UNICA made it public that the crushing of the Center-South in the second half of May reached 45.2 million tons of sugarcane, a reduction of 3.4% against the same period last year. The sugar production, which got up to 2.7 million tons in the fifteen days, was also 7.7% smaller compared to the same period the previous year. The sugar mix in the fifteen days was smaller than last year’s. Although these numbers might seem promising, it’s important to clear some points up before adopting an optimistic view.
For starters, if we analyze the accumulated crushing volume in the crop so far, it is 140.7 million tons of sugarcane, almost 12% larger than the 2023/2024 crop. This volume is the largest of the last four years, losing just to the accumulated in the 2020/2021 crop. Over the last 10 years, the accumulated volume until the second half of May has represented on average 21.4% of the crushed total in the respective year. Excluding the extremes, the average is still the same, suggesting that the 2024/2025 crop can be as large as the record crop of 2023/2024, which was 654 million tons of sugarcane. Therefore, caution is made necessary.
Over the last week, sugar performance in New York has been positive in the three first maturities. The July/2024 contract closed out the week at 19.35 cents per pound, 35 points above the previous Friday’s close (equivalent to an increase of 7.70 dollars per ton). The October/2024 and March/2025 contracts closed out stronger, with increases of 55 and 46 points, 12 and 10 dollars per ton over the week, respectively. However, the longer maturities, from May/2026 on, closed out from 5.50 to 10 dollar per ton down. This might have been caused by the weakness of the Brazilian real, which created fixation opportunities in real per ton for the sugar of these crops. The weaker real made export sugar fixation more appealing for the maturities in the two next crops.
Lula’s weak government and the perception the market has that the president is disoriented, suffering constant defeats in the Congress takes a toll on the Brazilian real. Lula is focused on just spending and promoting his megalomaniac ideas. The imbroglio with the PIS and Cofins provisional measure caused the Brazilian entrepreneurs to protest strongly, which put an end to the increase of the tax burden. And, as an economist and our reader put it, “Brazil is no longer a country of opportunities for the ordinary citizen (non-political or non-servant), [and now] is getting the job of driving away talents at universities, industry and financial sector done. There is an effort to drive away the capital, with the Government (contumacious debtor and deadbeat) and the politicians (tax dodgers, patrimonial, and usurpers of the public goods) mining the condition for survival of the capital here”.
According to our dear reader, “The commodities are changing their behavior in regard to the historical pattern. Apparently there is a search for real assets in ore (industrial and precious), energy and food. The flood of liquidity in the United States and the trajectory of the public debt are creating an unusual demand for the commodities as the FED starts to mop up the liquidity of the system and the dollar is under more pressure. The Chinese movements in Taiwan and the Russian movements in the Eastern Europe (challenging NATO) are also potential sources of pressure”.
Brazil was to be way ahead of the game, but the Brazilian political class is one of the most mediocre on the planet. We have a legion of parasites in public offices, not to serve the country but to feast on it. And they do go all out – a secretary that steals at the rice auction, a minister that orders a road that runs up to his farm to be paved, a justice that uses money to pay for bodyguards while he watches the Champions playoff. None of them is thinking about Brazil. The overwhelming majority of those at the three branches are worried about enriching themselves, while the country goes down the drain. So many wrongdoings, so much corruption, so much theft and so much lack of shame make it all look surreal. As a result, they are paving the way for another “do-gooder” in the 2026 elections, risking us getting into an endless looping and electing another clueless person.
Back to the sugar world, our collaborator Marcelo Moreira, calls our attention to the maturity of the July/2024 options next Monday. It looks like the big “fight” of the market will be with the exercise price of 19.50 cents per pound. Depending on the appetite of the funds, the market can again try to go for 19.00 cents per pound as well as 20.00. The open position at these exercise prices of 19.00 and 20.00 has more than 15,000 lots in calls and 14,000 in puts. This volume might have some influence. Meanwhile, the funds have reduced their short positions and are now short at just 71,600 lots.
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Arnaldo Luiz Corrêa
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