SPIRITUAL RETREAT
Facing resistance to surpass the 28-cent-per-pound value and aiming to reach the coveted figure of 30 cents, the sugar futures market in New York has decided – at least that is what it looks like – to take a break from this impetus. In a week that had more holidays than trading sessions, with Brazil and the USA pausing for national celebrations, the market ended up adapting to a “let-us-wait-and-see-what-happens” atmosphere. The result was a closing on Friday with an accumulated reduction of 30 points over the week, driving the March/2024 contract to close out at 26.88 cents per pound in a kind of spiritual retreat of the prices, hoping for brighter days ahead.
On the other trading months, there were falls between 2 and 5 dollars per ton from May/2024 to March/2025 (which represent Brazil’s 2024/2025 crop) and a slight price increase (average less than 1 dollar per ton) from May/2025 on. Since the Brazilian Real has stayed practically unchanged over the week against last Friday’s closing, the NY values converted into reals declined by R$38 per ton in March/2024, an average of R$18 per ton for 2024/2025 and remained unchanged for the remaining months.
So, dear sugar buffs, answer quickly: when did New York last close out the day with sugar at the glorious 28 cents per pound? If you guessed September 16, 2011, you nailed it. Twelve years ago, when colorful pants and Blackberry were still in fashion!
It is true that the market had its moment of fame with a peak of 29.39 cents, only to then drop almost 200 points. And the mythical 30 cents? Oh, they made an appearance the week before. Since the Sugar Dinner in Brazil – where the traders were very optimistic – the market has been fluctuating between 26.75 and 27.95 cents, with an average that does not go out of tune, reaching 27.36 cents. That’s the kind of interval that even those who do not know anything about the market could play darts and hit the bull’s eye!
The bullish points have all been triggered – rain in the sugarcane fields interrupting the crushing, rain at the Santos port interrupting the loading, in addition to news from Indonesia about the need for sugar imports and Egypt buying sugar, and all the arsenal of fundamentalist news that should foster the market. No success with reheated news. Today we do not have the release of the COT (Commitment of Traders), as we cannot see the position of the non-index funds due to the Thanksgiving Holiday in the USA. The position will be reported on Monday. Based on the volume traded over the week, no significant change should be expected.
The renowned economist José Roberto Mendonça de Barros, from MB Associates, has a more optimistic view about Brazil’s economy compared to most of his peers. He points out that while many analysts focus too much on the country’s fiscal challenges – a sensitive point of the government – MB Associates projects a moderate fiscal deficit, estimated at about 0.7% of the GDP.
MB’s optimism, however, stems from a wider perspective which includes the dynamism of the agricultural sector, the expected expansion of the oil industry until 2029/2030, and the strengthening of the mining sector.
According to Mendonça de Barros, Brazil has definitely settled as a giant on the sugar global market and is advancing toward a model of robust trading growth similar to the Asian one, with an amazing commercial surplus of US$90 billion fostering the economy. However, he warns that without a solution to the fiscal problems, the country will not reach sustainable economic growth because solving this issue is imperative to allow for the decrease in interest rates to levels that favor a virtuous cycle of economic development.
Have a great weekend.
To read the previous episodes of World Sugar Market – Weekly Comment, click here
To get in touch with Mr. Arnaldo, write on arnaldo@archerconsulting.com.br
