IKAR in Mass and Industry Media

Record Russia Sugar Output Risks Leaving Nation With Supply Glut

Bloomberg

(Bloomberg) -- Russia is set to increase beet sugar production next year beyond this season’s record, threatening to leave it with a supply glut.

Output has tripled since 1999, when the nation ranked as the biggest importer, to a record 5.2 million metric tons in the season ending July, according to the Russian Union of Sugar Producers. It may reach 5.5 million tons next season as farmers plant more this spring, said Andrei Bodin, head of the union. Russia will probably struggle to absorb excess supply through increasing exports.

“Russian sugar is not currently competitive against other sugar on global markets,” Stefan Uhlenbrock, an analyst at commodity researcher F.O. Licht in Ratzeburg, Germany, said by phone. “I don’t see much sense” in increasing output further, he said.

Russian exports, mostly to neighboring countries of the former Soviet Union, are seen at just 4,000 tons this season, said Evgeny Ivanov, an analyst at the Moscow-based Institute for Agricultural Market Studies. Also, most local producers are unable to store sugar for years like U.S. and European Union companies as high financing costs mean they fund operations with revenue.

Overproduction may reduce domestic prices, Ivanov said.

Russia began producing more of the commodity after it introduced import taxes on white and raw sugar a decade ago, leading to investment in farming beets and upgrading mills, Agriculture Minister Alexander Tkachev said at a meeting with President Vladimir Putin in September. Since 2004, the import levy has been $340 a ton for white sugar and $140 a ton to $270 a ton for raw cane depending on prices on ICE Futures U.S. in New York.

Russia will rank as the 23rd-largest importer of sugar in the 2015-16 season, taking shipments of 800,000 tons in raw value, according to F.O. Licht. Raw cane imports are mostly from Brazil.

14.04.16

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