term historical averages, which may result in a barrier to higher growth in crystal sugar prices. Still in late February in the Center-South, crystal sugar stocks with up to Icumsa 180 were at 2.84 million tons. This volume is 30.56% higher than that of the same time last year, with 2.18 million tons, but 11.57% below the previous month, when crystal sugar stocks were at 3.21 million tons. Against the 5-year average for the same period, of 2.21 million tons, recent volumes are 28.39% higher. In the Northeast regions, the volumes of crystal sugar stocks reached 258.76 thousand tons, up 6.05% over the year, against 275.41 thousand tons. In the margin, there is an increase of 7.73% over the 240.19 thousand tons, and an increase of 4.82% over the 5-year average for the same period (246.85 thousand tons).

        In this context, analyzing the historical comparison with data already deflated, we observe that in March the average trading price of a 50-kg bag of sugar with up to Icumsa 150, in Ribeirão Preto, was BRL 107.89. In comparison with the same month of the previous year, there was an increase of 30.31% over the average of BRL 82.79 per bag, already deflated. Despite strong annual gains, there was a much less intense appreciation in the margin, of 0.88%, when compared with the trading average of BRL 106.94 observed in February 2021. Expanding the analysis point of view, we see that the average price of March this year is 33.49% above the average price for this period over the past five years, already deflated, which is currently around BRL 80.82.

        In the previous month, current prices had been 29.08% above the average of the last five years for the period, which until then fluctuated by BRL 82.85. As a result, the average price of the last five years between February and March showed a devaluation of 2.45%, contrasting strongly with the advance observed in the annual comparison, where current prices showed very significant gains of more than 30%. With this, we can interpret that the distance between the current price level and its historical average grew wider.

       For March, SAFRAS & Mercado expected prices to be around BRL 108.00, which was 0.10% above the effective price average for the period of BRL 107.89. For April, SAFRAS & Mercado expects average prices to be around BRL 106.00, which must mean an annual increase of 30.08%, a decrease in the margin of 1.75%, and a 37.94% increase over the five-year average price for the same period.

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