The physical sugar market had a March marked by slightly higher prices in the short-term comparison and even stronger from a broader analysis scope. The effects of the sharp lows seen in the commodity’s futures prices and in the physical market of ethanol [both anhydrous and hydrated] are milder on average crystal prices with up to Icumsa 150.
In this sense, besides having a lower impact, the average price was neutralized by the negative pressure due to the high price levels of the first ten to fifteen days of the month, when sales still fluctuated in the range of BRL 80.00 to 81.00 a bag for Icumsa 150 in the interior of São Paulo. With the deepening of the COVID-19/crude oil/dollar crisis and its effects on ethanol and sugar in New York, losses began to be felt in the physical market of crystal sugar, with lows to the level of BRL 79.00 at the turn from the first to the second half of March. From this level, lows deepened to BRL 77.00 or, at most, BRL 76.00, which helped keep the general average of the month still at the level of USD 78.00 a bag. The milder impact and the influence of high prices in the first ten days of March were the ‘key’ to a very moderate decline in the overall average.
SAFRAS & Mercado expects new lows in average sales, with a floor to be observed in daily negotiations around BRL 73.00 and, worst case, at BRL 70.00. However, sale levels like these are expected to be much less common, with the average of BRL 75.00 tending to prevail at the end of April, with lows at BRL 73.00 and the beginning of the month, and prices still in the range of BRL 76.00 to 77.00. The impact is clearly mitigated in the case of crystal sugar due to the strong availability of cane supply for the production of VHP when destined for sugar. The commitment of forward business with the 2020/21 crop, still in February, involved around 12 million tons, or 65% of the exports forecast for the year, 19 million tons. Thus, there will be little margin for the manufacture of crystal sugar, remembering that hydrated ethanol must still concentrate most of the production mix of the crop, at 56%. As a result, the levels of decline of crystal sugar tend to clearly remain ‘soft’ in the assessment of SAFRAS & Mercado, with the greatest impacts being felt by sugar in New York, hydrated and anhydrous ethanol.
In this context, in March, the average trading price of a 50-kg bag of sugar with up to Icumsa 150 in Ribeirão Preto was BRL 78.39. In comparison with the same month of the previous year, there was an increase of 16.13% over the average of BRL 67.50 per bag. This was a rise moderately above the year’s average, which has fluctuated around 12.54%. Between February and March, the average annual gain increased by 1.80%, dropping from the level of 10.74% to current 12.54%. Slightly below the gains in the annual comparison, in the margin there was an appreciation of 0.84% over the trading average of BRL 77.73 observed in February 2020. The 0.84% growth in the March margin was clearly below the margin growth in February, which hit 5.44%. Expanding the analysis scope, the average price of March this year is 11.85% above the average price for this period during the last five years, which currently fluctuates around BRL 70.08.
In the previous month, current prices had been 6.75% below the five-year average for the period, which until then fluctuated by BRL 72.82. As a result, the average price of the last five years between February and March showed a devaluation of 3.75%, in sharp contrast with the increase observed in the annual comparison and in the margin, where current prices showed significant gains. Thus, we can interpret there was a divergent behavior between the price level and its historical average for the period, with the former advancing more than 0.84% in the margin and the latter decreasing 3.75% in the short term. For the month of March, SAFRAS & Mercado expected prices of around BRL 79.00, which was 0.78% above the effective average price of BRL 78.39 for the period. For April, SAFRAS & Mercado expects prices to be around BRL 75.00, which must account for an annual increase of 10.70%, a decline in the margin of 4.32%, and a high of 15.96% from the average price of the last five years for the same period.