February 27th, 2017
By João Paulo Botelho and Loredane Pereira
Week begins with declines for sugar futures
In
today's trading session, the last before the expiration of the March contract,
the front month raw sugar contract declined 3.6% on last Friday close to USD
19.09/lb on the ICE/NY. In addition to this decline, the quote of white sugar
on the London commodity exchange registered a decline of 2.6%, accounting for USD
528.2/T.
One
point that can be seen as bearish for raw sugar quotes is the volume of open contracts
on the March/17 contract, which recorded 35,869 lots last Friday, prompting
market agents to project a large volume of delivery via the exchange. Analyzing
the relationship between the number of open contracts with 3 sessions until
maturation, along with volume of sugar delivered via the commodities exchange
in recent years, it is estimated that deliveries on the March contract are
close to 17,900 lots, or just over 910,000 tonnes of sugar.
Open contracts and deliveries
via the commodities exchange - ICE/NY
Source: ICE/NY. Design: INTL FCStone
It
is worth remembering that currently on the physical market in the Brazilian
Center South (the largest sugar producing region in the world) the latest index
of premiums/discounts on ICE/NY being traded for VHP FOB Santos was close to
the flat for deliveries both for March and April, suggesting little incentive
for sellers to deliver product via the commodities exchange.
With
that, there were rumors in the market that, should deliveries occur through the
commodities exchange, the sugar could be of lower quality, which would find
some difficulty in being traded on the physical market; or would originate in
other regions of the world.
Following
this bearish trend for the March contract, the spread between the two nearest contracts
showed a rise from 1 to 6 points of charge. In addition to that, the spread for
white premium between the two exchanges, taking the May contracts into
consideration, rose slightly further on Monday to USD 106.02/T.
In
the field of fundamentals, the most recent data for the Thai 2016/17 crop was published
today, where the accumulated figure until February 23rd showed a
decrease of 10.1% in sugarcane grinding year-on-year, accounting 65.6 million
tonnes. Total production in gross value presented a reduction of 5.9%, closing
at 6.9 million tonnes. However, it is important to note that the indexed difference
between the crops is decreasing, mainly due to the better rate of recovery this
year (10.6%).
Crop
Monitoring - Thailand (by 2/23)
Source: OCSB; Design: INTL FCStone
Petrobras announces reduction in gasoline
prices at refineries
Last
Friday (24), Petrobras announced an average reduction of 5.4% in the price of type-A
gasoline at refineries, effective as of last Saturday (25). For Diesel oil,
there was a relatively smaller reduction of 4.8%. With the state's new pricing
policy of periodic revisions for their prices at refineries, the main reasons
for the decline from the previous revision were based on the appreciation of
the national currency, lower sea freight levels, and adjustments carried out in
the company's competitiveness on the domestic market.
Meanwhile,
the price of US Gulf conventional gasoline in Brazil had a decrease of 1.5%
between the average of last week and the average of the week prior to the last
change in the price of gasoline and diesel oil, which occurred on January 26th.
For end
users, gasoline is expected to average 2.3% cheaper following the readjustment
downwards, or BRL 0.09/L, according to Petrobras.
Type-A gasoline prices
in Brazil (BRL/l)
Source: OPIS; BCB; MME.
Design: INTL FCStone
Prices - Sugar
Prices - Ethanol
