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IKAR in Mass Media

RUSSIA NOT EXPECTED TO IMPOSE RAW SUGAR DUTY BEFORE APRIL

20 февраля 2007 года

Russia will not impose a seasonal import duty on raw sugar before April, the deputy head of the Union of Sugar Producers, Sergei Mironov said.

The union proposed imposing a seasonal duty of $270 per tonne as of March 1 for a period of five months, but judging by how slowly this issue is being discussed, the duty cannot be imposed before April, Mironov told Interfax.

A number of issues still have to be settled with the Finance Ministry and Economic Development and Trade Ministry, he said. In particular, opponents of the duty think the new mechanism for regulating imports could accelerate inflation.

But our calculations do not confirm this. According to data from the Federal Statistics Service, the wholesale price for sugar in Russia was 15,400 rubles per tonne (not including VAT). If the seasonal duty is introduced, the price could increase to 15,900 rubles, or by 3.5%, Mironov said.

The seasonal duty would correct the unfavourable price situation and balance sugar prices so that they would allow the industry to develop, he said. The price has fallen to 13,000 rubles per tonne recently, and such a considerable drop has above all reduced the income of agricultural producers, who are currently the main sellers of sugar, Mironov said, adding that 2 million tonnes of sugar remain unsold after the sugarbeet harvest.

He said the duty would reduce raw sugar imports from a tentative 2.6 million tonnes in 2006 to 2.4 million tonnes this year, which would maintain growth in domestic production of sugarbeet and beet sugar, gradually enabling Russia to replace sugar made from imported raw material with domestic product.

The seasonal duty will help maintain the upward trend in sugarbeet and beet sugar production that we have seen in the past three years, Prodimex group chairman Igor Khudokormov agreed.

Russia harvested a record 29.9 million tonnes of sugarbeet in 2006 and produced a record 3.2 million tonnes of beet sugar.

Khudokormov said the margin of raw sugar importers will not change, as it is determined by fluctuations in demand and supply, not by the level of duties.

Dmitry Rylko, the head of the Agrarian Market Institute (IKAR), said the sugar market is currently in a deep depression caused by excess stocks. If the situation is left to develop on its own, rices will continue to fall, with all the corresponding negative consequences for the sugarbeet harvest, he said.

Therefore, the introduction of the seasonal duty is aimed, above all, at restricting imports of raw sugar and thus prevent a collapse in prices on the country's sugar market and prevent the suspension of investment in the domestic beet sugar industry, he said, adding that investment has been quite substantial in recent years.

The duty would not have a major impact on retail prices, since Russia already has huge reserves of relatively cheap sugar, world prices are dropping and thirdly, retail prices in general live an independent life, Rylko said.

If imports are not restricted, transitional sugar reserves in the country will reach the highest level in the market's history, which means we can again give up hope of a complete recovery and development of the domestic beet sugar industry, IKAR chief analyst Yevgeny Ivanov said. Imports could increase sugar stocks to 3 million tonnes by the end of March from 1.8 million tonnes a year earlier, he said.

Russia imported 156,000 tonnes of raw sugar last November and imports doubled to 303,000 tonnes in December, compared to imports of respectively 50,000 tonnes and 70,000 tonnes in the same periods of 2005, according to IKAR. Experts reckon that, under the current regime, month imports could increase to at least 400,000 tonnes.

Raw sugar imports are currently regulated by a floating duty that is set according to a scale that takes into account prices on the New York Mercantile Exchange.

Russia's sugar market is estimated at almost 6 million tonnes per year. The gap between demand and supply of beet sugar is filled by imports and processing of raw sugar, but the share of raw sugar in the country's sugar resources has been shrinking in recent years.

Source: Interfax  |  #sugar   |  Comments: 0   Views: 105

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