Sugaronline Editorial - From Russia with love By Meghan Sapp

Published: 02/17/2017, 12:15:00 PM

Ukraine has some new competition in the CIS and Central Asia regions.



Ukraine has some new competition in the CIS and Central Asia regions

 


As the world market’s availability tightens in Q2 just before it swings back into a surplus, the Central Asian region got a Valentine’s Day card from its neighbour Russia. They have 500,000 metric tonnes of surplus sugar to export and its available now.

Though that may come as a welcome relief to the CIS countries and others in the central Asian region like Kazakhstan who has a 400,000 tonne import demand, Russia’s sudden switch from net importer to net exporter may add further pressure to global prices that may not be quite so welcome by others.

Speaking at the Dubai Sugar Conference this week, Rusagro Sugar’s CEO explained that this switch to exporter is not a blip as a result of one-off spectacular yields but is the result of nearly a decade of concentrated effort to boost yields and planted area with the express aim of supplying the region.

Since 2008, sugar yields have grown on average 7% per year since 2011 while growing area has grown 7% since 2013. Together that saw 2016 production reach a record 6.1 million tonnes, 900,000 tonnes more than the previous year that led to a 500,000 tonne surplus, though less than the 1 million tonnes they thought in October could be exported this season. Similar results, weather permitting, are expected for 2017 as well. Unless, of course, thanks to increasing production capacity at some factories that figure goes up and creates more supply availability on the market.

The timing is poor due to the reintroduction of European sugar onto the global market this fall, adding more surplus that will weigh on prices, but the advantage is that the markets Russia intends to service are logistically challenging for any but the nearest suppliers. Rusagro says that between the CIS and Central Asian countries there is import demand of 1.69 million tonnes.

Competition in the region will then likely be between Ukraine, whose exports reached 465,900 tonnes in 2016 following production of more than 2 million tonnes in 2016/17, and those who have dominated the market so far by excelling with complicated logistics. With the Ukraine focusing on new African and Asian markets, they may leave the more complicated trades to Mother Russia.

But Russia’s entry to the market may erode some of the high prices that have compensated for the challenges in the past, creating competition where it isn’t welcome—except by the local consumers who will no doubt welcome lower prices thanks to Russia’s Valentine’s Day gifts.

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