The average closing prices of the current driver contract on the ICE Futures US had a month of January marked by significant highs in both the annual comparison and in the margin. The market in New York was much more volatile and with significant gains due to the combination of the off-season that precedes the 2020/21 season in Brazil’s Center-South with the slow advance of the crush of the new 2019/20 season in India. The Indian crop, in spite of having started in October last year on its official calendar, has advanced slowly over the last weeks.
Even now, four months after the official start of the season in the country, supply volumes produced are 23% lower than in the same moment of the previous season. During November and December this gap was even greater, in the range of 38% to 32%. The point is that this occurred in the midst of a longer off-season in Brazil, brought forward by about 40 days due to the rains that hit local cane fields, reinforcing the tone of scarcity of supply and rising prices in New York.
The expectation of SAFRAS & Mercado is for new losses for international futures for the commodity in view of the coming season of Brazil’s Center-South. This crop will have a record cane volume of 600 million tons, including another record of 18 million tons of cane remaining from the previous season that had not been processed or reaped due to the aforementioned rains in cane-producing regions since October last year. Therefore, despite strong gains at the beginning of the year, the next few months tend to bring important negative correction movements to New York prices.
In this context, in January, the average closing price of the March/20 contract on the New York exchange was USD/cents 14.17. In comparison with the same month of the previous year, there was an increase of 11.67% over the average of USD/cents 12.69. In the margin, there was an appreciation of 6.23% over the average of USD/cents 13.34 in December. Expanding the analysis scope, we see that the average price of January this year was 6.42% below the average price for this period of around USD/cents 15.14 for the last five years. In the previous month current prices had been 10.09% lower than the average for the last five years for the period, which until then was around USD/cents 14.83.
As a result, the average price of the last five years between December and January rose by 2.07%, while the March/20 price level ended up advancing 6.23% in the margin. Therefore, the reading is that there was a reduction in the distance between the current price level and its historical average for the period, with the price level of the current driver contract getting closer to the historical average.
For January, SAFRAS & Mercado’s expectation was for prices around USD/cents 13.50, which was 4.71% below the effective average price for the period at USD/cents 14.17. For February, SAFRAS & Mercado expects prices to be around USD/cents 14.50, which must account for an annual increase of 12.62%, together with an advance of 2.35% in the margin, and a 2.71% decrease from the average price for the last five years for the same period.