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Russia eyes $2 bln sugar overhaul, weather permitting

30 сентября 2009 года

MOSCOW, Sept 29 (Reuters) - Russia may supply $500 million in subsidies to help its sugar industry boost production by 42 percent in 2012, a draft government programme showed, though the plan will depend on good weather and non-accession to the WTO.

The latest draft of the Russian beet sugar development programme, seen by Reuters on Tuesday, said a $2 billion sector overhaul could boost beet sugar output to 4.32 million tonnes, or 67 percent of the its total sugar production, in 2012.

Russia, the world's No. 2 raw sugar importer, produced 57 percent of its sugar from domestic beet last year and expects to refine 3.05 million tonnes of sugar from this year's crop, down from a record 3.55 million tonnes in 2008.

"Every government programme should be viewed as a 'maximum' programme," said Yevgeny Ivanov, sugar market analyst at the Moscow-based Institute for Agricultural Market Studies (IKAR).

"The draft took a lot of effort to compile, but its full implementation depends on a number of different factors."

The three-year government plan, drafted by the agriculture and economy ministries along with industry lobby the Russian Sugar Producers' Union, envisages boosting refining capacity to 385,960 tonnes per day by 2012 from 284,140 tonnes currently.

To achieve this, Russia must improve seed quality and build new refineries, as well as upgrade existing plants and to cut losses during harvesting, shipment and storage.

The government is targeting investment of 59.6 billion roubles ($1.98 billion) and is prepared to supply 15 billion roubles in subsidies, the draft programme showed.

Sugar producers themselves should invest 9.3 billion roubles between 2010 and 2012, while banks can lend the remaining 35 billion roubles necessary for the programme, it said.

Russia has 76 refineries processing sugar beet. Leading producers include Razgulay , private firms Prodimex and Rusagro and French sugar giant Sucden.

WTO, WEATHER AND MARKETS

The plan targets an increase in Russia's gross sugar beet crop to 36.2 million tonnes in 2012 from 31.2 million in 2010.

But its implementation is contingent on good weather and could be threatened by volatility on world sugar markets or Russia's accession to the World Trade Organisation before 2012.

"Unfavourable weather conditions may cut yields and sugar content, as well as the planned beet crop," the government said.

And, should Russia join the World Trade Organisation, it will be forced to cut the upper level of its raw sugar import tariff to $250 per tonne from $270.

"This will cause a rise in imports to 3.3-3.5 million tonnes, equal to 60 percent of consumption volumes, and will lead to the stagnation of domestic production and the destabilisation of the domestic sugar market," the draft said.

In such a scenario, sugar refining from domestic beet would fall to 2.5 million tonnes, the government said in the draft.

Russia appeared to take a backward step in its 16-year bid to join the WTO in June, when Prime Minister Vladimir Putin said Moscow would only join the trade bloc as part of a customs union with ex-Soviet states Belarus and Kazakhstan.

The draft showed Russia planned to set equal import tariffs on raw sugar for Russia, Kazakhstan and Belarus. It proposes raising the low end of the raw sugar import tariff to $180 per tonne from the current Russian level of $165.

"Volatility on the international sugar market, coupled with the absence of efficient customs tariff regulation, may cause a decline in the sugar beet area to 600,000 hectares and of beet sugar refining by 1.7 million tonnes," the government said.

The draft provided the following target figures for the beet sugar sector:

2010 2011 2012
Beet sugar output (mln tonnes) 3.73 3.91 4.32
Sowings area (ha) 859,000 895,000 981,000
Yield (tonnes/ha)30.23 31.06 38.596
Gross beet crop (mln tonnes) 31.2 32.7 36.2
Beet losses during harvesting and shipment (pct) 12-15 n/a 8-9
Beet supply to refineries (mln T) 27.5 28.8 31.4
Beet losses during storage (pct) 3.6 3.3 3.0
Sugar content in beet (pct) 16.8 16.9 17.3
Sugar output (pct) 13.56 13.58 13.76
Production capacity(T/Day) 302,300 310,600 385,960

($1=30.13 Rouble)

Source: Reuters  |  #sugar   |  Comments: 0   Views: 65


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