IKAR in Mass and Industry Media

RUSSIAN SUGAR INDUSTRY THREATENED BY OVERPRODUCTION – ANALYSTS

Interfax

The Russian sugar industry faces the threat of overproduction, and sugar prices continue to fall, sugar market analysts say.

"The current situation on the sugar market can already be called a crisis of overproduction," said Sergei Mironov, deputy chairman of the Russian Sugar Producers Union (Soyuzrossakhar).

This is above all attributable to the fact that the production of sugar made from raw sugar has increased significantly in recent months, he said. "Many companies sharply increased sugar imports to the country in anticipation of the introduction of a seasonal duty on raw sugar, and this has led to overproduction," he said, noting that raw sugar production totaled 769,000 tonnes on March 1 compared to 401,000 tonnes a year ago on the same date.

In addition, Russia produced a record-high 31.45 million tonnes of sugar from sugar beets in 2006, he said. "This amount would easily suffice until the end of spring, but the raw sugar has complicated the situation," he said. As a result, sugar prices have fallen 20% over the last six months, he said.

The Federal State Statistics Service said the wholesale factory gate price on granulated sugar was 13.7 rubles per kilogram in January compared to 17.2 rubles six months ago.

The union had proposed imposing a seasonal duty of $250 per tonne as of March 1 for a period of five months to limit imports of cheap raw sugar to the country.

Agrarian Market Affairs Institute (IKAR) leading analyst Yevgeny Ivanov also said the continued drop in sugar prices - 18 weeks in a row - is the result of excess sugar on the market. Besides an increase in the production of sugar from sugar beets and raw sugar imports, he said the drop could also be attributed to continued imports of white sugar from Belarus and other CIS countries as well as the EU, particularly the Kaliningrad region.

IKAR analysts said overproduction has been seen in a number of Russia's neighbors, such as Belarus, Ukraine and Moldova.

The situation is being complicated by the fact that the planting season is underway and farms are likely trying to step up sales of last season's sugar. "The bottom has not likely been hit yet, and the Russian market will continue to slowly decline for the next few weeks if not months," he said.

Russia produced 5.8 million tonnes of granulated sugar (from both sugar beets and raw sugar) in 2006, up 3.4% from 2005. The country consumes almost 6 million tonnes of sugar per year.

21.03.07

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