The physical sugar market had a very quiet November in terms of trading averages in the interior of São Paulo for a bag of crystal sugar with up to Icumsa 150. This scenario contrasts sharply with the most recent data from the first week of December, when the very flattened average of BRL 65 a bag was easily broken by negotiations first at BRL 66 and then BRL 67.00, level that now is apparently settling down. But back to November, before moving further into the outlook for the end of 2019 and 2020, we note that even in November there was a clear strengthening of the general average of sales at BRL 65.00 in the interior growing regions of São Paulo.
This price level has been firm since the end of the first week of November with the formation of a sharp reduction in demand that prevented prices from advancing in the face of a strong decline in supply. Rainfall in Center-South cane fields since the fourth and last week of October only accentuated the sharp reduction in supply availability, which, in the end, was useless while demand was still weaker, which ended up “sealing” the high level of the period.
Moreover, we had a context of very high stocks since October, when the supply of crystal sugar with up to Icumsa 150 was the second largest in the market, second only to the standard export VHP. The market with high sugar stocks also helped form a relatively comfortable short-term supply picture, even in the face of a virtually paralyzed crush in the Center-South because of rains.
Total volumes of sugar stocks in Brazil reach 12.08 million tons, out of which 58.09% are VHP, equal to 7.02 million tons. Then we have crystal sugar with up to Icumsa 180, which reaches 4.46 million tons, or 36.90% of the country’s total stocks. In third place comes organic sugar, with 191,000 tons or 1.59% of total stocks, followed by refined sugar, with 183,000 tons or 1.52% of the total, and crystal sugar with Icumsa 180 to 300, with 173,000 tons or 1.43% of the total.
In this context, in November, the average trading price of a 50-kg bag of sugar with up to Icumsa 150 in Ribeirão Preto was BRL 65.00. Compared to the same month of the previous year, there was a fall of 3.70% from the average of BRL 67.50 per bag. This was a decline far below the YoY average of 13.38%. In contrast to the losses on a yearly basis, there was appreciation, but to a lesser extent, of 0.74% over the trading average of BRL 64.52 observed in October. The 0.74% growth in the margin in November was well below the growth in the margin seen in October (6.50%). Broadening the analysis scope, we can see that the average price of November this year is 12.19% below the average price for this period over the last five years, which is currently around BRL 74.02.
In the previous month current prices had been 6.42% below the five-year average for the period, which until then fluctuated around BRL 68.95. As a result, the average price of the last five years between October and November went up by 7.36%, above the increase observed in the monthly comparison, where current prices showed gains of only 0.74% in the margin. With this we can interpret that the November current price level ended up having a very moderate positive evolution that contrasted sharply with the advances seen over the five-year average, with the latter having positively distanced itself from the current price level. For November SAFRAS & Mercado’s expectation was for prices around BRL 65.00, which was exactly in line with the effective average price of BRL 65.00 in the period. For December SAFRAS & Mercado expects prices to reach around BRL 65.80, which must mean a 3.24% annual decline, a 1.23% increase in the margin, and an 11.11% decrease from the five-year average price for the same period.