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22 Nov 2023

Commodities in Focus Weekly: Sugar rush: Laytime and demurrage under sugar contract rules

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Sugar's rally shows no sign of souring. In early August, we wrote about the impact of the El Niño phenomenon on the upcoming sugar harvest.1 Since then, extreme heat and low rainfall due to climate change have also contributed to low yields in Asia.2 For example, India's sugar production is likely to fall by 8% this season and, with sugar also being diverted for ethanol production, the government has introduced an export ban.3 Global inventories are at their lowest level in 13 years, leaving the world craving sugar supplies from its top producer: Brazil.4

However, logistics are being stretched and logjams are afflicting Brazilian ports. We offer guidance on the demurrage provisions in the Refined Sugar Association Rules and Regulations (the "RSA Rules"),5 the Sugar Association of London Rules and Regulations (the "SAL Rules"),6 and the ICE Futures U.S. Inc. Sugar No. 11 Rules (the "No. 11 Rules")7 as demurrage is of the main ways this congestion is likely to impact traders buying and selling Brazilian crop.

Click here to read more.

 

 

1 cif-weekly-40.pdf (shlegal.com)

2 Financial Times, 'Extreme weather hits lovers of sweet treats in the pocket' (30 September 2023); Financial Times, 'Sugar: rain pain ensure price will cane it for a while' (9 November 2023)

3 Reuters, 'India braces for 8% sugar output dip as cane crop suffers-trade body' (1 November 2023)

4 Bloomberg, 'A World Desperate for Sugar Sees It Pile Up in Brazilian Ports' (1 November 2023)

5 Effective 2 March 2021.

6 Effective 31 July 2019.

7 Effective 26 April 2021.

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Emma Skakle

Emma Skakle
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T:  +44 20 7809 2335 M:  Email Emma Office:  London