Production decreases in BR, but prices do not move up

Cepea, January 4 2019 – In the 2018/19 crop, the Central-Southern region in Brazil produced more ethanol. In São Paulo, biggest producer, after keeping the production mix heavier on sugar for two seasons (2016/17 and 2017/18), the amount of sugarcane allocated to produce sugar decreased, to 41.76% in 2018/19 (in the 16/17 and 17/18 crops, the average was 53%), according to a report from Unica released in November/18. From April/18 to November/18, the sugar production in São Paulo state totaled 17.748 million tons, 26.15% smaller compared to the same period in 2017. Average prices of sugar in both domestic and international markets have not reacted to the production decrease in Brazil and presented lower levels compared to last year.


In most part of the period from April/18 to December/18, in the spot market in São Paulo state, average monthly prices were below those registered in the same period of 2017. In August/18, the CEPEA/ESALQ Index for crystal sugar (São Paulo), Icumsa color from 130 to 180, averaged 51.95 BRL per 50-kilo bag, in real terms, the lowest in ten seasons. In September and October/18 alone, the averages of the Index surpassed those in the same months in 2017. Prices in Brazil were underpinned by the dollar valuation, due to political uncertainties (given that Brazil exports roughly 2/3 of its production) and rains in this time of the year.


From April/18 to December/18 (until Dec. 21), the CEPEA/ESALQ Index for crystal sugar averaged 60.11 BRL per 50-kilo bag, downing 14.37% in relation to the season before (from April/17 to December/17), in real terms – values deflated by IGP-DI November/18.


In general, the weak demand triggered price drops in the domestic market. As observed in previous years, purchasers surveyed by Cepea closed anticipated contracts with mills and, in 2018, closed only a few additional trades in the spot market. This scenario may be partially attributed to the change of profile of the end consumer, who has reduced the consumption of sugar-based products. According to Cepea survey, total sugar sales in São Paulo state, from April to November/18, reduced 7.5% in relation to the same period of 2017.


The production decrease in Brazil has not underpinned demerara sugar values traded at ICE Futures, which have moved down, affecting prices in Brazil. The international decrease is attributed to the global surplus of sugar – according to International Sugar Organization, the 2017/18 season registered a surplus of 10.51 million tons.


The USDA says that important countries, such as India (world’s biggest sugar consumer) increased their production in 53%, approximately, in the 2017/18 crop, which finished in September/18. The European Union and Thailand also produced 14.1% and 46.6% more, respectively, in relation to the crop before.


Brazil exported 19.7 million tons from January to November/18, according to Secex, generating a revenue of 6.077 billion USD. In the same period of 2017, the country shipped 26.7 million tons, with revenue of 10.71 billion USD.




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