Porto Alegre, October 13, 2020 – During the month of September, average annual gains were slightly lower than observed in the immediately previous month due to the difference in the levels of oscillation between Oct/2020 and Mar/2021, which ended up negatively impacting the monthly averages.
The international sugar market had a month of September marked by the shift in the driver position from the first to the second screen in New York. Only in this change, the average oscillation of the driver contract grew by 70 points from Oct/2020 to Mar/2021 when, at the time, prices moved out of the range of 11.50 to 12.30 cents. From this reversal to the end of the month, even higher levels of prices were reached in daily prices, with highs reaching 13.50 cents. After this, prices evidently retreated due to the fundamentals of the sugar market, although in the initial peaks of gains the crude oil market was behind these bullish movements.
On the fundamental side, the future price curve in New York continues with a clearly negative slope. This gets more evident when we look at futures contracts maturing in 2021 and 2022. Looking at these fundamentals, we see a scenario of high supply and short demand. The result is a positive balance of 10 million tons according to the most recent USDA’s report, published in May this year. More recently, the ISO sought to correct part of its surprisingly negative balance of 9 million tons in its most recent August report, neutralizing this volume almost entirely by pointing to a final surplus of only 0.7 million tons in the international crop of 2020/21.
Even close to neutrality, it is still unlikely that there is a balance between supply and demand with Brazil and India having record production, besides an international context still negatively impacted by the effects of social exclusion measures. In India alone, after an off-season with record stocks of 16 million tons, the next crop prepares for a productive boom of 27 to 35 million tons, with the local productive sector pushing the government to subsidize exports of 6 million tons, even with huge deficits in its GDP (-23.9% in the second quarter of 2020).