| NEW YORK
NEW YORK Oct 8 Louis Dreyfus Corp
has bought nearly 1.9 million tonnes of raw and refined sugar in
recent weeks in a buying spree worth about $750-million that has
thrown further confusion into a market roiled by excess
One of the world's biggest sugar merchants was the sole
buyer last week of the 1.49 million tonnes of raw sugar in the
largest ICE Futures U.S. exchange delivery in at least 24 years.
That came on the heels of the purchase of 313,150 tonnes of
refined sugar through London's Liffe exchange just weeks
Between those purchases and another deal to buy 60,000
tonnes of Thai sugar for delivery in July through September
2014, Louis Dreyfus has bought roughly $750 million worth of
sweetener in the last month, based on futures prices and
The move has stoked the hopes of some bulls that the market
might have bottomed out after raw sugar futures hit three-year
lows in July. That was down by more than half from a peak of
over 36 cents a lb in early 2011.
But other traders say the company has merely scooped up
unwanted supplies at low prices, underscoring the sheer scale of
Brazil's output and the world surplus.
Louis Dreyfus scooped up sugar through the futures market as
a surplus piled up and prices weakened over the past three
years, a spokeswoman said in an email this week.
The firm has been a buyer seven of the 17 times it has
participated in a delivery against the New York raw sugar
contract since July 2008, available ICE records show.
"The deliveries do not bring any change to the global supply
or demand of sugar," the Louis Dreyfus spokeswoman said.
Even so, the size and pace of the buying have the market
reeling as dealers calculate the impact on availability and
The massive ICE delivery alone represents more than half of
last month's exports from Brazil, the world's No. 1 producer,
according to Reuters calculations.
The most-active March contract has risen over 4
percent since the October expiry and confusion over the huge
delivery kept traders on the sidelines for much of the last two
Bruno Lima, a senior risk management consultant at INTL
FCStone in Brazil, said the October ICE delivery was one of the
most "difficult" the market has ever had to handle.
"On the one side, it means probably (the seller) didn't have
anywhere else to place that sugar," he said.
"On the other, it's not likely they (Louis Dreyfus) would
bet that much on that amount of sugar if they did not have
destinations for at least some of the sugar."
WEATHER RISK, TIGHT SUPPLIES
Even so, the market outlook might be brightening, the bulls
With the bulk of the recent ICE delivery due from Brazil,
traders have speculated that Louis Dreyfus is betting on
potential supply tightness at the start of 2014, ahead of the
world's No. 1 producer's next harvest.
Rain forecasts have already stoked worries that the final
leg of Brazil's harvest will be delayed even more after wet
weather hampered crushing in September.
While Louis Dreyfus owns sugar and ethanol unit Biosev in
the country, global traders say the sugar is likely bound for
destinations in China, the Black Sea Region and Africa.
In China especially, raw sugar's drop to three-year lows has
stirred refiner demand.
Speculation has mounted that the first quarter of 2014 might
see short-lived tightness ahead of Brazil's next harvest in
Analysts and traders expect the world surplus to more than
halve from last season to about 4 million tonnes in the 2013/14
crop year that began on Oct. 1.
A COMPLICATED MATTER
Some dealers are not convinced, pegging the deals as another
sign of a market awash in supplies, particularly as a huge part
of October's ICE delivery is expected to come from Brazil's No.
1 sugar producer, Copersucar S.A.
The October contract's discount against the March contract
widened in the days ahead of delivery, seen as evidence that
Copersucar preferred to sell at a steep discount to prices
further out than hold onto the material.
"If the largest producer decides to deliver, it's a vote
that this was the best price they were going to get," said a
A spokesman for company declined to comment.
Few if any vessels had been called for the exchange sugar as
of Thursday, traders said. Dreyfus has until Dec. 15 to call
ships to ports for loading, according to exchange rules.
Vessel nomination is closely watched by the sugar industry
as it can indicate whether or not there is a home for the sugar.
"One would think to take all that sugar and not have a home
for it would be rather dangerous," said a U.S. trader.
Dreyfus' buying comes at a particularly sensitive time after
the recent slump in prices stirred new demand from refiners in
China, which was the world's biggest raw sugar importer last
Any further recovery in prices seen since the October expiry
would threaten to extinguish the renewed demand, traders fear.
"Everyone needs the market to come back down," said another