October 1, 2018 / 2:28 PM / 2 months ago

UPDATE 2-S. African sugar makes rare appearance in small ICE October expiry

(Recasts first sentence with South African sugar and impact of global glut and EU policy, adds analyst comment, market details)

By Ayenat Mersie and Chris Prentice

NEW YORK, Oct 1 (Reuters) - Raw sugar from South Africa made a rare appearance in the cash delivery against an ICE Futures U.S. contract, exchange data and traders said on Monday, the latest sign of the impact of excess global supplies and changes in European Union policy.

A Louis Dreyfus Company BV unit was the sole buyer of about 271,000 tonnes of raw sugar delivered against the ICE contract that expired on Friday, ICE data showed on Monday. The bulk of the sugar came from Central America, Mexico and Brazil, but the focus was on the unusual presence of South African sugar.

A spokeswoman for Louis Dreyfus did not respond immediately to a request for comment on its plans for the sugar.

It was the first time since at least 2004 that South African sugar appeared in delivery against an ICE futures U.S. contract, the exchange said, though traders said they could not recall a time it had ever appeared.

The South African sugar, to be delivered by ED&F Man, is the latest sign of shifting trade flows in a world awash in excess supplies. South Africa has historically been an exporter to Europe, but a shift in the bloc’s sugar policy in 2017 caused European producers to boost output.

The sale could signal that the changes in the EU left South Africa “nowhere to go but the board,” Michael McDougall, senior vice-president of sales for ED&F Man Capital Markets, said in a note. The exchange, or “the board,” is often seen as a buyer of last resort.

Limits on European Union sugar beet production were lifted in September 2017, drastically increasing regional production and diminishing the need for imports.

“South Africa was only one of the casualties this year,” McDougall wrote.

The delivery totaling 5,337 lots of sugar was worth about $62 million based on Friday’s settlement price of 10.42 cents per lb.

The 5,337 lots of sugar delivered against the October contract were the smallest delivery against an October contract since 2011, according to exchange data compiled and reviewed by Reuters.

The benchmark March ICE raw sugar contract was trading at 11.58 cents per lb, up 0.38 cent, or 3.4 percent, as of 1:07 p.m. EDT (1707 GMT). (Reporting by Chris Prentice and Ayenat Mersie in New York Editing by Jonathan Oatis and Matthew Lewis)

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