After two consecutive weeks closing out on a downward trend, the sugar futures market ended Friday’s session at 24.38 cents per pound, a 69-point appreciation corresponding to a little more than 15 dollars per ton. This movement together with the weaker real against the dollar (it closed out the week with a devaluation of 0.70% at 4.9000) provided an additional R$102 per ton for those who still have sugar to fix this crop. For the 2024/2025 crop, the improvement was R$82 per ton.
The small volume in NY reflects the vacation in the Northern Hemisphere and the resulting business decrease. In order to put that in numbers, since the American Independence holiday (July 4), the average sugar volume traded daily at the NY Exchange has been 87,000 contracts in 26 trading floors, an amount 59% smaller than that of the same previous period.
Of course, the market apathy is also related to the lack of news, because in previous years, despite the vacation time, we had huge volumes when the supply and demand fluctuated and wreaked havoc with the market. In spite of the stagnation over the week, the funds liquidated almost 22,000 long contracts reducing their speculative position to 111,600 contracts.
The price difference of gas dammed by Petrobras is extremely detrimental for the sector. Artificiality in pricing or price composition of commodities is the shortest way to shortage. And from what we hear, we are running this risk on diesel here. In any company in a capitalist system planning is supposedly based on the crazy idea to count on free prices and without the unhealthy interference of the government. But why would we do that when we can have an environment as “favorable” as this to plan and hedge. It’s too hard a task and the mills are suffering.
The problem is not only price damming; it’s a total celebration of chaos! Keeping gas at a price below the one practiced by the foreign market is a true push… not to invest! And who doesn’t love a harmed logistics, with a storage capacity so efficient that makes it impossible to keep more sugar because there is no warehouse or to find tanking for the produced ethanol?
The wisdom to keep ethanol price below the production cost is just inspiring. After all, who needs a functioning market when we can swim in uncertainty and inefficiency? And Lula does that masterfully. The only light in this dark panorama that goes against the obscure dweller of the “Palácio do Planalto” is Minister Haddad, with his eye on 2026.
The numbers of UNICA show that the Center-South is crushing 9.74% more than the same period last year (until August 1) and 19% more sugar. The pro-sugar mix hits 48.68%. There doesn’t seem to be any doubt that sugar in NY will need a lot of stamina, a lot of bombastic news, a lot of climate instability to be able to stay above 22 cents per pound by the end of 2023. That’s a hard task.
On the other hand, the volume of futures contracts traded at the Exchange until the end of July added up to 23.1 million, a 20% jump in the traded volume compared to the same period last year.
20% is a sigh of relief for a friend and broker in Manhattan who has the epic task of getting three daughters married next year. Concerns over volatility and risks lose ground when there are dresses to be picked, cakes to be tasted and an increasing volume of futures contracts that need to be traded before the bells of the wedding toll. Let’s toast to that, hoping that the market continues to be as generous (at least volume-wise) as the proud father on the wedding day!
You all have a nice weekend and Happy Father’s Day.
Arnaldo Luiz Corrêa
