Supply changes the seasonality pattern of 7 years

Even with the recent small raises, last week (from Feb 11th to 15th), Brazilian sugar price registered the lowest value compared to the same period of the last four crops. The reason is the excess of supply. In nominal terms, the current price is roughly 10 percent, 50 percent and 25 percent inferior in relation to the same period of 2005, 2006 and 2007, respectively.

In the average of the seven previous crop seasons, sugar prices present an increase from April, when the crop starts, until January. In this crop, however, there was a decrease of 26 percent between April/07 and Jan/08. Likewise, in an unusual way, the sugar has showed lower profitability against the ethanol in several periods of the last months. The inferior advantage of domestic sugar trades compared to exports was also atypical in the off-season period.

During the first fortnight of February, the Brazilian sugar market moved at a slow pace, especially due to the carnival holiday. The CEPEA/ESALQ Index for crystal sugar (Sao Paulo state) averaged 26.05 reals or 14.89 dollars per bag of 50 kilos on Feb 15th, increasing 0.97 percent in Real over Jan 31st.

Regarding the price parity calculated by Cepea, the anhydrous ethanol remunerated 2 percent more than the crystal sugar during the first fortnight of February. For the hydrated, the advantage was of 4 percent. Comparing the two types of ethanol, the anhydrous remunerated 6 percent more than hydrated in the same period.

The Brazilian Institute of Geography and Statistics (IBGE) forecasted the national 2008/09 sugarcane crop production at 549.606 million tons, increasing 6.7 percent over the previous crop.


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