Porto Alegre, July 19, 2021 – The expectation of advance in the supply of Asian origins maintains a moderate tone in sugar prices; strong statistical loading is still present in the market. In June, the sugar market observed a still high positioning on the part of average negotiations of raw sugar futures contracts in New York, already with the new spot contract, October/21. In the annual comparison, the June average showed gains of 45% over the same period last year. Although it is a level lower than the 61% gains observed in the previous month, the 45% growth in June is seen as one of the biggest of the year, only behind May (61%) and April (57%). Many of these annual highs stem from statistical loading, compared to the low prices last year, due to the outbreak of the pandemic crisis.
Moreover, prices are supported by losses in the Brazilian sugarcane crop that faces the impacts of the drought that has been observed since the second half of February this year. One of the counterpoints is the advance in the supply from Asian origins such as Thailand and India. The latter, with a great level of oversupply, intends to export 1 mln tons more than the 6 mln tons the government stipulates as target. In this context, prices are clearly limited between 17.50 and 18.00 cents, when they become attractive to Indian exporters even without government subsidies. This vector helps to delimit the short-term highs for the commodity, which reduces its volatility and maintains its monthly average of around 17.00 cents.
In this context, in June, the average closing price of the October/21 contract on the New York Stock Exchange was 17.35 cents. In comparison with the same month of the previous year, there was an increase of 45.29% against the average of 11.94 cents. In the margin, there was an appreciation of 0.88% over the trading average of 17.20 cents seen in May. Expanding the analysis perspective, we can see that the average price for June this year was 27.70% above the five-year average price for this period, which currently hovers around 13.58 cents.
In the previous month, current prices had been 27.91% higher than the five-year average for the period, which until then was 13.44 cents. As a result, the average price for the last five years in May and June rose 1.05% while the October/21 price level ended up advancing 0.88% in the margin. Therefore, the reading is that there was a marginal reduction in the distance between the price level and its historical average line. For the month of June, SAFRAS & Mercado expected prices around 17.45 cents, which was 0.59% above the effective average price for the period at 17.35 cents. For the month of July, SAFRAS & Mercado expects prices to be around 17.40 cents, which must mean increases of 46% YoY, 0.31% in the margin, and 26% over the five-year average for the same period.