Brazilian sugar flat price fall on bearish fundamental and macro scenario

Brazilian raw sugar for March shipment was assessed by S&P Global Platts at 13.65 cents/lb on Thursday, the lowest assessment level since January 9.

Macro aspects such as the wide spread of the coronavirus, which has been lowering the global economic growth forecast, and the devaluation of the Brazilian real against the US dollar have been considered the main triggers of the downward price movement of the ICE NY11 sugar future market.

The ICE NY11 sugar futures market settled on February 13 at 15.56 cents/lb, the highest settlement level of the front future contract since May 23, 2017, when the global sugar crop 2016/17 started to record small surplus.

After testing, the highest settlement in almost three years the sugar future market has been losing support on a daily bases. The biggest daily drop was recorded on February 27, the day prior to the March (H) front contract expiry on February 28, when the market collapsed 7.72% in one day, to 14.23 cents/lb from 15.42 cents/lb.

In addition to the bearish macro environment the fundamentals pointing to a higher sugar production in Brazil Center-South crop 2020-21 (April to March) started to lower the estimated deficit of the global crop 2019-20.

Market participants are increasing their estimates of sugar production in Brazil, ranging from 31 million mt to 33 million mt. This means an increase of at least 4 million mt from the total sugar produced in the current CS crop 2019-20. In addition to a higher sugar mix some trading houses are estimating an increase in the total cane crushed.

Mills from CS Brazil are expected to start to crush the new crop in mid-March as the latest weather forecast are pointing to a rather dry March, favoring the cane harvest, which added one more bearish tone to the international sugar market that will receive an additional supply of sugar earlier than initially forecast.