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IKAR in Mass Media

Low sugar price fuels talk of cut in FSU beet area

15 мая 2013 года

Ukraine's sugar beet sowings have fallen even further than had been thought thanks to weak prices of the sweetener, sugar giant Astarta Holding said, amid doubts over plantings in neighbouring Russia too.

The group, Ukraine's top sugar producer, said that domestic plantings had plunged 45% year on year to some 250,000 hectares, which would be by far the lowest figure since the collapse of the Soviet Union, falling below the 322,000 hectares reached four years ago.

The figure is below a government estimate of sowings of 293,000 hectares, while Ukrtsukor, the Ukrainian sugar producers' union, had pegged plantings at 360,000 hectares.

The decline reflects, besides the weak international sugar price, extra pressure on Ukrainian values from "sizeable inventories" which high loan interest rates have made expensive for companies to fund, prompting liquidation, Astarta said.

"The situation was complicated by high protective barriers for Ukrainian sugar by some traditional importers in the former Soviet Union," the company added.

The customs union of Russia, Kazakhstan and Belarus in fact raised to $205 a tonne, from $140 a tonne, its raw sugar import duty as of the start of this month.

Beet vs cane

Raw sugar prices in New York actually fell below 17 cents a pound on Wednesday for the first time since 2010, thanks to the strong Brazilian harvest, putting them at a level below that believed to be the cost of production in most producing areas.

"There is not much that Brazilian producers can do about it as they already have the crop in the ground," Macquarie analyst Kona Haque said, if adding that investment in cane stands may decline, potentially effecting production in future seasons.

"But it is different for beet producers. You could see producers in the likes of Russia and Ukraine having turned to other crops.

"A price of 17 cents a pound cannot be very attractive for them."

Farmers in Russia, historically one of the world's top sugar importing countries, will cut beet sowings by 20% this year, consultancy Ikar forecast in March.

US Department of Agriculture officials have reported the cost of sugar beet production in Ukraine last year at about $1,600 per hectare, compared with $800 per hectare for corn and $500 per hectare for wheat.

Profits rise

Astarta said that the drop in Ukraine beet sowings looked set to leave much of the country's processing capacity idle.

"Plenty of sugar plants, including those belonging to big integrated producers, will not operate, at least in this season," the group said.

"Consequently, one could expect material drop in sugar production."

The comments came as the group unveiled a 33% jump to E11.4m in earnings for the January-to-March period, on revenues up 29% to E83.3m, despite lower sugar prices.

The group flagged 22% growth in revenues at its dairy operations, which boast a herd of more than 15,000 head, besides 66% growth in agricultural revenues.

Astarta shares, which are listed in Warsaw, jumped 5.0% to 56.70 zloty in morning deals.

Source: Agrimoney.com  |  #sugar   |  Comments: 0   Views: 72

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