Sugar Closes Week 17.4 Points Higher

The futures Sugar market in NY closed the week at 17.04-per-pound slight higher against last Friday for July/2014, a positive 12-point variation (a little over 2.50 dollars per ton). The export market did slightly better as well with 35-point discounts (they had been at 45-50). China and Dubai were reported as being the main business destinations.

Futures prices alignment for longer maturities is starting, though timidly, to perceive that we could see a more positive cycle for sugar in the future. But, meanwhile, the market is at the demand ICU room.

This week, the funds reduced (taking into account Tuesday through Tuesday) the long position they had at 30,000 contracts. They settled this volume and the market fell 25 points only, which is the same as selling 1,200 contracts so that the market would move just 1 point down. At the other end, covering their short positions were the trading companies. The scenario looks very constructive when this happens. In other words, NY might keep going up next week. Don’t get overexcited about it, though.

On one side we have the bears, which profit from too much sugar on the world market taking a toll on the first maturity of the futures contract in NY and, on the other side, the bulls which are sure that by the second semester, close to September when October/2014 expires, things will already have reflected a lower crushing than it is expected today in Central-South and, hopefully, some help from the weather. September could be a turning point for prices.

In the summer of 1966, a song by a group named The Happenings hit the charts and was number 3 on the Billboard in the United States and held on there for several weeks. In Brazil, it was number 1 in the early 1967: it is “See you in September”. This could be the theme song for the sugar market these days.

The average price for sugar in NY in March was R$936.00 per ton, converted by the closing of the first contract on trading in the stock exchange and converted into reais by the closing of the currency by the Central Bank. In April, with the significant worsening of demand, this price plummeted to R$871.00 per ton. In May, we reached the average of R$891.00 per ton. It wouldn’t be unreasonable to claim that this price can have the same performance as that of March when the market has a better idea of how much it will be milled in the Central-South. 18.30 cents per pound would be enough to accomplish that goal.

Oil closed the week a little over US$106 a barrel. This would mean gas at R$3.21 at the pump if Brazil followed the international market.

The more Dilma falls on the polls for presidential elections in October, the more the market gets excited. Brazil has not seen a situation where the continuity of the government translates negatively onto the market with so much uncertainty in 25 years. Some analysts believe, for instance, that the assets in the country are undervalued by 30%. They bet PT’s leaving the government could mean a 40% growth on the BOVESPA index. A structural change in the fuel pricing policy can favor ethanol, and therefore bring more support to sugar price on the international market.

Last week, a bank passed around among its clients a curious prognosis based on some mathematical model which stated that the World Cup final game will be played by Spain and Argentina. After this Dutch tractor thrashed the current world champions, I wonder where this model’s creator is.

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.