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IKAR in Mass MediaRussia prepares to launch sugar futures24 сентября 2007 года MOSCOW, Sept 18 (Reuters) - Russia's RTS exchange expects up to seven firms to trade when it launches the country's first sugar futures contract on Wednesday, as producers hedge risk ahead of a second successive year of record beet sugar output. Traders in Russia and western Europe said the launch of the white sugar contract on the RTS bourse would have more chance of success than previous attempts, due to the increased maturity of the market in the world's largest importer of raw sugar. But questions remain as to the amount of liquidity the contract will be able to attract. "The success will depend on the ability of the sugar contract to attract independent investors," the International Sugar Organization's senior economist, Sergei Gudoshnikov, said. Russia refined a record 3.3 million tonnes of sugar from its own beet last year -- more than half its total consumption -- and expects production to hit 3.4 million tonnes this year as refineries invest in equipment and farmers sow more beet. The RTS contract will apply to five-tonne lots of white sugar. The price will be in roubles per kg and delivery terms will be free on rail, meaning the seller pays to deliver the sugar to any station in one of two southern Russian regions. "Tomorrow we expect around five to seven participants," said Sergei Danov, head of derivates development at the RTS. "There has been interest from practically all participants in the Russian sugar market, including the 'Big Five'," he said, referring to Prodimex Group, Evroservis, Rusagro-Sakhar, Dominant and Razgulay . "We hope that about a third of trade will be from those companies with foreign capital," Danov said. French-owned merchant Sucden, with three refineries in Russia, is one of the country's leading producers. U.S.-owned food giant Cargill is also a major trader and owns 25 percent of the Nikiforov refinery in Tambov region southeast of Moscow. HEDGING RISK The first monthly contract traded would allow suppliers to sell forward for November delivery. The March contract, which will also be launched on Wednesday, would offer arbitrage opportunities against the New York market, Danov said. Valery Zvyagin, deputy head of derivatives at the RTS, said the main advantage of futures trading would be insurance against any unfavourable price moves. "While large companies hesitate, smaller players have a great chance to increase their market share by using futures contracts," Zvyagin posted on an Internet forum hosted by the independent Institute for Agricultural Market Studies (IKAR). European dealers said they expected big producers of refined sugar in Russia, such as Sucden, to use the contract primarily as a hedging tool. "A futures market that manages risk should be welcome," one senior London-based white sugar futures trader said. "The trade will be looking at the market as a means of hedging risk," another trade source said. "However, I suspect that the top five or six producers will not be too happy at having the market so transparent." Denis Demenkov, finance director for Russky Sakhar, said he was impressed by the contract and welcomed its introduction. "It's of interest to everyone. The farmer can better understand how much their sugar is worth and we, as a sugar producer, would be interested in using the scheme to dispose of our stocks, especially in the autumn," said Demenkov, whose company operates the Nikiforov refinery part-owned by Cargill. Dealers said the big question mark was the level of liquidity that would flow into the Russian sugar futures market. They said large international investment funds and speculators were unlikely to get involved at the start. Another contributor on the IKAR forum, who gave his name as 'private trader', said the contract would interest speculators. "Food prices have become unstable, plus there's a seasonal factor, so we need to examine sugar. Indeed, it's a strategic commodity." A Moscow-based sugar trader said by telephone: "Time will tell. The market will tell. The sugar market in Russia is very changeable, so it's very difficult to give any sort of long-term forecast." Details of Russia's first sugar futures contract follow: Bourse: RTS exchange Contract months: March, May, July, October, November Source: Reuters | #sugar | Comments: 0 Views: 122
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