The physical sugar market had a January marked by advances in the average trading price of a bag of crystal sugar with up to Icumsa 150 traded in the interior of São Paulo. These advances, seen in the annual comparison as well as in the margin, reflect not only a short to medium-term market driven by the off-season, but also reflect a scenario of lower stocks of both crystal with up to Icumsa 180 and VHP.
The latest data on stocks show that by the end of the first half of January there were 9.02 million tons of sugar stored in the country. Out of this volume, 54% are VHP, with 4.95 million tons, while nearly 37% are crystal with up to Icumsa 180, with 3.37 million tons. From the end of the second half of December to the first of January, VHP had a 7% decline in its stock volume, going from 5.35 to 4.95 million tons, while crystal with up to Icumsa 150 also had a decline of 7%, from 3.63 million to 3.37 million tons. Given a longer off-season and lower stocks, the average price of crystal sugar ended up finding a support base for new highs. However, SAFRAS & Mercado warns that the limits of highs have been saturated in the short term at the level of BRL 76.00 a bag due to regular rains hitting the cane-producing regions of the Center-South, with signs of revitalization of cane fields next season.
In this context, in January, the average trading price of a 50-kg bag of sugar with up to Icumsa 150 in Ribeirão Preto hit BRL 73.72. In comparison with the same month of the previous year, there was an increase of 7.86% over the average of BRL 68.35 per bag. This was an increase well above the total average of -1.89% in the year earlier. As January is the first month of 2020, we have no analytical basis for comparing the evolution in the margin of the accumulated average for the year, which is only possible with the February data. Slightly below the gains in the annual comparison, in the margin there was an appreciation of 5.64% over the trading average of BRL 69.79 observed in December 2019. The 5.64% growth in the margin in January was below the margin growth seen in December, which was 7.36%, but in line with the pattern of evolution of the previous month. Expanding the analysis scope, we see that the average price of January this year is 1.90% below the average price for this period during the last five years, which is BRL 75.15.
In the previous month, current prices were 7.84% below the average of the last five years for the period, which until then had been BRL 75.72. As a result, the average price of the last five years between December and January showed a devaluation of 0.75%, in sharp contrast to the increase observed in the monthly comparison, where current prices showed gains of 5.64%, as previously mentioned. With this, we can interpret that the current price level of January ended up having a positive evolution much more intense than that seen over the 5-years average, as the latter negatively distanced itself from the current price level. For the month of January, SAFRAS & Mercado expected prices of around BRL 73.00, which was 0.98% below the effective average price of BRL 73.72 for the period. For February SAFRAS & Mercado expects prices to be around BRL 75.00, which must mean an annual high of 9.63%, a 1.73% increase in the margin, and an 11.42% growth over the average price of the last five years for the same period.