Porto Alegre, November 25th, 2022 – The October average of the sugar front contract at the Ice Futures US ended up advancing 4% in the margin despite the 5% annual decline
The supply gap between the end of the 2022/23 crop in Brazil’s Center-South and the slow start of the 2022/23 crop in Asia maintained the market with slight gains in the short term in New York. The international sugar market had a month of October marked by slight gains of just over 4% for the average price of March/23 when compared to the immediately previous month, in the margin, while in the annual comparison, against the same month last year, the averages fell by 5%. In the short term, we can see that the March/23 average price in New York found support, albeit limited, due to the supply gap between the transition from the current 2022/23 crop in Brazil’s Center-South and the new 2022/23 crop from Asia. On the Brazilian side, we have a fundamental scenario of the end of sugarcane crush and production of derivatives, with the supply curve in a strong negative tone since the end of July this year.
On the Asian side, we have the prospect of a new 2022/23 season with great production expansion in terms of supply volume. Despite this, this supply should only increase between the months of December 2022 and February 2023. Until that happens, the new crop in Asia, despite the prospect of a large supply, will have marginal levels of production in its first months of the calendar, as is the case in October and November 2022. Soon the scenario that emerges is that, at the same time that Brazil finishes its crop, Asia begins a new season very slowly, with low supply growth in the two main international origins between the months of October and November. This guaranteed the moderate short-term gains observed for March/23 in the October average, which hit 18.52 cents.
SAFRAS & Mercado expects the final November average price at around 17.80 cents, which would be 3.91% lower than the recent averages of October and 9.33% lower than the November average prices of the previous year. Compared to the 5-year average for the same period, prices expected for November this year must present an 11% advantage. Despite the increase in the margin, compared to the previous month, the October average fell by 5.6% YoY. This decline was caused by higher prices at the same time last year, when until then the current crop in the Center-South of Brazil ended abruptly 40 days before the official calendar, in December, with a large number of mills ending their activities in the first days of October due to the historic drought that was observed in that season. This ended up boosting prices in New York, forming the statistical load that we now observe for the October 2022 averages.
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