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Russian Sugar Production Seen Hitting a Record for a Second Year

Bloomberg, 30.12.17

• In November, dollar prices fell to lowest since at least 2010
• Russia may boost sugar exports to 480,000 tons this season

(Bloomberg) -- Russia is producing more sugar than ever, depressing domestic prices.

Beet sugar output may exceed 6.6 million metric tons this season, which started in August, according to the Institute for Agricultural Market Studies, or IKAR. That would be a second straight annual record.

Globally, the sugar market is depressed with too much supply. U.S. raw sugar futures slumped 23 percent this year. In Russia, local prices measured in U.S. dollars dropped to the lowest since at least 2010, according to IKAR data as of November.

While Russia is still a small producer compared with giants like Brazil, its growth in sugar is another sign of the country’s ambitions in agriculture. In the past decade, Russia has become a superpower in wheat and is now the world’s top exporter.

“We have made a colossal breakthrough in past 20 years, and we still have room to grow,” said Evgeny Ivanov, an analyst at IKAR in Moscow. “But the prospect of implementing this potential is greatly hampered by the current low prices. The trough in prices will greatly reduce everybody’s inspiration for investment.”

Russia now produces 5.5 tons of sugar from a hectare of harvested beets, up fourfold from 1996, according to IKAR. Still, other European Union countries with similar growing conditions, such as Poland, can achieve higher output from the same harvested area due to better farming and processing technology.

Weak prices mean some Russian producers are losing money in areas where beet yields are lower and production costs are higher, according to IKAR. That may force some of them to go out of business, leaving their competitors to boost production, Ivanov said.

“The geographic structure of the industry will change,” he said.

Russia may export 480,000 tons of sugar this season, according to IKAR. That’s more than the 329,000 tons shipped out in the previous period, according to the Agriculture Ministry.

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