Russia will produce more than 7,2 million tons of sugar this year, analysts expect. That is 18% more than last season. Where are the Russians going with that increased production?
The record production in Russia is partly due to the larger area of sugar beet. Despite the fact that the government and market experts discouraged expansion, the area is said to have increased by 2% last year. In addition, growing conditions were favorable, which is why trade association Soyuzrossahara estimates that sugar beet volume will increase by 9 million tons this year to just over 50 million tons.
At the same time, the average yield from sugar beets in the country is increasing. Last year the sugar yield increased by 0,6 tons to 6,2 tons per hectare. The productivity has more than quadrupled in 20 years and is expected to increase further to 7 to 8 tons per hectare in the coming years.
Sugar supplies
Exact figures for sugar consumption in Russia are lacking. The Russian market agency IKAR estimates consumption at 6 million tons. That would mean that, if the production estimate is correct, Russia has 1,1 million tons of sugar available for export. Add to this the sugar reserves already present in the country. According to IKAR, this will increase to 1,5 million tons in the spring of 2020. Export could contribute to eliminating sugar surpluses.
IKAR expects that Russia can sell 0,8 to 1,1 million tons of sugar on the traditional markets this season. These are the markets that the Russians can reach by rail and road. Countries such as Armenia, Belarus, Georgia, Kyrgyzstan and Kazakhstan, Afghanistan, Mongolia and North Korea are important markets for Russian sugar. If Russia wants to increase export volumes, it will have to invest in shipping via sea containers, according to market analysts. The infrastructure is not yet sufficient. The country needs large port terminals, which will allow exports via the Black and Baltic Seas.
Price almost halved
The question is whether Russia can compete with other countries. According to Evgeny Ivanov of IKAR, this is currently the case, as sugar prices in Russia are now among the lowest in the world. Due to the large increase in production and high stocks, the sugar price in Russia is said to have fallen 10% in the past 46 months. Ivanov: "The volume of world sugar trade is 60 million tons. If our prices are competitive, we can send any volumes to any market. Our grain exports are an example of this. They have grown enormously over the past 20 years thanks to the development of port terminals."
Russia has not long played a significant role in the international sugar market. Only in 2016 was the harvest larger for the first time than the country uses annually. Russia was able to do this in 2016-2017 for the first time export a significant volume of sugar. This involved 350.000 tons of sugar, 5% of the total sugar production in the country at the time.
Central Asia
Deputy Prime Minister Alexei Gordeev emphasized during a meeting with President Putin that 20 years ago, 85% of the sugar consumed in Russia was imported. "Now Russia exports sugar with confidence." According to him, the markets in Central Asia are particularly promising for the Russians. Gordeev also said he supported a proposal from FAS, the state anti-monopoly body. This forces producer organizations to develop exports in order to create more balance between supply and demand on the sugar market. "The association of sugar producers allows us to operate more powerfully in export markets."