Porto Alegre, July 12, 2021 – The risk of drought in cane-growing regions in Brazil’s Center-South and Midwest keeps supporting the gains of crystal sugar. The risk of frost at the end of June reinforces new advances for the short-term average in July. In June, the sugar market had new gains for the average trading of crystal sugar with up to Icumsa 150 in the Brazilian domestic market. For the second consecutive month, annual gains, already deflated, exceed the 45% level, overlapping with the pattern of 30% highs YoY observed for the first four months of 2021. Part of these gains is indeed a statistical load from the lows observed in the previous year when the pandemic crisis arose. However, already in 2021, added to this vector, we have the drought that has hit cane fields in the Center-South and Midwest since the beginning of the second half of February.
The production losses in the sugarcane crop are increasingly contrasting crystal sugar with up to Icumsa 150 with the other derivatives, such as VHP sugar and hydrated ethanol, respectively the first and second option of mills in the use of sugarcane. Recently, anhydrous ethanol has gained more strength in production, a movement that occurs due to the rising demand for gasoline. In the transition from June to July, the Center-South still faced the entry of a polar air mass from the south of the country, which must bring new negative impacts on sugarcane fields in the region between the north of Paraná and south of São Paulo. Once again, due to the weather, a support is formed for new price highs in by-products, among them crystal sugar with up to Icumsa 150, which must have an average at the end of July of nearly BRL 118.00 a 50-kg bag.
In this context, analyzing the historical comparison with data already deflated, we observe that, in Ribeirão Preto in June, the average trading price of a 50-kg bag of sugar with up to Icumsa 150 was BRL 116.33. In comparison with the same month of the previous year, there was an increase of 45.31% over the average of BRL 80.06 per bag, already deflated. Despite strong annual gains, in the margin there was an appreciation of 1.21% when compared to the average trading price of BRL 114.95 observed in May 2021. Expanding the analysis perspective, we can see that the average price of June this year is 42.58% above the average price for this period over the last five years, already deflated, which currently hovers around BRL 81.59.
In the previous month, current prices had been 39.42% above the five-year average for the period, which until then hovered around BRL 82.45. As a result, the five-year average between May and June dropped 1.04%, contrasting sharply with the increase observed in the margin, where current prices rose by 1.21%. Thus, we can interpret there was a positive distancing of the price line compared to the historical average practiced in June, although the historical average has also advanced in the short term.
For the month of June, SAFRAS & Mercado had forecast prices around BRL 118.00, which was 1.43% above the average effective price of BRL 116.33 for the period. For the month of July, SAFRAS & Mercado expects average prices to be around BRL 118.00, which should mean increases of 46% YoY, 1.43% in the margin, and 44% over the average price for the last five years for the same period.