November was a period of sharp lows in the average prices of raw sugar in New York for the current driver contract, March/25, which fluctuated with an average price of 21.65 cents in the period.
Year-over-year, we have seen a sharp decline of 24% from the average of 28.68 cents seen in November 2023, and in the margin, compared to the immediately preceding month, there was a 3.09% decline from the average of 22.34 cents seen in October.
Compared to the 5-year average for the same period, we have seen even sharper lows, of 5.05%, compared to the 22.81 cents that are usually seen at this time of year. Both last year’s prices and the 5-year average were adjusted by inflation and set to the current values.
In the annual comparison, we have seen a decline of over 24% due to the statistical carryover of higher prices seen at this same time last year. During that period, the sugar market was at its highest price levels for the last 15 years.
In addition, we have the inflationary adjustment that further boosts last year’s prices, increasing the statistical carryover. However, SAFRAS & Mercado warns that the decline we are experiencing in the short term is not a statistical carryover. This is because the almost 3% decline in the margin in November, compared to the previous month, together with a decline of almost 5% from the 5-year average, shows that the sugar market fundamentals are negative for prices. We have very clear indications of positive harvest progress from several international origins, such as India, Thailand, China, France, and Ukraine.
These production advances create a perception in the international market of high availability of sugar supply from November this year, one month after the start of the current 2024/25 international crop that begins in October.
The peak of production in Asia occurs in January, clearly leading to the perception that the current downward trend in prices will continue. Last month, SAFRAS & Mercado estimated average prices for November based on the March/25 driver contract in New York at 20.00 cents, which ended up being 7.6% lower than the average prices seen in the period, at 21.65 cents.
For December, the expectation of average prices for March/25 in New York remains at 20.00 cents, which should result in a decline compared to the current November average of 7.8%, as well as a decline in the annual comparison of 14%, and a decline of 3% from the 5-year average for the same period. This downward trend in prices should persist given the production growth in Asia and Europe, as well as a rainy off-season in the sugarcane fields of Brazil’s Center-South.
SAFRAS & Mercado has published on its platform a monthly report on rainfall expectations for the December 2024 to February 2025, showing that at least in December and January, rainfall volumes should be high and above the historical average for this time of year.
Therefore, the market interprets that a rainy off-season in the Center-South will lead to a rapid recovery pattern for cane fields in the future 2025/26 Brazilian crop, which will begin to be reaped in April next year.
In this sense, we have a fundamental market condition from the supply perspective that as soon as the new crop in Asia and Europe is almost over, after a strong production season, it will be the turn of Brazil’s Center-South to begin its new season activities, also with robust levels of sugar production and cane crushing, resulting in downward pressure that will continue throughout the first half of 2025 until the base at around 18.00 cents.