Sugar Semi-annual 2012

An Expert's View about Horticulture and Support Services in Russia

Posted on: 21 Oct 2012

Beet Sugar Production to Fall But Still Be Second Highest on Record.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 10/4/2012 GAIN Report Number: RS1261 Russian Federation Sugar Semi-annual Beet Sugar Production to Fall But Still Be Second Highest on Record Approved By: Levin Flake Prepared By: Mikhail Maksimenko Report Highlights: 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. Production: Table 1a. Russian Sugar Beets, Area, Production, and Utilization (1,000 HA, 1,000 MT) Suga 2010/2011 2011/2012 2012/2013 r Beets Ru Market Year Begin: Sep Market Year Begin: Sep Market Year Begin: Sep ssia 2010 2011 2012 USDA USDA USDA O New Post fficial O New Post fficial O New Post fficial Area Planted 1,160 1,160 1,200 1,292 1,143 Area Harvested 910 910 1,130 1,200 1,080 Production 21,500 21,500 33,000 47,640 42,500 Total Supply 21,500 21,500 33,000 47,640 42,500 Utilization for Sugar 21,500 21,500 33,000 47,640 42,500 Utilizatn for Alcohol 0 0 0 0 0 Total Distribution 21,500 21,500 33,000 47,640 42,500 Table 1b. Russian Sugar, Production, Supply, and Distribution (1,000 MT Raw Value) Suga 2010/2011 2011/2012 2012/2013 r, Centrifugal R Market Year Begin: Oct Market Year Begin: Oct Market Year Begin: May ussia 2010 2011 2012 USDA New USDA New USDA O New Post fficial Post Official Post Official Beginning Stocks 399 399 350 350 455 455 Beet Sugar Production 2,996 2,996 5,500 5,500 5,050 4,850 Total Sugar Production 2,996 2,996 5,500 5,500 5,050 4,850 Raw Imports 2,260 2,260 750 500 1,000 700 Refined Imp.(Raw Val) 250 250 140 250 200 200 Total Imports 2,510 2,510 890 750 1,200 900 Total Supply 5,905 5,905 6,740 6,600 6,705 6,205 Refined Exp.(Raw Val) 17 17 275 300 300 300 Total Exports 17 17 275 300 300 300 Human Dom. Consumption 5,523 5,523 5,995 5,885 6,015 5,540 Other Disappearance 15 15 15 15 15 15 Total Use 5,538 5,538 6,010 5,900 6,030 5,555 Ending Stocks 350 350 455 400 400 350 Total Distribution 5,905 5,905 6,740 6,600 6,705 6,205 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 (see Table 2 below) 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. Table 2. Beet Harvesting in 2012 compared to 2011 Harvested, ha % of planted Yield, MT/ha Gross harvest, MMT 10.02 2012 525,800 46.0 35.7 19.0 10.12.2011 573,600 44.5 37.6 21.5 Source: Rossahar Table 3. Dynamics of sugar beet development Average weight of beet, grams Sugar content, % 2010 2011 2012 2010 2011 2012 09.01.2012 292 498 511 16.59 14.79 14.82 Source: Rossahar 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. Chart 1 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. Table 4. Indicators of sugar production industry in the Customs Union in CY 2011 Country Area, Yield, Gross beet Stored Refineries Sugar production, 1,000MT 1,000ha MT/ha harvest, beet, product Total Including 1,000MT 1,000MT capacity From From 1,000MT/day sugar raw