Low profits drive Black Sea farms out of sugar into grains

Russia’s plan to be self sufficient in sugar is taking a step backwards as struggling farmers shift towards planting more profitable grains such as wheat, meaning increased sugar imports are likely, much of it from Brazil.

Last year’s drought in Russia led many farmers to switch away from sugar, hampering progress towards Moscow’s stated aim of producing 80 percent of domestic consumption.

A decade ago, Russia was the world’s biggest raw sugar importer, but has steadily reduced its requirement.

“Two years ago, the Russians were on track to self-sufficiency. Now they have retreated,” Sergey Gudoshnikov, a senior economist at the International Sugar Organization, said.

He said the area planted to sugar beet in Russia was expected to fall some 15-20 percent year-on-year in 2013/14 as many farmers turned to grains, notably wheat.

As a result, Russia’s 2013 wheat crop is estimated to rise by a third this year.

“Last year’s drought resulted in a drawdown of grain stocks and high domestic prices of grains,” Gudoshnikov said.

Efficiency gains in sugar beet farming and processing will limit the fall in output, some analysts have suggested, as Russia’s sugar industry has invested heavily in new plant and equipment, and in better seeds and fertilisers, to modernise the sector and boost yields.

“A 20 percent drop in area can’t be compensated for solely by efficiency gains,” Gudoshnikov said.

A Russian producers’ representative said he expected Russia to boost raw sugar imports.

“Russia is able to produce enough sugar from beet to cover its needs, but will continue to import raw sugar in the next three years due to low margins and a fall in acreage,” Andrei Bodin, chairman of the Russian Sugar Producers’ Union, said.

Trade houses such as Sucden, Cargill and Vitol import raw sugar to Russia, mainly from Brazil,Cuba, Thailand and India.

According to the ISO, Russia is expected to see net raw sugar imports in excess of one million tonnes in 2013/14, up from net imports of some 700,000 tonnes in 2012/13.

Increased imports are also expected despite the raw sugar import duty charged by the Customs Union of Russia, Kazakhstan and Belarus to $205 per tonne, introduced on May 1 from $140 a tonne that had prevailed since August 2011.

Russia is expected to import no more than 200,000 tonnes of duty-free white sugar from Belarus under Customs Union rules in 2012/13. However, analysts said Belarus does not tend to stick to its annual quota and was likely to supply more than this.

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