The sugar futures market in NY closed out the week almost unchanged compared to last week. March/2021 closed Friday at 14.98 cents per pound, just 7 points above the previous week’s closing, or approximately 1.50 dollar per ton. Now, for the months covering the 2021/2022 crop, that is, from May/2021 to March/2022, the average positive fluctuation was just half a dollar per ton. The next crop continued pressured and suffered a 3-dollar-per-ton drop on average. I imagine more companies are taking advantage of the good prices in real per ton in order to add on fixations.
After the previous week’s euphoria, when the real appreciated by more than 6% against the dollar, this week the American currency closed out Friday at R$5.4600, an 0,8% appreciation. So, export sugars closed out at R$1,678 per FOB ton on average for 2021/2022 and R$1,573 per FOB ton on average for 2022/2023 – an improvement of R$13 per ton on both.
The market still lives with the doubt about the reenactment of the Indian subsidy. Common sense points to a reduction from the current 10,400 rupees to a more palatable level according to the complex fiscal situation the country is facing with the pandemic and the drastic reduction in the economic activity. According to the newspaper The Economist, the Indian GDP has shrunk by 23.9% over the quarter. Our numbers show that if the export subsidy were reduced by 25%, to about 7,800 rupees, India would still be competitive at the current sugar price levels in NY.
Brazilian sugar export in October hit 4.2 million tons, the highest volume registered in a single month since October/12 (3.9 million tons). This volume is 119% greater than that seen in October/2019. In the accumulated of the calendar year we have already exported more than 25 million tons, 71% above that of the same period last year. In the crop year (April to October/2020) we reached 20.8 million tons, 84% above that of the same previous period. It all leads us to believe that exports in the crop can break the historical record that hit almost 29 million tons of sugar.
Ethanol export also grew 34.5% in the twelve-month accumulated closed out in October. 2.49 billion liters is the exported volume covering the period from November/2019 to October/2020.
The sugar market continues to follow the funds’ appetite, whose position based on last Tuesday will only be released next Monday due to a holiday in the United Sates. We are sure that the sugar market can ultimately increase a little more in cents per pound (maybe creeping up to 15.50 cents per pound March-based). However, we believe that higher prices in real per ton have already been seen. Below are the reasons for this certainty:
Fixations for the next crop, based on October 31, reach 45%, the greatest percentage for the period since Archer Consulting started monitoring the fixations of the mills nine years ago. The price found was 12.50 cents per pound, without taking into account the polarization premium, equivalent to R$1,541.97 per FOB Santos ton, or R$0.6712 per pound, both including the polarization premium. Our estimate is that 11% has already been fixed for the 2022/2023 crop.
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In 1822, when Brazil became independent from Portugal, the United States was the first one to recognize the new country. Since then, the relationship between the two countries has always been admirably cordial. As proof of this friendship, in 1876, on the occasion of the 100th anniversary of the Independence of the USA, the then Brazil’s Emperor Dom Pedro II was the guest of honor at the Philadelphia Centennial Exposition, the greatest world’s science fair until then and that was part of the commemorative events of the centennial.
Dom Pedro II was a very dear person to the American intellectual elite and the then president Ulysses Grant felt enormous admiration for him. It was on that occasion that the Emperor got to know the newest invention presented at the fair, the telephone by Alexander Graham Bell, who he became friends with and was also the first person to buy Bell Telephone Company shares.
In 2020, showing total impudence and arrogance, president Bolsonaro has ignored the result of the American election and hasn’t congratulated President-elect Biden yet, unlike the great majority of the heads of government of the other countries. Bolsonaro is keeping company with Putin and some other minor leaders, holding on to his unshaken mediocrity. Never content with his buffoonery, at an event with entrepreneurs last Tuesday, referring to Biden’s stand (without mentioning him) on the Amazon and possible trade barriers against Brazil, he said “that when we run out of saliva, we’ve got to use gunpowder”. Aren’t there any limits to this guy’s insanity?
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It’s with deep sadness that I announce the passing of my friend Samuel Levy last Monday, the 9th. For 35 years, he headed Suporte & Resistência, benchmark in Brazil when it came to graphic analysis of commodities markets, focusing on sugar and coffee. Levy was passionate about the market and classical music, especially Beethoven and violinist Itzhak Perlman. Levy left a legion of technical analysis enthusiasts, many of whom were his pupils, and he will be missed – may he rest in peace.
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This is your last chance. Then, only in March/2021!!! Take advantage of the last registration days for both totally on-line, live/pre-taped recently-launched courses by Archer Consulting: Essential Course on Futures in Agricultural Commodities and Advanced Course on Options in Agricultural Commodities. More information at priscilla@archerconsulting.com.br
You all have an awesome weekend.
Arnaldo Luiz Corrêa
