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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


12 October 2012

USDA GAIN: Russia Sugar Semi-AnnualUSDA GAIN: Russia Sugar Semi-Annual

FAS/Moscow estimates Russia’s 2012/13 beet sugar production to fall from last year’s record, but still be at the second highest level in history as availability and production of sugar beets is expected to remain large. Russian imports of raw cane sugar sharply decreased in 2011/12, and are only expected to grow slightly in 2012/13 because of this strong domestic production of sugar beets and beet sugar.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Production:

Sugar Beet Area and Sugar Beet Production

Sugar beet planted area decreased 9.1% in 2012 due to a number of factors. First, planting was delayed in the South of Russia because of cold weather. Also, because of the huge crop in 2011, farmers experienced high losses as a result of lack of beet storage facilities and processing capacities to handle the huge volume and this discouraged farmers from increasing area. Despite these factors, planted area still remained at a high level in 2012 as a result of continued strong prices for beets. Average prices for beets in 2011/12 were at 1,602 rubles/MT, down less than 2% from 1,636 rubles/MT in 2010/11 when production was far smaller.

FAS/Moscow estimates overall sugar beet production at 42.5 MMT in 2012, down 11% compared to 2011/12. This is due not only to lower planted area but also poorer yields in Southern regions due to continued dryness in early summer 2012.

Beet Seed Production

Sufficient domestic production of beet seeds continues to be a problem for domestic growers. The Russian Ministry of Agriculture is supporting beet seed production to decrease the dependence on imported seed, which are often not adapted to the Russian climate. The Russian sugar beet industry considers the absence of facilities for treating beet seeds as a bottleneck to attaining self-sufficiency. With funding from Federal programs, a seed treating plant was constructed in Voronezh oblast. The plant was put into operation in March 2011 and by the end of the year has already produced 100,000 units of coated sugar beet seed units (1 unit =100,000 seeds), including 2,500 seed units from sugar beet seed of domestic breeding. It is planned that by 2015, the share of domestic selection seeds will be 43% of the total beet seeds supply and when at full capacity this one plant will cover 35% of the Russian needs in sugar beet seeds.

Beet Harvesting September 2012 Russia

As of early October harvesting of sugar beets in Russia was about half completed. The pace of harvesting was ahead of last year’s pace but the yield and gross harvest were down. By October 2nd, 19.0 MMT of sugar beets were harvested, compared to 21.5 MMT by October 12th last year. This production gap between this year and last year, however, is expected to shrink as the harvest progresses. This is because early beets are harvested from the South, which was hit by severe dryness this year, but then the harvest progresses northward where the growing conditions were good this year.

Although average yield is down, early reports are that root weight and sugar content as of early September are up slightly from last year. It is expected that root sugar content will actually increase as harvesting moves to the north where the sugar stored in the root increases rapidly as winter approaches.

Sugar Production

FAS Moscow forecast production of 4.85 MMT of white beet sugar in raw value basis in 2012/13 following the five-year trend (excluding the 2010). This is 11.8% less compared to 2011/12 due to lower domestic beet production and expected lower sugar extraction due to excessive precipitation during vegetation period.

In 2011/12, due to very large beet stocks as a result of record production, domestic processing of sugar from beets lasted until March 2012, while in the previous 3 years the switch to processing of sugar from cane happened in January (See Chart 1 below). As a result the timeframe of sugar processing from raw cane sugar has been significantly curtailed in 2012. Production of white sugar from raw cane sugar accounted only for 352,500 MT in October 2011 – July 2012 compared to about 1.35 MMT in October 2010 – August 2011.

Sugar Production from Sugar Beets and Raw Cane Sugar by Month, in 2009-2012, MT

Source: Rosstat

Customs Union: Sugar Production and Industrial Activity

The entire Customs Union (Russia, Belarus, and Kazakhstan) produced 8.31 MMT of white sugar in CY 2011, including 5.27 MMT from sugar beets. Sugar from beets occupied 66.6% of total (7.087 MMT) Russian sugar production; 7.1% of total (238,000 MT) Kazakhstan production, and 53.5% of total Belarusian sugar production (985,000 MT), and the figures for 2012 are expected to show an even higher percentage from beets.

Consumption:

In 2006-2010 consumption of sugar in Russia ranged from 37 kg per person in 2009 to a high of 40 kg in 2008 dependent on beet sugar production and domestic and world prices. There is also variability by region and in sugar beet producing Southern and North-Caucuses regions consumption was 42 kg and 44 kg per person respectively, while in the Ural, Siberian and Far East regions (removed far from sugar beet producing zones) consumption was about 34-36 kg.

Consumption of sugar is not growing linear to production of sugar containing products as the food processing industry increases utilization of sugar substitutes. The chairman of the Russian Union of Sugar Producers has proposed to maintain the current level of rates of duty on citric acid, yeast food, and confectionery products after Russia's accession to the WTO, and to restrict the use of artificial sweeteners and high-energy glucose-fructose syrups.

