Despite the off-season period, quotes drop in Brazil

Cepea, February 16, 2018 – Quotes of the crystal sugar traded in the spot market of São Paulo State dropped in the first fortnight of February, despite the off-season period in central-southern Brazil – the downward trend of quotes has been observed since the second fortnight of December/17. The current price level is linked to sugar supply, which has been enough to meet demands.


Liquidity, in turn, decreased in that period. Consumers seemed to be stocked up, with lower needs for additional purchases. In this scenario, the volume produced decreased as well. Between January 31 and February 15, the CEPEA/ESALQ Index for crystal sugar (São Paulo) dropped 4.2%, closing at 53.09 BRL (16.40 USD) per 50-kilo bag on February 15.


The recent price drops of crystal sugar in the spot market of São Paulo State added to the stable quotes of demerara sugar at the New York Stock Exchange (ICE Futures) have narrowed the price gap between these two sugar varieties. Observed since early September/17, the advantage of the Brazilian market over exportations, which reached 15.75 reais per 50-kilo bag in the week between December 11 and 15, 2017, narrowed to less than one real per 50-kilo bag (0.70 BRL per 50-kilo bag) in the week between Feb. 5 and 9.


Price rises of demerara sugar at ICE Futures may be linked to forecasts for lower sugar production in the 2018/19 season in central-southern Brazil. INTL FCStone estimates the output from that Brazilian region to total 32.4 million tons, while Archer Consulting estimates it to reach 30.5 million tons. Ethanol production is expected to be prioritized in the 2018/19 crop from central-southern Brazil, since the competitiveness of the biofuel may be higher, due to the high price levels of gasoline at pumps.


According to the last report released by Unica (Brazilian Sugarcane Industry Association), in the current crop (until Feb. 1, 2018), mills from central-southern BR have produced 35.831 million tons of sugar. If forecasts are confirmed, sugar production will decrease by 4 – 5 million tons in the 2018/19 crop.


In a global context, however, lower production in Brazil will be offset by higher production in Asia and Europe, pressing down demerara sugar prices at ICE Futures during the global 2017/18 season.




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