The International Trade Council reports that a significant portion of the unprecedented physical delivery of sugar by commodities traders upon the expiration of the October futures contract on the Intercontinental Exchange (ICE) will be directed to China, based on information provided by two traders familiar with the transactions.
Wilmar International, the Singapore-based food trader that accumulated a substantial long position and opted to take nearly all of the record delivery totaling 2.87 million metric tonnes, has reportedly finalized agreements to sell between 1 million and 1.5 million tonnes to China. These traders, representing two of the largest players in the global sugar trade, also noted that Wilmar has secured deals to export some of the sugar to Indonesia, Egypt, and India. Wilmar has not responded to Reuters' request for comment.
The physical delivery of sugar at the October contract's expiry last week marked the largest in the history of any contract, in any year, since the commencement of raw sugar futures trading in New York, the world's price benchmark for the sweetener, in 1914.
All 2.87 million tonnes of sugar originate from Brazil and are set to be loaded from Brazilian ports between early October and December 15. The volume is sufficient to fill approximately 45 Panamax-sized vessels.
The first trader expressed, "We think Wilmar has already sold most, or even all, of that volume," indicating that China acquired around 1.2 to 1.5 million tonnes. The second trader estimated Wilmar's sugar sales to China at roughly 1 million tonnes, suggesting that the Singapore-based trader is poised to profit due to the considerable volume of sales.
China's increased sugar purchases followed the country's decision to resume sales of its sugar reserves, marking the first time since 2016. This decision was prompted by dwindling domestic sugar stocks and elevated prices.
Traders and analysts pointed to several factors contributing to the substantial delivery, including a record-breaking Brazilian crop, elevated interest rates, and a reduced premium between the October and March contracts on ICE.
Given the onset of the rainy season in South America, the logistical operations for Wilmar and the delivering parties are expected to be challenging and could result in loading delays.
Six commodities traders, including China's COFCO, Louis Dreyfus Co, Sucden, and Viterra, opted to make deliveries in compliance with ICE rules. According to these rules, deliverers are responsible for bringing the sugar to the ports, while the receiver is tasked with nominating the vessel.
The second source revealed that Wilmar has nominated the first six vessels this week, with most of the loading set to occur at Santos and Paranagua ports. Analyst Claudiu Covrig highlighted that this extensive delivery may lead to significant lineups and extended waiting times in October and November as sugar vessels vie with grain exports and potentially encounter delays linked to the rainy season.