Sugar prices grows 41% yoy in september in brazilian physical market

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    Porto Alegre, October 05, 2020 – In Brazil, the physical sugar market had a month of September marked by the rising acceleration of the average trading price of crystal sugar with up to Icumsa 150 traded in the interior of São Paulo. Year over year, advances reached almost 42%, while in the margin they surpassed 7%.

    The end of September was a period in which the strong movement of appreciation in crystal negotiations with up to Icumsa 150 in the interior of São Paulo (which has been observed since June) had a new level of growth. Continuing the sharp upward movement started in August, prices have rapidly evolved from the level of BRL 83.00 to the range of BRL 85.00 to 86.00 per bag. In the previous month, the level rose from BRL 79.00 to 83.00. One of the main drivers sustaining crystal sugar prices is the strong expansion of the supply of VHP by mills in the Center-South. This movement has already been pointed out by SAFRAS & Mercado since mid-May, when the commitments with the current crop were already well above the average for the period.

   Since then, VHP sugar export commitments have remained strong. However, for the next season, 2021/22, they range from 7.5 to 8 million tons out of exports expected at 28 million tons. In this context, crystal sugar ends up being the third option in the trade-off of mills that still look at the manufacture of hydrated ethanol as a second option, while the indications of the external market of VHP are not that positive. SAFRAS & Mercado warns that this favorable scenario for VHP commitments and, consequently, for the prices of crystal sugar with Icumsa 150, due to its reduced availability, tends to go on and even grow. Expectations are for a positive premium until December, which will keep the export market heated as well as the negotiations with next year’s crop.

     At the other end, we currently have a food processing industry increasingly present in the short-term market. The ideal period for closing supply contracts between mills and industries is until the end of October, at most in the first half of November. At this time, the market is more focused on the off-season in Brazil’s Center-South, with processing industries having a natural aversion to closing supply contracts in the middle of the off-season. Moreover, the production of food and beverages for the year-end extra demand has to be completed by the beginning of November at most, given the logistical period for the production flow. It is also at this point that the extra demand is concentrated, with contracts closed until October for delivery in November and sending the final production until the end of the first half of December. In this context, SAFRAS & Mercado’s expectation is that the price jump seen now between August and September is the final phase of the market demand. The industries that had not closed their supply contracts between June and August, when the crop in the Center-South of Brazil was at the peak of the supply curve, now tend to do it between September and October, and then leave the market, with stable but nominal prices slightly above BRL 80.00 to 83.00 a bag.