Give this much to Wilmar International: When it jumps into a market, it jumps in—to 3,000 swimming pools full of sugar. Actual, physical sugar. Wilmar, which counts Archer Daniels Midland among its major investors, was just a humble palm-oil giant seven years ago when it decided to diversify into sucrose. Last year, it bought and sold about 8% of the world’s supply, which is a lot: 13.5 million tons. In the last two years, it’s bought 6 million tons for about $2.3 billion, which is also quite a lot. Those kinds of numbers tend to attract attention, as does the fact that Wilmar is doing much of it by actually physically settling futures contracts, which in the sugar trade happens less than half-a-percent of the time. Choc-finger, meet Sweet Tooth.
“Everybody was looking at them,” said Bruno Lima, head of sugar and ethanol at brokerage INTL FCStone in Brazil. Last week, traders and analysts ruminated on Wilmar’s latest purchase and whether it was a positive sign for sugar demand. Prices have edged higher since.
Consider the fact that, when in 2015 Wilmar bought up the world’s entire oversupply of sugar at a tremendous bargain, sugar prices proceeded to double. Then, when prices topped out in September, Wilmar dumped a bunch of the stuff, and prices fell 24%.
Actually, don’t consider those facts. Wilmar sugar chief Jean-Luc Bohbot assures that one has nothing to do with the other.
“There is no clear correlation” between the two. Over the past few decades, sugar prices have gone in both directions when there were large physical deliveries, he added.