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IKAR in Mass Media

ANALYSIS: Brazil targets China as Russian sugar buying fades

15 сентября 2011 года

LONDON, Sept 14 (Reuters) - Russia's sugar output set to almost double year-on-year will push it off the scale as an importer, forcing top producer Brazil to turn to the fast-growing Chinese market.

But Brazil will face fierce competition from Thailand, the world's second-biggest sugar exporter after Brazil, which has a big freight advantage to the Chinese market.

Russia, which was until recent years the world's leading raw sugar importer, has traditionally been the top buyer of Brazilian sugar, but that is set to change as Russia moves toward self-sufficiency.

Russia's bumper crop could lead to a near doubling of production of beet sugar to 5.8 million tonnes in 2011/12, meaning that Russia could enter the sugar export market in 2011/12, according to analyst F.O. Licht.

"The market expects Russia to develop a high level of self sufficiency in sugar in the near term," said Julio Maria Borges, a director of analyst JOB Economia in Sao Paulo.

Russia will refine around 4.3 million tonnes of sugar from beets this year, a record volume but still far from what could be expected from this year's big crop due to limited storage and processing facilities, a Russian analyst said.

It increased sugar beet sowings area for this season's crop to 1.3 million hectares from 1.1 million a year ago, when a severe drought cut beet sugar output to 2.74 million tonnes.

Yevgeny Ivanov from the Institute of Agricultural Markets Studies told Reuters that he expected a very small volume of sugar imports to Russia until the end of the year, after Russia raised its import tariff on raw sugar to $85 per tonne in July from $50 and to $140 per tonne in August when the domestic sugar refining season started.

Sergey Gudoshnikov, a senior economist with the International Sugar Organization (ISO), said that if Russia's beet sugar output almost doubles in 2011/12, the country could slide down the rankings as an importer of raw sugar.

CHINA IN THE LIMELIGHT

Analysts believe that Chinese demand for Brazilian sugar will pick up the slack from Russia but note that Thailand will be a strong competitor to Brazil, due to its greater proximity to China in terms of freight.

"China should substitute for Russian imports," said Borges. "Russia is still the number 1 market for Brazil, but China is growing fast and is the next most important client."

Chinese demand has been compounded this year by a drought, and it has been drawing down stocks from state reserves in recent months.

"China is expected by the world market to have a deficit of 2.5 million tonnes next year," said Huang Junfei, a senior analyst with Changjiang Futures.

"A majority of the imports would be used to refill state reserves. Brazilian raw sugar will be the best choice in terms of quality. Also both trading parties (Brazil and China) are familiar with each other after China's large imports this year."

Sterling Smith, senior market analyst with Country Hedging Inc in the United States, said, "The Chinese already do plenty of business with Brazil and we can expect that to continue."

Asian markets, notably China and Indonesia, are expected to buy more sugar from Brazil, said Carlos Murilo Barros de Mello, managing director of the physical and derivatives sugar trading business at Macquarie Bank.

"For 2012/13, as for 2011/12, various markets are opening up for Brazil, especially in Asia, capable of receiving sugar that Russia might eventually cease to buy from Brazil," he said.

"Indonesia has imported growing volumes, and is likely to continue to do so, just as in the case of China."

An alternative supplier to the Chinese sugar market in 2011/12 could be India, the world's second largest producer after Brazil.

India swings from being a sugar exporter to an importer from one year to the next.

"China may not import a large quantity from India, even though a surplus is expected in India, as Chinese buyers are not familiar with Indian supplies, and India's supplies are limited," said Huang Junfei.

Thailand's proximity to China, combined with longstanding trade links, and fierce competition between Thai and Indian exportable supplies, will increase Thailand's incentives to meet Chinese sugar demand, analysts said.

After Brazil, Thailand is the number 2 sugar supplier to China.

Thailand will benefit from rising sugar costs of production in rival Brazil as the South American economy has boomed.

However, Brazil is still by far the main origin for sugar supplies to the world market and, unlike other suppliers, has potential to substantially increase its sugar planted area.

Source: Reuters  |  #sugar   |  Comments: 0   Views: 83

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