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IKAR in Mass Media

Russia`s Sugar Boom Is Stumbling as Exports Struggle to Compete

05 апреля 2019 года

Russia’s difficulty exporting its sugar could slow the expansion of the industry that’s seen a big transformation in the past two decades.

The country has swung from being the world’s top importer of raw sugar to having excess supplies to offload as it improved beet refining and taxed imports to aid domestic producers. But the expansion looks set to slow because Russian sugar prices are still too high to compete in the global export market and its ports can’t adequately handle large shipments.

While Russia is the world’s second-biggest beet sugar producer, it isn’t as efficient at processing as other suppliers, meaning its costs are much higher. Even some of Russia’s close neighbors often prefer to import raw supplies from the other side of the world and refine it, which can be cheaper than buying direct from the Black Sea nation.

Sugar Shift

“That Russia has reached self-sufficiency for the long term is for sure,” said Sergey Gudoshnikov, a senior economist at the International Sugar Organization in London. “I don’t think it will become a leading exporter. It’s hard for Russian sugar to compete with supplies from Europe, Brazil and refining plants in the Middle East.”

With high production costs, competing with the likes of EU exports may be especially hard with global prices near a 10-year low amid ample supplies. Russian inventories will probably swell for a fifth straight year in 2019, and white-sugar exports may drop 73 percent to 137,000 tons this season, according to the Institute for Agricultural Market Studies, known as IKAR.

Azerbaijan and Uzbekistan are proof of how hard it is for Russia to crack the export market. While close to Russia, they often import raw cane from places like Brazil and process it into white sugar. That can be cheaper than buying refined Russian sugar, said Evgeny Ivanov, an analyst at IKAR.

Exports by sea are also a problem because Russian ports lack capacity to load sugar into containers, and its producers haven’t yet adopted internationally accepted packaging practices, such as using certain bags, Ivanov said.

Weak export infrastructure and expensive logistics are barriers to exporting sugar, Marina Sidak, head of the analytical service at Sucden Russia, said at a S&P Global Platts conference in Geneva. While the government is taking steps to compensate transportation costs to support exports, shipments are likely to remain contained to some former Soviet states and central Asia, she said.

Ros Agro Plc, one of the biggest Russian sugar producers, isn’t planning to increase the capacity of its plants significantly, Chief Executive Officer Maxim Basov said last month. Instead, it will work toward reducing production costs by improving the technology to store beets, which tend to perish quickly. The Agriculture Ministry sees beet plantings holding steady this year.

“Over the long term, the industry’s prosperity depends on just one factor: a constant reduction of production costs,” Gudoshnikov said. “If the costs come down, Russia will have a better chance to ship sugar outside of the country.”

https://bloomberg.com/

Source: Bloomberg  |  #sugar   |  Comments: 0   Views: 846

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