Quotes are firm in BR, and advantage of domestic spot market over exports widens

Cepea, September 16, 2020 – Although prices for the demerara sugar marketed at the New York Stock Exchange (ICE Futures) dropped in the first fortnight of September, agents from the refineries in São Paulo (SP) were unwilling to lower asking prices for crystal sugar in the spot market of the state. In that scenario, the CEPEA/ESALQ Index for crystal sugar (São Paulo State) rose by 1.5% in the first half of the month (Aug. 31 – Sept. 15), closing at 86.43 BRL/50-kilo bag (16.35 USD/bag) on Sept. 15.


At ICE Futures, prices for demerara sugar were pressed down by oil devaluations, which lower the competitiveness of ethanol against gasoline, leading refineries to prioritize sugar production even more. Besides, high production in Brazil influenced international devaluations too. According to Unica (Brazilian Sugarcane Industry Association), from April/20 to August/20, the refineries in SP produced 17.899 million tons of sugar, 43.76% more than that in the previous season 2019/20. The volume of sugarcane processed in that period totaled 249.691 million tons, 6.64% higher than that last year.


As for parity prices, the advantage of the domestic market over exports increased in the first half of September, due to the high price levels for crystal sugar in Brazil, the devaluations of demerara sugar and the dollar depreciation. In the second week of the month, quotes were nearly 10 Reais/bag higher in the domestic market.


As for the world demand and sugar supply in the coming season (2020/21), the International Sugar Organization (ISO) estimates a slight sugar deficit of 724 thousand tons. For the current season (2019/20), estimates for a production deficit were revised down from 9.3 million tons to 136 thousand tons. Lower ethanol consumption in Brazil, because of the effects of the covid-19 pandemic, led Brazilian refineries to increase sugar production, which contributed to reduce the deficit. According to Rabobank, hydrous ethanol consumption from April to June 2020 decreased by 30% compared to that in the same period of 2019.





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