The sugar futures market in NY closed Friday at 11.47 cents per pound, a 17-point drop against the previous week’s closing, but at least R$15 better per ton as the Brazilian currency devalued more than 3% in the week against the dollar, closing at R$4.1240, the highest value since last September. As an experienced broker in NY has rightly pointed out, there has been such a lack of news about the sector, and the businesses on the virtually paralyzed physical, that it is as if the week never existed.
Exemplifying in numbers, the volume of contracts traded at the Exchange has been very low; in August the daily average of contracts has been 105,000, which is 12% lower than the average in August/2018. This year, up until Friday, 24 million contracts have already been negotiated, a little above the 23.6 million over the same period last year.
Meanwhile, since the market will not go anywhere, the funds have added another 10,659 lots short in the week, now totaling 163,643 lots short (8.3 million tons of equivalent sugar).
The trade war between the USA and China is still going on, with the latter now imposing retaliatory tariffs on another 75 billion dollars of American goods including cars, soybean, cotton, pork and beef products, among others. Therefore, agricultural commodities plummeted, while gold went up. The foreign setting is heavy and the fear of a recession is hovering over our heads.
Some American economists believe that “we have never been so close to a recession as now”. The greatest evidence would lie on the fact that the spread between 2- and 10-year long earnings in the USA has turned negative for the first time in 12 years. Since 1950, every time we have seen a reversal on the interest rate curve, it has resulted in a recession.
UNICA has published the crushing number over the fortnight. “In the accumulated of the 2019/2020 harvest up until August 16, the crushing came to 350.31 million tons, relatively equal to the 350.22 million tons processed over the same period last year. But to the State of São Paulo, the gap has remained – 204.31 million tons crushed by the São Paulo units up until August 16, a 2.50% drop over the 2018/2019 cycle”, the report says.
The accumulated sugar production in the Center-South is 15.457 million tons of sugar – a 6.34% drop against the last harvest. The total amount of produced ethanol reaches 17.874 billion liters – a 1.39% drop against last year. It’s the same amount of sugar, but less production. This year the amount of ATR per ton of sugarcane fell by 5.34 kilos. And it will fall even further. The accumulated mix is at 35.4% sugar and 64.6% ethanol.
The worldwide hysteria about the fires in the Amazon is certainly part of a well-worked out plan by those troubled by the new attitude of the Federal Government. The data published by INPE (National Institute for Space Research) show that there have been 76,720 fire spots in the region up to now and that if this proportion is to be kept, we will come close to 120,000 spots by the end of 2019, 10% below last year’s total and 65% below the peak seen during 2007, during Lula’s term. This data can be checked out here: http://queimadas.dgi.inpe.br/queimadas/portal/estatistica_paises
The National Aeronautics and Space Administration, NASA, states that based on their satellite data analyses, the total activity of fires in the Amazon basin this year has been close to the average compared to the last fifteen years. What is behind all this collective (or should I say, selective) hysteria? My thesis is that great part of the national media has seen the source of earnings from governmental ads dry up. The president has turned off some faucets, and this media, dominated by the worst, delirious, schizophrenic left-wing supporters, is bent on destroying Brazil’s image abroad, with the approval of some contaminated diplomacy, locally-based NGO’s and grotesque pseudo-celebrities that are not able to find the Amazon on the world map and believe that lions, tigers, kangaroos, and giraffes can be found there.
Fire is a problem Brazil has been facing for decades and it should be tackled. There is no doubt about that. But now it has turned into something ideological. Blaming the fire spots in the Amazon on Bolsonaro is just as insane as blaming president Trump on the recent and devastating fire in California or blaming bigmouth France president, Emmanuel Macron, on the destruction of Notre Dame.
Who would be interested in smearing Brazil? The Brazilian defeated left-wing unable to cope with the loss of power and money that spouted out of PT’s (Workers’ Party) sewer? The mainstream media that cannot count on the money from government ads anymore? The agricultural producers from Europe that fear the increase in the participation of the thriving Brazilian agribusiness if Mercosur breaks off the deal with the European Union? Make your bets. The indisputable fact is that nobody is worried about the extinction of the blue macaw or the golden lion tamarin. They are only worried about themselves.
Have a nice weekend.
Arnaldo Luiz Corrêa
