Wilmar scooping up sugar in bulk buys

A Wilmar Sugar Australia processing plant near Ayr, Queensland. Since 2015, Wilmar has bought more than five billion kg of sugar at US$2.3 billion, enough to fill 3,000 Olympic-size swimming pools.
A Wilmar Sugar Australia processing plant near Ayr, Queensland. Since 2015, Wilmar has bought more than five billion kg of sugar at US$2.3 billion, enough to fill 3,000 Olympic-size swimming pools.PHOTO: BLOOMBERG

Traders fear move will give agribusiness firm control of commodity and influence prices

Wilmar International is buying unprecedented amounts of sugar on the United States futures exchange, the Wall Street Journal has reported, creating confusion in one of the world's most volatile commodity markets.

The agribusiness firm has been scooping up sugar by physically settling tens of thousands of futures contracts and collecting the commodity from ports across South America and elsewhere, the Journal said in a report published yesterday. Last week, it agreed to buy US$512 million (S$723 million) in raw sugar at the expiration of a popular futures contract on the ICE Futures US Exchange, the report added.

Traders have debated similar moves by the company in the past, and are concerned that Wilmar could control a large amount of world's tradable sugar and influence prices, the Journal said.

"They are a market mover," Mr Nick Gentile, head trader of New York Commodities trading firm Nickjen Capital said. Since 2015, Wilmar bought more thanfive billion kilograms of sugar at US$2.3 billion, enough to fill 3,000 Olympic-size swimming pools.

At one point in 2015, the company mopped up that year's oversupply when sugar prices were at multiyear lows. In the rally that followed, sugar prices more than doubled, traders said.

In September, when prices peaked, Wilmar delivered excess sugar it owned to other traders and prices fell 24 per cent in the following months.

Now, traders are watching Wilmar's latest purchases, and ruminating whether it was a positive sign for sugar demand, the Journal said.

Wilmar, founded 26 years ago, is one of the world's largest palm-oil producers, entered the sugar business in 2010, and counts the family of Malaysian billionaire Robert Kuok and Chicago-based Archer Daniels Midland Co, among its major shareholders.

Last year, the company handled 13.5 million tons of sugar - nearly 8 per cent of the world's production, leading to analysts saying Wilmar is possibly the world's biggest sugar trader.

Mr Jean-Luc Bohbot, the 48- year-old who runs Wilmar's sugar business, said there is no evidence that the company's trades affect market prices.

That is "very much an incorrect view," he said in a recent interview with the Journal. "Sugar is an extremely fragmented commodity, with a very large number of players around the globe."

He said Wilmar's sugar purchases and sales appear in some cases to have preceded rising and falling prices, but added, "There is no clear correlation" between the two.

A version of this article appeared in the print edition of The Straits Times on March 09, 2017, with the headline 'Wilmar scooping up sugar in bulk buys'. Print Edition | Subscribe