NY Sugar Market Experiences A Modest Fall

The Sugar market in NY closed the week on Friday at a 16.97 cent-per-pound for October/2014. It was a modest fall for October/2014 – just 7 points. However, the same does not apply to the other trading months, which suffered strong falls between 47 and 59 points, that is, a weekly negative variation between 10 and 13 dollars per ton. Note that the market continues falling with little volume. And the funds have liquidated their long positions.

Since July 10, the market has been trading below the average of 50, 100 and 200 days. It was under this condition that the market beat the year’s lowest levels in January.

As for exports, the discounts must be generous for buyers to show up. And the businesses in the week (about 200,000 tons) must have discounts up to 78 points for the first fortnight of August shipment.

The total volume of crushing released by UNICA accumulated until the second fortnight of June was 202.9 million tons. The number was seen as bearish by the market, which compared it with the same period last year in which the total crushing came to 182.0 million tons. The market perception is that the accelerated rhythm will continue. On the other hand, for example, when the 2010/2011 harvest was analyzed for the same period more than 215 million tons were crushed and then it closed the year at 557 million tons. The reviewed predictions for this year for the most part bring the number down. The consensus is now at between 550-560 million tons. And, even so, the market falls.

The monthly ethanol sales on the internal market for the first six months this year reached a total of 11.25 billion liters, 12.3% larger than that for the same period last year. Anhydrous answered for 4.83 billion liters and hydrous 6.42 billion liters with variations of 24.2% and 4.8%, respectively. It is clear that the number of flex vehicle owners who would rather fill their tanks up with hydrous ethanol is stable (due to parity loss with gas price in most states) while anhydrous keeps going up to meet the increase in fuel consumption (8.5% over the last 12 months), according to what was discussed here last week. Since on average the first semester of the year represents 45% of the year’s total sale, we would close 2014 at 25 billion liters.

What is negatively surprising is the performance of ethanol exports. Over the first six months of 2014, the volume was just 768 million liters, a sudden 36% fall against the same period last year. With corn price falling by 13.4% at the Chicago stock exchange over the last 30 days, accumulating a 31.4% loss for the last twelve months, it is just natural that corn ethanol fill in some gaps on the international market making it harder for Brazilian ethanol to compete.

Rumor had it last week that a big European trading company with a strong presence on oil and natural gas markets would be stopping its sugar activities. If that is true, it is another important participant saying goodbye, decreasing the options of the mills and concentrating the market even more.

The good news for the sector came from the release of the election poll for president. Dilma now would tie with Aécio in a presidential run-off. Since elections are still 11 weeks out, there is a real chance of PT losing the election. Would this drop in the polls have been caused by the unfriendliness, haughtiness and arrogance Dilma showed at the World Cup’s final game when hundreds of millions of viewers saw her undisguised expression of dislike when handing over the trophy to the German champions and her lack of elegance to Angela Merkel when the Germans scored?

If Dilma loses the election, she will be the first president not to get reelected (except for Fernando Collor, but that’s another story) for a second term which goes to show that the voter does not put up with incompetent people for very long. Over the last 100 years, in the United States, for example, only 4 presidents didn’t manage to get reelected: George Bush (father), Jimmy Carter, Gerald Ford and Herbert Hoover, and we all know the reasons. Dilma will find out why as well.

Over the last 30 days soybean oil has fallen 9% on the international market, wheat almost 11%, corn 13.4%, soybean 18.6% and cotton 24.7%. This has not been a good month for commodities. To the government, the fall represents a relief on food price while it tries its hardest to keep inflation down for as long as it can in an election year.

Archer is promoting the 1st Advanced Course on Agricultural Options, attending to requests from various agribusiness segments. It will be a 2-day course focusing exclusively on options about agricultural commodities. The course will be held on July 29 and 30 in São Paulo.