Wilmar Makes Another Big Sugar Purchase; Focus Still on Brazil

By Carolyn Cui

Wilmar International Ltd. has emerged as the sole buyer of nearly 600,000 metric tons of raw sugar on the ICE Futures U.S. Exchange against the March contract, in a purchase worth $192 million and marking the fourth delivery in a row taken by the Asia-based commodity trade house.

In New York, prices for raw-sugar futures for May delivery declined 0.8% to $14.24 a pound on Tuesday. The March contract which expired a day earlier settled at $14.56, when Wilmar scooped up all the sugar left on the exchange, according to brokers.

Over the past year, Wilmar spent over $1 billion in three physical deliveries of raw sugar. The company couldn't be reached for immediate comment.

The exchange on Tuesday published the details of the March delivery, which showed a total of 11,791 contracts were up for grabbing, with sugar coming from Guatemala, El Salvador, Costa Rica and other Central American countries. ADM Investor Services, EDF Man Capital Markets Inc. and J.P. Morgan Securities were among the firms that were on the hook to ship the sugar to Wilmar, according to the exchange.

"The fact that somebody did step up and take it was taken by the market as a positive sign, but the delivery is sort of a more visual sign of normal demand offtake," said Michael McDougall, director of commodities agency at Société Générale.

All eyes are still on Brazil, the world's largest sugar exporter. Analysts are closely watching the weather in the country and its impact on the cane production. Some Brazilian local analysts have recently increased their estimate of the world deficit this year from 3.8 million to 4.4 million tons, and estimated the sugar production in Brazil at 33.8 million tons, according to analysts at Marex Spectron.

"We have the impression that estimates are going up slightly on the basis of good rains and the probability that relatively high prices will have had a beneficial effect on yields," they wrote in a note to clients.

It is unclear what motivated the purchase, but brokers said Wilmar is likely to profit from Asia's growing demand and reduced production. Outputs from India and Thailand are both estimated to fall this year. But official sugar imports into China fell 23% in January, raising questions about the underlying demand for the sweetener.

In other markets, Arabica coffee for May dropped 1.1% to $1.1380 a pound, cocoa for May fell 0.9% to $2,928 a ton, and frozen concentrated orange-juice futures for May dropped 0.7% to $1.257 a pound. Cotton futures gained 0.5% to 56.80 cents a pound.

Write to Carolyn Cui at carolyn.cui@wsj.com

(END) Dow Jones Newswires

March 01, 2016 11:08 ET (16:08 GMT)

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