The week was made shorter because of the Thanksgiving Holiday in the USA. The sugar futures market in NY closed Friday’s shortened session at 14.77 cents per pound, a 48-point drop compared to last week. We have said here that 15 cents per pound is a pretty heavy price level and draws a great amount of hedge. Being slightly stronger for the second week in a row, the real depreciated sugars by R$70 per ton in the reference month March/2021.
The weekly report can be summed up as following: the contracts with shorter expiration dropped further and the contracts with longer expiration ended up going up. It’s as though the scales were after the price balance. The real appreciation can have had an effect on the pricing postponement for the 2022/2023 and the next crops. The dollar curve for the longer expirations can also have been affected by the perception of the banks of an improvement on the economy and a less volatile Brazilian currency.
We think that the box of surprises of the sugar market, pretty well manipulated by the funds, has run out of new tricks. Everything that could have positively affected the market fundamentals so that it could go beyond 15 cents per pound in March/2021 has already been duly expressed. The market had all kinds of attractions for different audiences, such as those old carnivals that would pop up in small country towns sometimes – merry-go-round, Ferris wheel, hall of mirrors, maze, clowns and the unfailing ghost train.
We have already been scared enough over this terrible 2020, but for the sector the year has been pretty good. The real devaluation has brought great prices for the mills at levels we couldn’t have imagined even at the start of the year when the market reached 15 cents per pound for the first time before the pandemic. At that point sugar was trading at the equivalent of R$1,420 per ton. It was a merry-go-round, with little horses making us experience that good feeling of freedom, courage and especially strength.
But the pandemic turned the market upside down. And whatever was up there ended up plummeting. From 15.00 cents per pound on February 12, we plunged into 9.05 cents per pound on April 28. It was like being on a Ferris wheel, that feeling of being high up there and then suddenly being down there. No shameless connotations, please. On Ferris wheels everyone can have control over them. They spin more slowly or faster. It was then that the market went from R$1,572 per ton to R$1,180, a dive into Hades’ depths. It was very painful.
It is in the hall of mirrors where we come up against reality. It’s a place that shows our essence. It was then that the mills woke up to reality and realized that the lost opportunities in the past were a stupid mistake and learning the lesson, if the market bounced back, there wouldn’t be any more excuses not to speed up fixations not only of this crop, but also of the following crops. The hall of mirrors, as the old adage goes, is the region of wisdom, knowledge, enlightenment. And the mills did speed up!
The maze sought out the truth; the disappointment at missed opportunities, at seeing the market melting under doubtful looks from those who had bet on the infinite and beyond. The maze can symbolically represent both the search for the truth and also the immediate danger. In Greek mythology, Minotaur was a monster that lived in the maze that, curiously, had the body of a man and the head of a bull, the animal that represents those who are bullish on the market. “I don’t know what you’ve drunk, but I want the same thing”, you might say about my reveries, but the fact is that at some point on the market we find ourselves in a maze, so to speak, listening to that The Clash song “Should I stay or should I go” on the headphone. Push play.
It’s the clowns’ turn now and we’re all in this category. We’re those who voted with an open heart hoping for a radical change in the country, especially from the moral standpoint. Unless you insist on sugarcoating it, we’re back to square one. There’s no government plan, there’s no approved budget for 2021 – it’s a real circus and we’re in the middle of the arena. And the real reflects the (mis) government. Nobody has a clue what might happen.
With all the scenario set up for a smaller sugarcane crop in the Center-South, plus a yellow light blinking on a possible Covid-19 second wave, isolation threats, decline in economic activity, shrinkage in sugar consumption, reduction in mobility that retracts fuel costs, everything leads us to think that our last level is to get on the ghost train which promises startles, fear, panic and a dose of excessive unrest.
Ladies and gentlemen, please board on platform 15.
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In a year full of bad events, nothing could be worse for soccer fans than the news about Diego Armando Maradona’s premature death. I had the pleasure to see him play in August 1987 at the Wembley stadium (61,000 people) at an exhibition match between the English League and the Rest of the World teams (3-0) celebrating 100 years of the English League. They played side by side with the soccer god Maradona, French Michael Platini, Brazilian Josimar and English Lineker. Before the match, Pelé stepped on the field to greet all the players and gave Maradona a warm hug – two gods within the same space. On two occasions, in 1995 and 1998, the Argentinian star was pretty close to wearing the jersey of my glorious Santos Football Club. It didn’t work out because Dieguito ended up signing on with another team. Soccer has gotten smaller and immensely sadder.
You all have a nice weekend.
Arnaldo Luiz Corrêa
