According to the info from Institute of Agricultural Market Studies (IKAR), in the 2019/20 season sugar export from Russia exceeded 800 thousand tons compared to 234 thousand tons last season. About this “Agroinvestor” told the leading expert of IKAR Evgeny Ivanov. “Access to unprecedented volumes is already a feat for all market participants,” he emphasizes. However, the expert does not exclude that, in the most favorable scenario, export this season may exceed even 1 million tons.
True, excess sugar reserves in Russia by the end of this year’s beet harvest by March-April 2020 will amount to about 1.5 million tons, Ivanov estimates. “This is the ideal amount we ideally need to export this season,” he adds. Earlier, the Ministry of Agriculture estimated a possible surplus of sugar on the market at 1 million tons. And although exports this season have grown relative to the past, especially in recent weeks, and are likely to increase until December, due to undeveloped pre-export infrastructure and restrictions in countries -importers have not yet been able to reach the necessary volumes of supplies, says Ivanov. “We must export at least 100 thousand tons of sugar per month, and for many months in a row,” he emphasizes, recalling that our country had experience shipping abroad up to 125 thousand tons per month in the 1999/2000 season.
However, our exporters on common markets in Central Asia are forced to compete with manufacturers in India and Pakistan, whose foreign sales are subsidized by their governments, Ivanov continues. In addition, logistical restrictions affect the export of sugar by rail and road. “It could be exported by sea, but the necessary infrastructure is lacking,” complains Ivanov. – If raw materials in bulk and in bulk (grain and vegetable oil) Russia learned to export in large volumes, then the export of finished products is still a serious problem. But given our prices for sugar, we could supply it much more abroad. ” But at this year already sugar export from Russia exceeded 800 thousand tons and continues to grow.
At the beginning of this season, surplus sugar amounted to 700 thousand tons, and against this background, prices fell. “Now sugar prices in Russia have dropped to an extremely low level – there have been no such prices in rubles for eight years – since December 2011,” Ivanov emphasizes. – Factories sell their products at 19.5 thousand rubles / ton, while a year ago prices were at the level of 35.5 thousand rubles / ton. This is extremely painful for the industry. ”
True, after lower domestic prices, export prices for Russian sugar became competitive in foreign markets, Vadim Yeryzhensky, deputy director general of the Prodimex holding (the largest sugar producer in Russia), draws attention. From July 1 to October 20, Prodimex exported 50 thousand tons of sugar, plans to export another 150-200 thousand tons by the end of the 2019/20 season. The main distribution channels are Kazakhstan, Kyrgyzstan, Azerbaijan, and Tajikistan, Yeryzhensky lists. Another market leader, Sykden, has shipped about 10 thousand tons of sugar abroad since the beginning of the season. The main sales channels are Armenia, Kazakhstan, Uzbekistan, and Turkmenistan. “Russian sugar is now very competitive in the former Soviet republics, as our suppliers sell it at low prices due to low domestic prices,” says Gleb Tikhomirov, financial director of the Sykden group in Russia. During the season, the company also expects to increase export volumes, however, there are factors hindering supplies. “In particular, Uzbekistan recently introduced a 20% duty on the import of white sugar into the country, and we believe that, first of all, this measure is directed against Russian sugar,” Tikhomirov said. Yeryzhensky says that more active shipments are hindered not only by barrage measures – import duties and excises, in particular from Uzbekistan, but also by complicated and expensive logistics, as well as high competition in the foreign market.
One of the ways to intensify the export of sugar under the prevailing conditions is the joint efforts of exporters. The Ministry of Agriculture recently supported the FAS proposal on granting the right to manufacturers to conclude agreements on the formation of associations for the purpose of export and equalizing the balance of supply and demand, the Finmarket agency reported. Deputy Minister of Agriculture Oksana Lut said that the union of Russian sugar exporters could begin work in early 2020. In her opinion, “the sugar situation in the country is bad” due to overproduction and low prices. According to Tikhomirov, Syukden has no plans to cooperate with other exporters, but Prodimeks, on the contrary, is discussing such an opportunity. “Together it is easier to solve the issues of export organization: to fulfill large contracts, form large parties, organize more logistics points,” Yeryzhensky explains.
In addition, in order to stabilize the EAEU sugar market, the Eurasian Economic Commission previously recommended that they consider the possibility of “setting a minimum price for sugar,” which would make its production profitable. The reason was the situation with the overproduction of sugar, primarily in Russia. The Ministry of Agriculture reminded that the government determines the minimum prices and now this measure applies only to alcoholic beverages and tobacco products. According to Ivanov, he has little idea of how, in practice, it would be possible to establish minimum sugar prices and sugar export from Russia exceeded 800 thousand tons. “It turns out that if prices fall below market prices, it will be necessary to give subsidies to manufacturers. However, the question is whether enterprises will be able to dislodge these subsidies from the state, ”the expert argues. The recommendation to establish minimum sugar prices is an attempt by individual EAEU members to protect their domestic market with non-competitive methods, Yeryzhensky believes. “Prices are dictated by the market, and if the established minimum prices turn out to be uncompetitive, especially in the season, all warehouses of the plants will be overstocked,” Tikhomirov notes.
According to Ivanov, in order to prevent future market oversaturation, the sowing area of sugar beets in Russia should be no more than 1 million hectares. “However, according to my feelings, not all manufacturers are ready to significantly reduce its crops in the spring of 2020,” the expert adds. Earlier, Vadim Yeryzhensky said that Prodimeks did not intend to reduce crops, since the holding should load its sugar factories with raw materials. And in 2019 sugar export from Russia exceeded 800 thousand tons.