Brazil’s sugar shipments look poised to improve on a sluggish start, after export values rose above domestic ones for the first time in 15 months, enhanced by an expanded refining premium.
Last week, the price of Brazilian crystal sugar averaged $127.04 per 50-kilogramme bag, according to Cepea – a value which, while up marginally week on week, fell behind that implied by white sugar futures even factoring in transport and refining costs.
“Exports remunerated 4.6% more than sales in the spot market of Sao Paulo did,” Cepea said, saying that is calculations included costs of $50.80 per tonne for freight and $89.00 a tonne for upgrading to refined sugar.
“It is important to mention that this scenario had not been observed since April 2021,” the Sao Paulo-based research institute said.
The shift to making “exports more profitable again” than domestic sales reflected in part the strengthening in the dollar against the Brazilian real, which boosts the competitiveness of the South American country’s exports.
However, Cepea noted too that the expanding premium for upgrading lower quality sugars into white sugar, which it attributed in part to supply concerns, including from Brazil’s key Centre South region where dryness has curtailed cane yields.
Investors have been “watching out for the productivity of sugar cane crops in Centre South Brazil, which has been limited by weather issues,” Cepea said.
Centre South sugar output so far in 2022-23, as started in April, is down by 22% at 9.68m tonnes, reflecting the weaker cane crop, and a diversion of a greater proportion of has been harvested to making ethanol rather than sugar, according to industry group Unica.
‘Still on fire’
The widened refining premium is also down to “higher world demand for the product”, Cepea said, a factor too noted by Marex, who termed the premium of London white sugar futures over New York raw sugar ones as “still on fire”.
The premium has been “like this for so long that it is probably telling us that real demand, ie consumption, is up”, Marex said.
The premium of London white sugar futures for October over their raw sugar equivalent ended last week at $135.21 a tonne, up by more than $11 a tonne week on week, and well above the $80.87 a tonne at which the premium entered 2022, on a March contract basis.
The improvement in Brazilian sugar export profitability follows a sluggish start for shipments to 2022-23, with exports totalling 5.22m tonnes over the April-to-June period, according to Unica.
That represented a slump of 25% year on year, and was the slowest start to a season in three years.
Ports data indeed suggest a pick-up in exports this month, with a vessel line-up equivalent to 3m tonnes in shipments currently booked, according to Marex.
Brazil’s June sugar exports totalled 2.33m tonnes, according to Unica, which records at 2.47m tonnes shipments in July 2021.