Market Transition from July to October Contracts

Last week, the Brazilian sugar market shifted its focus from the July contract to the October contract as options expired and July delivery approached. During this transition, sugar found the strength to overcome its resistance, leading technical analysis to point to a recovery above 20 cents per pound, which was achieved on Thursday the 27th.

Impact of Unica Report on Sugar Prices

Notably, despite a robust delivery expected for July, the rise in sugar can be attributed to market expectations regarding the release of the report from the Sugarcane and Bioenergy Industry Union (Unica).

Effect of Dry Weather on Sugar Mix

The lack of rain contributed to a certain pessimism regarding the sugar mix, with an average expectation orbiting around 49.5%. The expected crushing was 48 million tons and the Total Recoverable Sugar (ATR) concentration was between 132 kg/t and 135 kg/t.

Challenges in Achieving High Sugar Mix

Therefore, although many may argue that a crushing of 48 million tons is difficult to perceive as bullish, the dry period and poorer cane quality are threatening the sugar mix. If the mix remained below 50% during the first half of June, it could be difficult to reach a level above 51% by the end of the season. And that's more or less what happened.

Unica Report Confirms Lower Mix

The Unica report released on Friday confirmed a lower mix of 49.7%. However, this value was still stronger than the market average expected. Furthermore, the grind values ​​were surprisingly high. The Center-South reached almost 49 million tons during the first half of June.

Concerns Over Cane Quality and Production Estimates

In general, the market is still concerned that the quality of the sugarcane may prevent a sugar mix above 51%. As a result, from current estimates of 41.5 million tons, sweetener production in the Center-South could be reduced to 41 million tons.

Focus Shifts from July Delivery to Unica Report

The anticipation of the Unica report and the average results from the Center-South created a buzz that diverted traders' eyes from the significant delivery of the July contract. The funds may have eased their short position, but Brazil can still produce more than 41 million tons.