LADIES AND GENTLEMEN!
The sugar futures market in NY seems to have turned into one of those carnivals that would set up on Santos beach sands and that I used to go to in my distant childhood long ago.
Even if we had been on those simple rides available back at those childish times a dozen times, we would feel a different emotion every time, even if the next ride occurred just next winter, when this troupe would set up in the beach city.
Every active participant in this environment of wild people that the sugar futures market has turned into who tries to find – albeit unsuccessfully – logical reasons for every insane price movement, will see themselves in this simple image of mine.
What stands out the most is the roller coaster, especially this past week. One goes from Heaven to Hell in a question of minutes, depending on which side the participant finds himself on. The market closed out Friday at 25.35 cents per pound, a 62-point high over the week, equivalent to almost 14 dollars per ton. At this same session, the market came to trade at 26.15 cents per pound and then melted and closed out at a low.
What’s worse is that despite appreciating 53 points (11.68 dollars per ton) in the months corresponding to the 2023/2024 crop of the Center-South, 27 points (6 dollars per ton) in the 2024/2025 crop and being unchanged in the 2025/2026 crop, the 1.76% real appreciation against the US dollar over the week (it closed out at R$4.8714), the values in real per ton showed an appreciation of 12, a drop of 14 and a drop of 43 real per ton, respectively – a monetary illusion like those carnival magical mirrors that reflect us sometimes taller and sometimes shorter, sometimes thinner and sometimes fatter. It was fun.
The highlight of the carnival, at least for the kids then, was the dark ride. Back then, kids read horror comic books, believed in werewolves and ghosts, and the test courage was to walk by the cemeteries at midnight. Therefore, there was nothing more appropriate than visiting such a ride.
In the adult eyes of today, everything at the carnival was incredibly rudimentary, but we were there for a good scare. The catharsis of olden times sends us to the sugar market of today. Many scares have bothered the sleep of financial directors of companies, with the ghost of margin calls hovering over their heads. And just when many were breathing with relief due to the market adjustment, the terror starts again.
Forget about the fundamentals. What we see on the sugar futures market in NY is something superhuman, but not in the sense of superior things, or something extraordinary or any mystical meaning. It’s just because the market has turned into a battle of algorithms, computerized systems without human participation. There is no sense for a market to go up 50 points and after you’ve come back from the bathroom, it has plummeted 80. Be aware. What is happening to the market has nothing to do with the perception related to the physical market. One has to be really careful not to fall for these narratives.
“But China has bought 700,000 tons”, the skeptics will say. Indeed, it might have caused some impact, and a small movement can reach levels where the algorithms become a fast opportunity to make money. Another point that can cause even more scares is the conflicting news about El Niño (every year we get the same litany) and the maturity of the options next week.
Now, the real world shows us that the crop in the Center-South is doing well, many mills stating that productivity has surpassed the expectations. There will be sugar for everybody. The capital flow is knocking down the dollar, possible migration of money that left Turkey in search of another emerging country. That is, it’s possible that we have already seen the highest level in real per ton, an issue we have talked about here. It’s time we got off the Ferris wheel.
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
