Porto Alegre, December 11th, 2023 – Rain in Brazil’s Center-South, delays in shipments in Santos due to the rain, and the delayed and deficient start of cane crushing from India and Thailand maintain an upward trend for the March/24 price averages in New York in November; December must have even higher prices with increased rainfall in cane fields in Brazil’s Center-South
The external sugar market had a month of November marked by upward movements in the average prices observed for the current driver contract, March/24. The average of 27.31 cents in November was 40.99% higher than the average of 19.37 cents observed in the same period of the previous year. In addition to this exponential increase in the annual comparison, prices also had a strong appreciation pattern compared to the immediately previous month, as in October the average was 26.90 cents. An interesting detail is that SAFRAS & Mercado expected even more significant gains in November, with the final average fluctuating at 30.00 cents.
Therefore, the effective average for the period ended up being 8.95% lower than SAFRAS & Mercado’s expectations. This frustration of expectations occurred due to vectors external to the sugar market, especially when looking at vectors linked to the international macroeconomic situation. In this sense, special attention should be paid to China, whose GDP growth estimates were also frustrated this year, which has sparked a high level of risk aversion in the international market.
This climate has neutralized a large volume of buy orders from speculators, who are not comfortable with possible position adjustments in light of the worsening of China’s macro problems. This more cautious action by speculators prevented March/24 from having buying strength to even test 28.00 cents in November, having briefly remained below this line in most of the month and even lost the level of 27.00 cents in the last week of November. Returning to China, concerns remain high given the lack of efficiency of the current stimulus measures that the government has carried out to increase economic growth.
Furthermore, SAFRAS & Mercado warns that the impacts of China’s low growth are especially felt by sugar on the fundamental side. This is because China is the world’s top importer of the commodity, with this year’s volumes expected to fluctuate at 4.6 mln tons, according to the most recent data from the USDA’s November report, down 400 thousand tons from the first report this year, which indicated an expectation of 5.0 mln tons for imports from China in the current international crop, 2023/24.
Despite this, SAFRAS & Mercado warns that December is to be marked by higher prices at around 28.00 cents. This is expected to occur due to the earlier closure of the cane crop by 60% of the mills that came into operation during the current 2023/24 crop in the region. With the rainfall, mills find it difficult to continue the mechanized reaping process without causing damage to the soil. In addition, there are also delays in the start of the 2023/24 crop in both India and Thailand, besides negative effects on cane crushing due to below-average rainfall in the last Monsoon season.
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