More than 1.43 million tonnes of raw sugar will be delivered against the ICE Futures U.S. May contract, much more than expected, sugar traders said, making it the largest delivery against a New York sugar contract since at least 1989 as a global surplus of the sweetner spills into the market.
Three trading firms will receive the sugar as the historically large delivery reinforced expectations that the growing surplus will continue to weigh on prices.
Cargill, Wilmar International and Bunge are the receivers, dealers said, and the sugar’s origins include Brazil and Costa Rica.
The actual amount of sugar delivered, as well as the deliverers and receivers, will be reported by the exchange on Wednesday.
Delivery of 28,222 lots would be the largest since at least 1989, according to data supplied by ICE, and worth more than $558.5 million based on May’s settlement of 17.67 cents a lb.
Cargill was said to be the largest receiver at almost 15,000 lots, Wilmar will take almost 8,000 lots and Bunge more than 5,000.
“We are getting a huge delivery right before the main player producer is starting their crop and expecting a huge cane crop. I have a tendency to believe that a large delivery like that is bearish,” said one trader, referring to top producer Brazil.
Brazil’s main center-south sugar cane crop is expected to see record output this season.
The large delivery shocked traders, who had expected about 500,000 tonnes. They anticipated origins to be Brazil, Central America and even Mexico in a market awash with global supplies.
A large delivery in a weak cash market is often perceived as bearish, though some cautioned that to see major firms taking delivery could be indicative they anticipate a price correction.
The sugar was likely headed for Asian markets, though it remains unclear whether there was immediate demand for it, traders said.
The size of the delivery was also surprising given May’s 0.07 cent premium to the July contract, with the most-active July contract settling at 17.60 cents a lb on Tuesday, traders said.
Spread activity has been volatile in recent weeks.
With the market in backwardation, carrying sugar into forward months can be an expensive venture, which prompted some speculation that the sugar may soon find its way to homes, and the huge delivery may not be as bearish as it initially seemed.
“Taking delivery of a spread that’s backwardated: Why would you want it unless you really need it to fulfill contracts?” said Nick Gentile, senior partner of commodity trading consultancy Atlantic Capital Partners.
This was the second time in recent delivery periods that Wilmar and Bunge have been receivers of ICE sugar and joined the likes of giants like Cargill and Louis Dreyfus.
In March, Singapore-based Wilmar received ICE sugar for the first time, receiving 3,007 lots, or roughly 152,762 tonnes, against the spot contract in a move seen as more common for large firms. The firm expanded into sugar in 2010.
Bunge received the bulk of October sugar deliveries at slightly more than 550,000 tonnes from a total of 594,895 tonnes, amid concern of supply disruptions in Brazil.
Cargill, Wilmar and Bunge could not immediately be reached for comment.