Cepea, August 3, 2021 – After dropping slightly in early July, the average prices for crystal sugar resumed rising in the spot market of São Paulo in the second fortnight of the month, hitting the highest nominal level in the series of Cepea (which began in 2003), at 117.99 BRL (23.24 USD)/50-kilo bag, on July 29 (considering the CEPEA/ESALQ Index). The upward trend of prices, which has prevailed this season (2021/22), is majorly linked to the low supply available in the domestic market because of the crop failure, which is a reflex of the bad weather that hit sugarcane crops in Brazil.
Even before the beginning of the current season (2021/22), agents from the sugar market expected the productivity of sugarcane crops to decrease in central-southern Brazil, due to the dry weather last year. However, this decrease may be worse, considering the low temperatures and frosts that hit the crops in late July. It is worth to mention that the period of production may be shorter this year, and some mills are scheduling the end of crushing to October.
The volume of crystal sugar marketed in mid-July was low, but later in the month, liquidity increased, and higher amounts were sold.
Abroad, the prices for demerara sugar were also influenced by the weather conditions in central-southern Brazil. The sharp increase in the prices of petroleum influenced sugar valuations too, since it may encourage an increase in the production of ethanol and a decrease in that of sugar at Brazilian mills – making the biofuel more competitive than gasoline. In the mid-term, agents from the market expect demerara sugar prices to continue high, due to the decrease in the productivity of sugarcane crops in Brazil.
Between June 30 and July 30, the CEPEA/ESALQ Index for crystal sugar averaged 116.40 BRL/bag, a slight 0.03% up from that in June and 14.45% higher than that a year ago – values were deflated by the IGP-DI from June/20.