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Russia may cut raw sugar import tariff from March

Reuters, 24.01.11

MOSCOW, Jan 21 (Reuters) - The customs union of Russia, Kazakhstan and Belarus may cut import tariffs for raw cane sugar to $50 per tonne from March following a drop domestic beet sugar production due to a drought, a market source and analysts said.

"The Russian government is examining lowering the tariff within a set of measures aimed at lowering inflation," the well placed source told Reuters on Friday.

"It is expected to be coordinated at one of the upcoming meetings of custom union experts. Given the urgency of the issue, the tariff may be set from March," the source added.

Currently, the tariff is $140 per tonne, unchanged from October 2010. Brazil, Cuba and Thailand are the main raw sugar suppliers.

Analysts from the Institute for Agricultural Market Studies (IKAR) also said the tariff may be cut earlier than expected.

"A cut in the import tariff to $50 in March 2011 instead of May, as well as an intervention sales (of sugar stocks) from Rosrezerv (the state reserve) are likely," IKAR said in its 2010 sugar review made available to Reuters on Friday. The drought caused a spike in Russian food prices, pushing up its annual inflation to 8.8 percent in 2010, well above a government target of 6-7 percent, Federal Statistics Service data showed this week.

The union's executive commission sets the tariff before the 15th of every month for the following month and bases its rate on the average price of sugar in New York for the preceding month. Russia, the world's third-largest sugar buyer, imported 1.94 million tonnes of raw sugar in January-October last year, up 59.7 percent year-on-year.

Imports fell drastically from June to September after the tariff rose from $50 per tonne in May to $200 in June and $239 in July, before decreasing to $203 in August and $171 in September.


IKAR forecast a decline in raw sugar imports in 2011, saying the country would refine a record volume of white sugar from domestic beets.

"IKAR forecasts sugar imports in 2011 to be no higher than 1.9 million tonnes, compared with 2.1 million in 2010, with consumption of around 5.5 million tonnes," it said in the review.

"The final import volumes will strongly depend on the import tariff dynamics, the situation on the domestic and external markets and prospects of a mega-crop of sugar beet in 2011. Practically all imports will take place in the first half."

Russia will also import 200,000 tonnes of beet sugar from Belarus, some 40,000 tonnes from Moldova, 30,000 tonnes from Kazakhstan and Kyrgyzstan and Kazakhstan, as well as some 5,000 tonnes from other countries of the former Soviet Union, it said.

Another 75,000 tonnes of white sugar mainly from the European Union will arrive in the exclave of Kaliningrad and will be shipped to Russia's mainland in the form of chocolates and other products, IKAR said.

IKAR said a 3.5 percent increase in the area to be sown with sugar beets this year may raise output to over 4.2 million tonnes from 2.73 million last year.

But this will be possible only if refining capacity and sowing areas continue to increase in the regions with a deficit of sugar beet resources. Otherwise losses will increase drastically, the firm said. "But even in this case Russia will produce no less than 3.8 million tonnes of beet sugar," IKAR said. Stocks of white and raw sugar by the end of 2010 fell to 1.99 million tonnes from 2.45 million by the end of 2009 and 3.04 million in the end of 2008, IKAR said.

"Therefore, with the start of a raw sugar processing campaign, monthly (refining) volumes of no less than 120,000 tonnes and low demand for sugar at the start of the year, a significant internal deficit is not expected earlier than in April 2011," IKAR said.

"Much will depend on the date the (low) import tariff is set and on its rate," it added.

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