The situation with delays in sugar delivery through the main commodity exchange in New York has sparked discussions among traders about the sufficiency of existing rules to protect buyers' interests.
The world's largest raw sugar trader, Wilmar International Ltd., was unable to load several ships sold after the expiration of futures contracts in March on the Intercontinental Exchange (ICE) exchange more than two months ago. According to sources, the company did not violate the exchange's rules, but some traders consider such delays unacceptable, Bloomberg reports.
There is a problem with the use of amendments in exchange market rules. The ICE exchange does not set specific deadlines for loading ships after futures contracts expire if the seller pays a penalty for the ship's delay.
Traders from Sucres et Denrees SA and Louis Dreyfus Co. purchased a total volume of 1.3 million metric tons of sugar after the expiration of the March futures, where Wilmar was the main seller responsible for over 80% of deliveries. Since then, the market price has dropped by about 15% compared to the contract closing price, which could lead to losses for buyers awaiting delivery.
Some traders consider delays to be expected due to loading issues at Brazilian ports. In addition, several terminals in the country require technical maintenance.
This situation became the subject of discussion at Sugar Week in New York, where traders from around the world gathered for conferences and meetings. There is a concern that delays may increase after Wilmar sells another 1.6 million tons of sugar expired in contracts in May.
Representatives of the ICE exchange, Wilmar, Louis Dreyfus, and Sucres et Denrees declined to comment on the situation.
This issue was already discussed in 2015 when ICE and the traders' committee considered making changes to futures contracts, including time delivery priority, but no changes were made. Similar delays were also observed when October contracts expired last year, with Wilmar acting as a buyer.
