Porto Alegre, April 12, 2021 – The foreign market showed a pattern of strong deceleration in the second half of March due to the proximity of the new crop in the Center-South region. Logistical risk for April and May can reverse this scenario. The month of March was marked by important changes in everyday prices of raw sugar in New York in the face of the fundamental pressure caused by the proximity of the new season in Brazil’s Center-South. Nevertheless, the monthly averages had part of this downward impact reduced by gains observed in the first half of March. To complete the scenario, in the same month of the previous year, the sugar market had faced a moment of strong depreciation of prices in the international market due to the expansion of social distancing measures in the combat against COVID-19, which until then was spreading in its first wave. The result was a strong annual statistical load that caused the March 2021 averages, in spite of falling over the month, to show gains of more than 34% a year.
Looking at the present and the future, we see that the external price trend remains bearish due to the weight of the fundamentals of the 2021/22 crop that is beginning in the Center-South. Historically, at times of crop arrival in the Center-South, the driver contract in the New York exchange tends to oscillate below its exponential moving average of 100 days. And this is exactly what it has tried to do in late May and early April. Even so, the logistical risk in the face of the overlapping with delayed shipments of the soybean crop can result in delays in sugar shipments and result in another upward change towards 20.00 cents. Even at the end of the fourth and last week of March, this was already a reality at the port of Santos, at least in the case of soybeans. The queues of trucks only do not happen in physical terms, since the online scheduling of loads results in a virtual queue, with trucks retained at the source and no longer at the destination.
In this context, in March, the average closing price of the May/21 contract on the New York exchange was 16.02 cents. In comparison with the same month of the previous year, there was an increase of 34.32% over the average of 11.93 cents. In the margin, there was an appreciation of 0.35% over 15.96 cents in February. Expanding the analysis point of view, we see that the average price of March this year was 12.38% above the average price for this period during the last five years, which is currently around 14.26 cents.
In the previous month, current prices had been 3.15% higher than the average of the last five years for the period, which until then fluctuated by 15.48 cents. As a result, the five-year average price between February and March fell 7.88% while the May/21 price level ended up advancing 0.35% in the margin. So, the price level moved away from its historical average.
For the month of March, SAFRAS & Mercado had forecast prices around 16.80 cents, which was 4.87% above the effective average of the period of 16.02 cents. For April, SAFRAS & Mercado expects prices to be around 15.50 cents, which must mean an annual increase of 52%, together with a decrease in the margin of 3.25%, and a 16% increase over the five-year average for the same period.