Sugar prices grows 40% YoY in October in the physical market


    Porto Alegre, November 09, 2020 – The strong interest of mills from Brazil’s Center-South in setting high prices for VHP sugar in New York ends up sharply reducing the supply of crystal sugar with Icumsa 150. Hydrated ethanol with occasional rallies in the short term reinforces this movement by boosting crystal sugar.

     The completion of the month of October was marked by new bullish movements for crystal sugar with Icumsa 150 traded on the average of the interior of São Paulo. The upward movements were already going on since July, when the average level of BRL 75.00 a bag gave rise to sales at around BRL 80.00. In September, the level of BRL 80.00 was gradually increased until reaching levels of BRL 85.00. The month of October, on the other hand, was a period when prices advanced even further, with levels of BRL 90.00 being quickly surpassed in daily negotiations, with sales having reached even BRL 95.00 at the end of the month.

     Despite this, it is important to note that the demand that arrives at mills at this time of year is residual, with most consumer industries having already made their medium to long-term supply contracts in July, at the most in August with some remaining medium to large scale volumes. To some extent, the demand observed in October and possibly in November is a set of isolated sales, with short-term loading, aiming at replenishing immediate stocks. On the other end, as mills are more focused on the production of VHP for the fulfillment of export contracts with the production of hydrated ethanol, to meet the strengthened demand in the short term, the supply of crystal sugar with Icumsa 150 ends up being even more reduced, with mills raising their sell prices, and industries having to accept the new indications to enter the market.

     In this context, in October, the average trading price of a 50-kg bag of sugar with up to Icumsa 150 in Ribeirão Preto hit BRL 90.80. In comparison with the same month of the previous year, there was an increase of 40.72% over the average of BRL 64.52 per bag. For reasons of statistical load last year, this ended up not being the sharpest percentage high of the year, despite being the highest average since October 2016. The average of October was also above the average of the year, which fluctuated around 22.74%. Between September and October, this average annual gain increased strongly, going from 20.74% to the current level of 22.74%. Well below the gains in the annual comparison, in the margin there was an appreciation of 5.62% over the trading average of BRL 85.97 observed in September 2020. Expanding the analysis scope, we see that the October’s average price this year is 22.27% above the five-year average price of around BRL 74.26 for this period.