beet sugar CU 1,409 396 52,283 45,708 373.77 8,310 5,266 3,044 Including: Belarus 100.7 453 4,485 4,427 29.60 985 527 458 Kazakhstan 16.0 240 155 142 22.50 238 17 221 Russia 1,292 392 47,643 41139 321.67 7,087 4,722 2,365 Source: The Russian Union of Sugar producers 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. Table 5. Sugar Consumption, Kg/Capita* Region 2006 2007 2008 2009 2010 % Δ 10/09 The Russian Federation 39 39 40 37 39 105,4 Central 42 43 44 43 43 100,0 North-Western 39 40 40 38 38 100,0 Southern 42 42 42 42 42 100,0 North-Caucuses 45 44 45 44 44 100,0 Volga region 37 37 38 36 36 100,0 Ural 34 35 36 36 37 102,8 Siberian 35 35 35 34 34 100,0 Far East 35 35 36 36 36 100,0 Source: Rosstat *including candies calculated as sugar Chart 2. 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. Chart 3. 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. Author Defined: Production Tables Table 6. Sugar Beet Trade, CY 2009, 2010, 2011 2009 2010 2011 11/10, % Beets Marketed, MMT 19.0 17.3 32.4 87.9 Average prices, 1,242 1,636 1,602 -2.1 Source: Rosstat Table 7. Indicators of sugar production industry in Russia, CY 1986-2011 1986- 1991- 1996- 2001- 2008 2009 2010 2006- 2011 11/10 1990 1995 2000 2005 2010 % Planted 1,475 1272 902 833 819 819 1,160 971 1292 11.4 area,1,000 ha Yield, MT/ha* 20.3 14.9 13.5 18.2 39.2 41.2 30,0 36,5 36.3 20.1 Gross beet 33,177 21,663 14,025 18,581 28,995 24,892 22,256 27,218 47,663 114 harvest, 1000MT Stored beet, 28,764 19,343 12,652 16,170 25,506 22,002 20,638 23,858 41,139 99 1,000MT Contaminant at 11.7 12.8 11.9 12.3 9.3 8.1 9.4 9.8 10.7 13.8 delivery for processing, % Sugar content at 15.7 16.0 16.3 16.0 17.1 17.6 16.6 16.7 16.0 -3.6 delivery to refinery, % Sugar output, as 10.72 11.56 12.35 12.66 14.33 15.05 13.58 13.83 13.00 -4.3 % of processed beets Sugar content in 2.274 2.56 2.36 2.12 1.89 1.79 2.07 1.93 1.90 -8.2 syrup Length of sugar 115 90 68 76 101 83 76 94 135 +59 processing, days days *Average yields in 1996-2000, 2001-2005-2006-2010, 2008, 2009, 2010, and 2011 are from harvested area, in 1986-1990, and in 1991-1995 - from planted area. Table 8. Wholesale and Retail White Sugar Prices RUR/kg 2009 2010 2011 2012 Whole sale Retail Whole sale Retail Whole sale Retail Whole sale Retail Oct 23.25 31.82 28.93 37.21 28.93 37.21 27.42 37.14 Nov 23.87 34.10 28.91 37.66 28.91 37.66 25.60 36.14 Dec 24.82 33.78 29.73 39.10 29.73 39.10 25.00 35.91 Jan 26.23 34.99 30.95 40.94 30.95 40.94 25.03 36.14 Feb 26.40 35.75 33.50 43.36 33.50 43.36 23.50 33.75 March 26.45 36.95 34.14 44.78 34.14 44.78 23.60 33.68 April 26.55 36.04 34.29 44.27 34.29 44.27 24.16 34.24 May 25.87 34.78 33.37 43.67 33.37 43.67 24.20 35.01 June 25.42 33.42 31.98 41.34 31.98 41.34 24.65 35.22 July 25.57 33.70 32.12 41.20 32.12 41.20 24.53 35.33 Aug 26.78 34.21 32.10 40.86 32.10 40.86 25.14 35.46 Sep 28.05 36.19 31.44 40.08 31.44 40.08 N/D N/D Source: The Russian Ministry of Agriculture Table 9. Prices for Molasses and