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Sugar and Ethanol Daily Report

By: StoneX Intelligence Brazil, StoneX Intelligence Brazil

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May/24 contract ends below US¢ 20.00/lb
 
Filipi Cardoso
filipi.cardoso@stonex.com
Marcelo Di Bonifacio Filho
marcelo.bonifacio@stonex.com
Rafael Borges
rafael.borges@stonex.com
 
 
Sugar | Deliveries against the May/24 contract exceed 30 thousand lots
On this Tuesday (30), the May/24 contract expired, finishing its last session at US¢ 19.71/lb, a daily drop of 49 points. Raw sugar entered a significant downward channel in April, a month in which May/24 retracted about 300 points. On April 01, SBK4 reached its highest level since the end of February, reaching US¢ 22.72/lb. Later, out of the 21 trading sessions, 14 were bearish for May/24, which thus expires below US¢ 20.00/lb - a level that had not been explored since January 2023.
Among the market fundamentals, April marked the strong start of the 2024/25 crop in the Brazilian Center-South, with 15.8 million tonnes of sugarcane crushed in the first half of the month, 14% higher than last year, and the sugar-directed mix at 43.6%—more than 5.0 percentage points higher compared to the previous year. In addition, despite a water deficit during the inter-crop of 2023/24, sporadic rains at the end of March reached the cane fields in several regions of the Center-South, which some producers have already reported as an important factor in helping to increase the productivity of the sugarcane to be harvested, especially in the peak months of the crop.
In April, higher-than-expected production during the final tail in Thailand and India led to increased optimism in the market, bolstering bearish arguments. Fundamental to this perception has been the release of some surplus estimates for 2024/25 (Oct-Sept), thus maintaining the trend of sugar stocks growth in the medium term.
The CFTC report for April 16th showed an increase in bearish presence in the NY#11 sugar market, as evidenced by the short position of speculators. Accordingly, the "free fall" of SBK4 in April was driven by both fundamentals and volatility brought by the specs. Throughout the month, the raw sugar traded below the 20-day moving average, very close to the lower Bollinger band - which, among several other technical indicators, represents a proxy for a support price.
NY#11 May/24 contract and Bollinger bands
image 93916
Source: ICE. Design: StoneX.

In today's session, deliveries against the May/24 totaled 32,914 lots, equivalent to about 1.6 million tonnes. In addition to the deliveries from March/24, the total volume of the first two contracts of the year is the highest since 2020, highlighting a positive sugar supply scenario at the moment. The market, in turn, may have seen the expiry of SBK4 as bearish because a significant amount of sugar is being delivered on the exchange, as was observed in October/23 and March/24.

Deliveries against NY#11 contracts (lots)
image 93917Source: ICE. Design: StoneX.

This context of an increase in sugar supply, supported by the estimates of surplus in the global 2023/24 season (Oct-Sept), which, according to StoneX, will be around 3.9 MMT, is also indicated by the spread May/24-July/24, which closed inverted today at 30 points - that is, July traded at a discount compared to May.

On the other hand, the other spreads may indicate an increase in purchases by the commercial side since the July/24-October/24 has been negative since mid-April - the October/24 closed today's session priced at US¢ 19.46/lb, 5 points above the SBN4. March/25, in turn, is trading at a premium of 32 points compared to July/24, which should also be a point of attention for the sugar dynamics going forward. 

INDICATORS
image-20240430190945-1
Sources: ICE, CEPEA, B3, ANP, NYMEX, CBOT, Central Bank of Brazil, California Air Resources Board (CARB), CONSECANA, StoneX. Design: StoneX.
 
 
 
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