Sugar prices in the physical market had an October marked by strong growth in the margin and also on a yearly basis. There have been basically two vectors sustaining gains so far. The first of them arose from the increase in short-term demand from processing industries that seek to guarantee the supply of the commodity with the extra demand of Christmas, year-end and carnival holidays. This increase in demand, which was registered in October and tends to have a residual force also in November, occurs exactly at a time when the supply curve is clearly downwards in the Center-South. Thus, we have a scenario of rising demand at the same time as supply is slowing down, which led to margin gains of 6.50% and yearly gains of almost 1.30%.
SAFRAS & Mercado has warned about this movement since July this year, reinforcing at each turn of the month the projections of gains for this asset. For November some more balanced reaction is expected, since on the one hand supply must fall further, but on the other demand tends to be no longer as strong as seen in October. This may prevent sales at around BRL 65 from evolving to the level of BRL 66, although this price was already practiced in the last week of October in some small trades.
In this context, in September, the average price of a 50-kg bag of sugar with up to Icumsa 150 in Ribeirão Preto was BRL 64.52. Compared to the same month of the previous year, there was a 1.28% increase over the average of BRL 63.71 per bag. This was a growth well above the 0.59% increase observed in the immediately previous month. In contrast to the year-over-year gains, in the margin there was an even higher appreciation, by 6.50%, when compared to the average of BRL 60.59 observed in September. The 6.50% growth in October was even higher than the margin growth in September, which hit 2.37%. Broadening the perspective of analysis, we see that the average price of October 2019 was 6.42% below the average price for this period over the last five years, which is currently around BRL 68.95.
In the previous month, current prices had been 2.07% below the five-year average for the period, which until then reached BRL 61.87. As a result, the average price of the last five years between September and October increased by 11.44%, more intensely than the advance observed in the monthly comparison, in which current prices posted gains of 6.50% in the margin. With this we can interpret that the October current price level ended up having a less intense positive evolution than the 5-year average, with the latter having distanced itself from the current price level. For October SAFRAS & Mercado had projected prices around BRL 63.00, which was 2.36% below the effective average price of the period, BRL 64.52. For November SAFRAS & Mercado expects prices to reach around BRL 65.00, which must account for a 3.70% annual decrease, an 0.74% increase in the margin, and a 62% decline from the average price of the last five years for the same period.