New York sugar falls 20% yoy in april

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The month of April was marked by a strong negative attack of the closing averages of the driver contract on the New York Stock Exchange. Basically, the current July/20 driver contract dropped by 20% year over year and almost 15% on a monthly basis. Furthermore, compared to the five-year average for the same period, current prices were 23% lower, against 15% in the previous period. However, these statistical comparisons do not only reflect the projections of a decline in demand resulting from the current COVID-19/Oil/Dollar crisis, but also the perspective of an increase in the international supply of the commodity.

Still in May, USDA must update its figures in its first biannual report for 2020, where the current prospect of a deficit of 0.5 million tons must turn into a surplus of 3 million tons. It is important to remember that two-thirds of this increase in the balance between the world supply and demand stem from a lower demand, with only one-third coming from the increase in supply, which in itself is far from being underestimated. Starting with Brazil, the scenario must be of a production growth from 33 to 36 million tons.

China’s supply is expected to get close to 11 million tons. Still in Asia, India must have a much smaller decline than expected by the representative entities of the local class, tending to oscillate around 29 million tons rather than 26 million expected earlier. In Thailand, sharp losses from the past to the current season, from 13.5 to 8 million tons, must be easily offset by projections for next season, 2020/21, which already starts with 12 million tons.

In this context, the average closing of the driver contract in New York has shown a strong decrease under all points of comparison observed by SAFRAS & Mercado. To complete the scenario, currently the price level for this asset has fluctuated within a short-term sideways channel between USD/cents 10.80 and 10.00, with a balance point at USD/cents 10.50, which must keep averages still low in May.

In this context, in April, the average closing price of the July/20 contract on the New York Stock Exchange was USD/cents 10.16. In comparison with the same month of the previous year, there was a decline of 20.55% from the average of USD/cents 12.79. In the margin, there was a less intense devaluation of 14.81% from the average of USD/cents 11.93 seen in March. Expanding the analysis scope, we see that the average price of April this year was 23.68% below the average price for this period during the last five years, which currently fluctuates around USD/cents 13.31. In the previous month, current prices had been 15.67% lower than the five-year average for the period which, until then, fluctuated by USD/cents 14.14.

As a result, the average price of the last five years between March and April showed a devaluation of 5.87%, while the July/20 price level ended up decreasing 14.81% in the margin. Therefore, the reading is that there was an increase in the negative distance from the price level from its long-term average, even though it also showed a negative slope in its direction in April, neutralizing a very small part of this distance. For April, SAFRAS & Mercado forecast prices around USD/cents 11.00, which was 8.26% above the effective average price for the period, at USD/cents 10.16. For the month of May, SAFRAS & Mercado expects prices to be around USD/cents 10.00, which must mean an annual decline of 15.43%, together with a decrease of 1.58% in the margin, and of 27.29% from the average price of the last five years for the same period.