Wholesale and Retail White Sugar Prices RUR/kg

Source: Russian Ministry of Agriculture

Trade:

Raw Cane Sugar Imports

FAS/Moscow forecasts raw sugar imports in 2012/13 increase slightly from 2011/12 to but remain at relatively low levels because of continued strong domestic production, and continued high imports of white sugar from Belarus (where domestic production is also large). Imports are estimated at 700,000 tons, up from 500,000 tons in 2011/12 but far below the 2.3 MMT in 2010/11. In the first half of 2012 Russia imported 415,000 MT of raw sugar, which is about 82% less than in the first half of 2011 when the Russian Government increased the time window for low-duty raw sugar imports (beginning in March rather than at the beginning May).

According to Russian Customs, Russia imported 422,283 MT of raw sugar in October 2011 -- July 2012 compared to 2,258,774 MT in October 2010 -- July 2011. Imports from Brazil accounted for 42.3% (313,240 MT) of total raw sugar imports, Cuba --14.6% (61,459 MT) and Thailand – 10.4% (43,751 MT) in October 2011 -- July 2012.

White Sugar Imports

FAS/Moscow forecasts white sugar imports in 2012/13 to fall only slightly to 200,000 from 250,000 MT in 2011/12 as imports from Belarus are expected to remain strong due to high production there. Russia imported 43,451 MT of white sugar from the world (excluding Belarus) in October 2011– July 2012 which is 44% less compared that period the previous year. Poland’s and Lithuania were the largest exporters of white sugar to Russia other than Belarus.

According to the Custom Union Statistic Service, in Calendar Year 2011 Belarus exports were strong with exports to Russia at 192,919 MT (worth $158 million) and to Kazakhstan 52,853 MT, worth (worth $58.85 million).

White Sugar Exports

According the Ministry of Agriculture, Russia exported a record 300,000 MT of sugar, (worth almost US$200 million) in marketing year 2011/12. About half of this amount went to Kazakhstan. FAS/Moscow forecasts white sugar exports in 2012/13 to remain at 300,000 MT because of high sugar availability and continued strong demand from Customs Union and other CIS members.

Free Trade Zone Will Protect CU Sugar Producers from Imported White Sugar

A CIS Free Trade Zone within the Commonwealth of Independent States to Ukraine, Russia and Belarus came into force on September 20, 2012. The agreement stipulates that the parties do not apply in relation to each other customs duties (and other payments equivalent to them) except for those listed in the annexes of the agreement. A list of duty exemptions includes sugar supplied from to Russia, Belarus, Kazakhstan and Moldova include the following: For sugar supplied from the countries of the Customs Union, the duty will be $340 MT. For sugar supplied from Moldova the duty will be 75% of the customs value (until 2015). For sugar supplied from the Customs Union and Moldova to Ukraine, the duty will be 50% of the customs value.

Russia Exports of Molasses

Russia also exported about 600,000 MT of molasses in 2011/12, a five-fold increase compared to 20110/12. Of this molasses total, almost two-thirds went to just 3 markets, Vietnam, Turkey and Ukraine. Profitability of molasses exports is low due to its low price and high transportations costs to the destination country. However producers are using this possibility to utilize by-products and increase its beet processing industry efficiency as demand from the domestic livestock production is low.

Russian Exports 1703, Molasses Resulting From The Extraction Or Refining Of Sugar

Source: World Trade Atlas

Import Duties

Starting on August 23, according with WTO accession, Russia released new duty schedule for sugar. The current raw sugar import duties vary within a year from a minimum $140/MT when the average monthly price at the New York Mercantile Exchange is more than $356.84/MT (excluding period from May 1 to July 31when the average price is not less than $485.03/MT) up to a maximum $270/MT, when the New York Mercantile Exchange average monthly price is less than $286.60/MT. Previously, the duty on seasonal imports of raw sugar from May through the end of July had been as low as $50/MT, but now the minimum is $140/MT throughout the year.

Policy:

The State Program 2013-2020

The Russian State Agricultural Program for 2013-2020 calls for the share of beet sugar in total sugar supplies (including stocks) to be 93.2% by the end of the year by 2020 (for comparison, for 2012/13 it is 78%). Many of the other goals in this program have already been met or surpassed in 2011/12 and 2012/13 because of the large sugar beet crops. For example, the program calls for sugar beet production to reach 41 MMT (production in 2011/12 and 2012/13 are above this), and beet sugar production 5.4 MMT (which was exceed in 2011/12). Also it calls for sugar exports to increase to 250,000 MT (and exports are estimated at 300,000 MT for 2011/12 and 2012/13).

Zero Tax for Farmers

The Russian State Duma adopted in the second reading on September 14, 2012 a bill to make permanent a perpetual zero rate of income tax and other tax benefits for farmers. According to the existing legislation, this exemption would have ceased to have effect starting January 1, 2013. In addition, grants and subsidies allocated from the budget for farmers are also exempt from income tax. The text of the bill notes that the amendments are designed to protect Russian agricultural producers from the WTO accession negative effects.

State Support Structure Changes to comply with WTO commitments

According to Russian government officials, all the regulations necessary to evolve mechanisms of state support of agriculture in compliance with Russia's WTO accession will be developed by the end of October. Such measures will be dealt with fuel and fertilizer subsidies, lending support and export promotion.

October 2012

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