Porto Alegre, August 8th, 2023 – In July, crystal sugar prices resumed a bearish trend in the physical sugar market. Basically, the advance of cane crushing in the Center-South, in the middle of a season of strong growth in the cane supply, has maintained a high production level for both VHP and crystal sugar. At the other end, aware of this fundamental scenario, purchasing industries are more likely to postpone their entry into the market as much as possible. In addition, when they are forced to carry out operations, they only do so at marginal levels, focusing on thin volumes intended only for immediate consumption.
Therefore, the physical crystal sugar market has been in a context of strong expansion of supply at the same time that demand has been contracted, even if momentarily in the short term. This explains the reversal of highs to lows in the annual comparison of sugar prices, always remembering that both the annual and five-year averages are deflated, corrected by inflation, and brought to current values. With this, we can see that in July the trading average of a crystal sugar bag in the interior of São Paulo at BRL 137.83, decreased by 1.23% from the equivalent price at the same time of the previous year of BRL 139 .55.
Besides the negative vector, we have a break in the bullish pattern seen in the previous two months (April and May), when 2023 prices had been 3.54% and 4.40% higher than the respective months of the year earlier, having even shown an increase in gains between May and June, which are now reversed in July. But it is also interesting to note that the pattern of the year has been negative so far. Since the beginning of the year, only May and June had positive comparisons against the deflated prices of the previous year. From January to April, the predominant vector was also bearish, and the data for July only resume the trend interrupted in May and June.
In the margin, we have a similar behavior. The average price of BRL 137.83 a bag in July had a decline of 5.35% compared to the average of the previous month of BRL 145.63. In the month earlier, the evolution in the margin had already been negative at 1.90%, and now in July we just had an increase in the negativity that already existed since the previous month, which preceded gains of 6.23% and 3.52% in April and May. Once again, we observe that the expansion of the declines seen between June and July only puts prices back within the negative trend seen throughout the first quarter of the year. In the 5-year average comparisons, also deflated and updated to present values, we continue with a pattern of strong positive distancing on the part of current prices, even though this distancing was reduced from June to July by going from 21.17% to 16.79%.
For July, SAFRAS & Mercado had estimated average prices of BRL 143 per bag, which ended up being 3.75% higher than the actual prices for the period of BRL 137.83. For August, SAFRAS & Mercado estimates average prices of BRL 135 per 50-kg bag for crystal sugar with Icumsa 150, which should result in a 2.06% decrease in the margin, compared to the average prices in July, and a decline of 3.87% YoY compared to the already deflated prices of BRL 140.44 in August 2022.
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