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IKAR in Mass Media

Drop in sugar prices to continue in Russia for several weeks - IKAR

15 марта 2006 года

MOSCOW. March 14 (Interfax) - Sugar prices in Russia, which have been falling since the beginning of March, will continue to drop for the next several weeks, a market analyst said.

"Sugar prices will continue to fall and at accelerated rates at the regional level since that was precisely where they grew the most," Agrarian Market Affairs Institute (IKAR) senior analyst Yevgeny Ivanov told Interfax.

He said there has not been such an imbalance in sugar prices in the regions, in the central regions of the country and at sugar plants for a long time as "the margin of small regional dealers has grown significantly."

According to IKAR data, the cost of sugar in the regions dropped from $927 per tonne on February 27 to $821 on March 13. In the central regions of the country, sugar prices dropped from $903 per tonne to $812 over the period. At sugar plants, the cost fell from $903 to $812 per tonne. "However, the consumer market's reaction to this process won't be able to be seen right away - retail prices, as a rule, grow quickly, but drop slowly," Ivanov said, attributing this to the "monopoly of retail trade networks."

Reasons for the drop in sugar prices on the Russian market include the fact that prices have fallen on the world market and an increase in imports of raw sugar, he said. "After passing the peak price of 19.73 cents per pound in early February, the price stopped and now a steady downward trend is expected with the exception of slight fluctuations," he said.

Imports of raw sugar have picked up significantly in recent weeks, Ivanov said. "Even those companies that were waiting in ambush for the last six months have begun importing raw sugar," he said. Imports of raw sugar totaled 136,000 tonnes in January, 270,000 tonnes in February and are likely to exceed 300,000 tonnes in March, according to forecasts.

The increase in purchases of raw sugar has also led to competition among suppliers on the market. Whereas from summer to March, only Brazilian raw sugar was being offered, now Cuban sugar has appeared on the market.

Imports from CIS countries have also led to the drop in the cost of sugar, Ivanov said. Belarus has begun importing exporting sugar to Russia through the recently created single customs checkpoint and "sugar is also gradually seeping in from Kazakhstan, Kyrgyzstan and Moldova," he said.

Commenting on the limits for the drop in sugar prices, Ivanov said the prime cost of sugar produced from imported sugar could be the limit. Based on the most recent exchange quotations, this figure is $707 per tonne, thus "prices still have some room to drop," he said.

The Economic Development and Trade Ministry recently said that sugar import duties might be temporarily abolished as part of anti- inflation measures. Commenting on this statement, IKAR general director Dmitry Rylko said "changing the existing sugar regime could be the most harmful thing for the long-term interests of the sugar industry and the consumer market."

"This could've been done six months ago at the height of the sugar beet campaign, then it would not have caused any damage to the industry," he said. "Now, abolishing the duty could lead to irreparable consequences," he said.

In essence, the government wants to punish the companies that brought raw sugar to the country in order to remove the deficit on the market and lower costs, he said. If the duty is abolished, these companies could suffer huge losses and not be able to function properly on the sugar beet market in the future, Rylko said. The most alarming part of this possibility is that the government is planning to abolish the duty just before the beginning of the spring sowing campaign, he said.

Russia produced 5.6 million tonnes of granulated sugar in 2005, up 15.7% from 2004. Of this total, sugar beet production amounted to 2.48 million tonnes compared to 2.24 million tonnes in 2004. The rest of the granulated sugar produced in Russia came from raw sugar.

Source: Interfax  |  #sugar   |  Comments: 0   Views: 98

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