The sugar contract at the NY exchange for March/2017 closed the week at 22.16 cents per pound. This was a 55-point fall against the previous week’s. Twelve dollars per ton of shrinkage in price. The other months had smaller falls, starting at 45 up to 7 points, or from 10 to 1.50 dollars per ton.
It looks like the market has been enclosed by a price interval between 22 and 24 cents per pound for some time now. Between the 23.90-cent-per-pound maximum on October 6 for March/2017 and the 22.12-cent-per-pound minimum at this Friday’s session, we have seen a 7.50% fall at just seventeen sessions.
At the same time, we can see averages of 50, 100 and 200 days of closing prices in NY at 21.85, 20.95 and 18.54 cents per pound, respectively, while the annual volatility today, which was 34.5% a month ago, is at 28%. This is to say that the market stagnation is visible, the discounts on the physical export market show that and the funds can be feeling (or maybe they are getting tired) there is some resistance around 23-24 cents per pound. Get ready for the worst if you belong to the group of mills that still haven’t fixed the sugar price (in real) for the 2017/2018 harvest. Should the market get into the 50-day average level – 21.85 cents per pound, the funds can stop fooling around and just pocket the money they are making, estimated by the market to be “just” two billions of dollars.
My guess – without any scientific support – is that if the funds happen to partially settle their long position, we might see the market at around 19 cents per pound again. The industrial buyers, especially those on the domestic market, can start smiling even before Christmas comes around, maybe over the same week of the presidential elections in the USA. Sugar in real per ton has plummeted from R$1,760 to R$1,610 in a little over three weeks. I think this turns on a yellow light. Don’t fall in love with the market because it will cheat on you.
Where can this analysis be wrong? Well, a brief look at the sugar price seasonality in NY shows the highest levels seen in the last 16 years invariably occur in January and February. That is, looking at the history there still seems to be , in theory, room for NY – prices in cents per pound – to be able to increase even further.
Thus, for those heavily indebted in dollars, waiting for better prices can pay off, even if the ceiling seems to be too close. Those who have little or no debt in dollars should already have been thinking in real per ton by now.
But in real, I have to admit I think it will be really difficult for the prices to go over the recently seen R$1.750. In order to keep today’s same R$1.610 per ton, should the exchange rate reach the 3.000 level many economists are betting the real value for early 2017 will be at, sugar in NY will need to trade at 23.25 cents per pound, 120 points over today’s level.
The press has now released some scientific work stating that sugar is the biggest villain when it comes to health problems. It says sugar consumption will result in obesity, high cholesterol levels and even dementia. We have seen coffee being blamed for heart problems before, which was denied years later. Then eggs were the great villain, which was duly discarded. Now, sugar is even “causing” dementia. At the DATAGRO conference the week before last, a panel discussion addressed the issue with interesting presentations by ISO President, José Orive and Roberta Re, WSRO General Director. The question that remains in the air after this “scientific research” is, “Who is funding it so it can come to these conclusions?” We just have to follow the money and we will find that out and what the purpose of these studies is.
Very well-informed people believe Lula won’t be arrested because he will flee the country. They believe he will create less trouble being out of the country (in Uruguay, some say) and won’t have the opportunity to turn into a martyr. It’s too bad if that happens. Crooks and criminal gang leaders of his caliber should rotten in jail or, metaphysically, go straight to hell. But I doubt the Devil would deal well with such a strong competitor.
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Enjoy your weekend.
Arnaldo Luiz Corrêa
