Cargill Buys Almost 1 Million Tons of Sugar in Expiring Futures Contracts

Cargill Inc. said that its sugar business took delivery of almost 1 million metric tons of the commodity as part of transactions involving expiring contracts at ICE Futures U.S. and handled by a unit of JPMorgan Chase & Co. (JPM)

JPMorgan Futures accepted delivery on 18,748 ICE futures contracts, or the equivalent of 952,398 tons, from five brokers, the New York exchange said yesterday on its website. The delivery was the biggest for ICE since 2009. The sweetener was sent to the sugar unit of Minnetonka, Minnesota-based Cargill, Pete Stoddart, the director of media relations, said today in an e-mail.

Raw sugar doubled in 2010’s second half on concern that global supplies would trail demand following crop damage in Australia and India. The sweetener touched a 30-year high of 36.08 cents a pound on Feb. 2.

Agricultural prices have a “lot of risks to the upside,” Abah Ofon, an analyst at Standard Chartered Plc, said today by phone in Singapore. “When there’s a risk of supply disruptions, a lot of users would rather take delivery now.”

Raw sugar for May delivery climbed 1.12 cents, or 3.8 percent, to settle at 30.38 cents a pound at 2 p.m. on ICE Futures U.S. in New York, the biggest gain since Feb. 2. In London, refined sugar for May delivery gained $27.10, or 3.7 percent, to $760.50 a ton on NYSE Liffe.

The quantity of the sweetener received represents 9.2 percent of the current year’s U.S. consumption as estimated by the government. Cargill, an agricultural processor and distributor, is the largest closely held company in the U.S.

1.35 Million Tons

“JPMorgan’s futures business accepts and makes deliveries on behalf of clients, as part of our normal business operations that facilitate customer access to global commodities exchanges,” Justin Perras, a JPMorgan spokesman, said today in an e-mailed reply to Bloomberg questions. JPMorgan is the second-largest U.S. bank by assets.

The delivery was the biggest since 1.35 million tons were delivered to satisfy the July 2009 contract, exchange data show. Each sugar contract is for 112,000 pounds (50.8 metric tons). The U.S. will consume 11.41 million short tons (10.4 million metric tons) in the year that began Oct. 1, the Department of Agriculture estimated on Feb. 9.

“The delivery was above the 700,000 metric tons we were expecting,” said Marcos Mine, head of sugar and ethanol trading at ICAP Brasil.

More than two-thirds of the delivered sugar came from Brazil, the world’s largest producer and exporter, according to the ICE report. The rest came from Central America and Thailand. March 15 is the last day for delivery against the recently expired contract.

‘Strong Hands’

“The larger-than-expected delivery against March may have weighed on sentiment initially, but as the sugar was received by strong hands, attention shifted onto the implications for May and May/July spreads,” Nick Penney, an analyst at Sucden Financial in London, said in a report today.

World demand exceeded supply by about 8 million tons last year, Ofon of Standard Chartered said. Improving supplies from Brazil may move the market toward a balance, with either a shortage or an excess of 1 million tons this year, he said.

“Inventories are very low, and users are rebuilding their stockpiles,” Ofon said. “It’s a backdrop against a very tight market.”

The global sugar market will be in deficit for a third year in the 2010-11 marketing season, C. Czarnikow Sugar Futures Ltd. said yesterday. The shortfall is 3.7 million tons now, it said.

Brazilian raw-sugar exports declined 6.5 percent from a year earlier to 915,900 tons in February, data from the Trade Ministry showed yesterday.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Isis Almeida in London at ialmeida3@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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