Sugar futures rose sharply Friday as the market prepared for another large delivery of sugar at the May expiry.
Front month sugar for May rose 3.4% to 15.70 cents a pound, with the July contract up 2.9% at 15.88 cents a pound.
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Wilmar International Ltd., a Singapore-based agribusiness, 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 company has bought more than 6 million tons of sugar in this manner since 2015, enough to fill roughly 3,000 Olympic-size swimming pools at a cost of some $2.3 billion.
"This looks like a mini squeeze. Someone not intending to delivery sugar suddenly finds himself short," said Robin Shaw, an analyst at Marex Spectron.
Mr. Shaw said Wilmar's moves in the futures market aren't indicative of any fundamental change in the outlook for sugar.
Agrilion Commodity Advisers said with open interest still at 30,404 lots [the equivalent of 1.5 million tons of sugar] as of last night's close, market expectations are for a delivery from 750,000 to just over one million tons of sugar with Brazil expected to be the main delivery origin.
Analysts have opined that Wilmar's play in the market as a seller of physical sugar is to drive up bullish bets for sugar.
"If you're controlling a large number of physicals, you're going to be in a stronger position than if you're someone who just trades one cargo a year and you're very much at the mercy of the market," said Jame Liddiard at Agrilion.
Still, analysts said that anyone taking a long position in the sugar market over the last few months will have been sorely disappointed.
Sugar futures have dropped 23% since February.
In other markets, cocoa for July was off 0.9% at $1,851 a ton, arabica coffee lost 0.3% at $1.267 a pound, frozen concentrated orange juice for July was up 1.7% at $.1586 a pound and July cotton rose 0.5% to 78.36 cents a pound.
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(END) Dow Jones Newswires
April 28, 2017 11:52 ET (15:52 GMT)