Sugar boom turning Russia into exporter with record output

Bloomberg

In just a decade, Russia has transformed its sugar industry. The country, which was once the world’s top importer of raw sweetener, is now on the verge of becoming a net exporter.
Aided by an import tax Russia introduced in 2004 to shield domestic firms from foreign competition, producers have been able to invest in making beet refining more efficient. The latest example is at one of the top manufacturers Ros Agro Plc’s Znamensky operation, where improvements mean the plant squeezes more sugar from molasses that used to go to waste.
The money spent by producers like Ros Agro, Prodimex Group and Dominant Group to make plants more efficient means Russia will this season become self-sufficient. Higher local prices also encouraged farmers to boost plantings. The nation will probably export “considerably” more than it imports in 2016-17 season, the Inte- rnational Sugar Organization predicts.
“Domestic pricing will go a long way to encourage one to revising planting decisions, and that has largely driven the growth and the capacity for production increases in Russia,” Tracey Allen, an analyst at JPMorgan Chase & Co. in London, said before the Dubai Sugar Conference, where she’ll lead a panel on Sunday. “We have seen quite a lot of growth recently.”
The amount Russia can ship out will be among topics discussed by traders, analysts, refiners and shipping firms gathering in Dubai from Sunday. ISO Senior Economist Sergey Gudoshnikov says exports may reach a record 500,000 metric tons this season. Still, the Moscow-based Institute for Agricultural Market Studies, or Ikar, forecasts a total of 180,000 tons. That would keep Russia a net importer.
Benchmark global white-sugar prices gained about 40 percent in the past year, and that increases the competitiveness of Russian supplies to nearby countries, said Evgeny Ivanov, an analyst at Ikar. Most of Russia’s shipments go to Kazakhstan, Tajikistan and Mongolia. Cutting losses during processing has been one of the most important production improvement, Nikolay Zhirnov, chief executive officer of Ros Agro’s sugar business, said in an interview. The new unit at the Znamensky plant in central Russia allows Ros Agro to make an additional 40,000 tons of sugar a year. The company boosted the plant’s capacity from processing 3,200 tons of beets a day in 2004 to about 8,000 tons last year.
Russian production will reach a record 6.1 million tons this season, according to the Russian Union of Sugar Producers. That’s about four times more than at the turn of the century.
Greater investment in farming techniques and seed development also helped, said Kona Haque, head of research at London-based trader ED&F Man Holdings Ltd. and who’s due to speak in Dubai.