Granulated pulp, RUR/MT Date Molasses Granulated pulp December 15, 2011 300 – 400 2,500 – 3,500 December 5, 2011 600 – 1,500 3,500 – 4,000 November 23, 2011 600 – 1,500 3,500 – 4,000 September 3, 2012 800-2,200 4,500 - 6,200 September 21, 2012 800-2,200 4,500 - 6,000 October 1, 2012 800-3-100 4,500-6,500 Source: Rossahar Trade Tables Table 10. Russian Import: Commodity: 170199, Cane Or Beet Sugar And Chemically Pure Sucrose, Refined, In Solid Form, Not Containing Added Flavoring Or Coloring Matter, Year Ending September: 2007 - 2011, Year To Date: 10/10 - 07/11 & 10/11 - 07/12, Quantity, MT Partner ding Year Ending C Un Year En it ountry 10/10 - 10/11 - 2007 2008 2009 2010 2011 %Change 07/11 07/12 World T 127,112 71,782 91,074 72,296 85,927 77,494 43,451 -43.93 Moldova T 44,864 0 30,993 5,742 25,332 25,332 2,552 -89.93 Brazil T 19,978 6,550 18,666 3,786 24,038 19,033 3,711 -80.5 Poland T 37,844 59,395 16,450 36,564 13,276 13,276 23,297 75.49 Lithuania T 0 1 0 511 1,383 1,383 10,582 665.21 Source: World Trade Atlas Table 11 Russia Export 1703, Molasses Resulting From The Extraction Or Refining Of Sugar 2008/09 2009/10 2010/11 2011/12 Q4 164,538 102,743 60,249 248,348 Q1 42,609 33,789 2,647 126,442 Q2 40,397 15,723 6,270 104,048 Q3 46,740 30,515 48,434 N/D Total 294,284 182,770 117,600 478,838 Source: World Trade Atlas Table 12. Russia Unit Value: Export Commodity: 1703, Molasses Resulting From The Extraction Or Refining Of Sugar Year To Date: January - July P Value(United States Dollars) % Change artner Country Unit Unit 2010 2011 2012 2012/2011 World T 115.89 156.90 71.64 - 54.34 Turkey T 112.99 0.00 93.49 0.00 Vietnam T 75.86 0.00 58.31 0.00 Germany T 78.41 0.00 58.93 0.00 Ukraine T 82.89 0.00 49.01 0.00 Netherlands T 0.00 0.00 130.50 0.00 Source: World Trade Atlas Table 13 Russian White Sugar Exports to Belarus and Kazakhstan in 2011 Price USD USD/kilo January March2012 MT MT USD Total 120,158 84, 442 $0.7/kilo 32,279* 22,910 Belarus 399 491 $1.23/kilo 44* 54 Kazakhstan 119,759 83,951 $0.7/kilo 32,235* 22,565 Source: Customs Union Statistic Service*Calculated Table 14. Kazakhstan Imports: Commodity: 1701, Cane Or Beet Sugar And Chemically Pure Sucrose, In Solid Form, Year Ending: July Quantity % Change Partner Country Unit 2010 2011 2012 2012/2011 World T 448,300 381,640 180,528 - 52.70 Ukraine T 172 0 89,634 0.00 Brazil T 299,729 339,780 58,717 - 82.72 Azerbaijan T 13,184 38,510 10,496 - 72.74 Cuba T 0 0 10,062 0.00 Source: Global Trade Atlas Table 15. Kazakhstan Import Statistics From World, Commodity: 17, Sugars And Sugar Confectionary, Year Ending: July C Quantity % Change ommodity Unit Description 2010 2011 2012 2012/2011 17 T Sugars And Sugar Confectionary 493,495 419,010 203,994 - 51.32 Or Beet Sugar & Chem Pure Sucrose, Solid 1701 T Cane 0 381,640 180,528 - 52.70 Form 448,30 gar Confection (Incl White Chocolate), No 1704 T Su C 22,674 16,961 10,997 - 35.17 ocoa ars Nesoi, Incl Chem Pure Lactose Etc; 1702 T Sug C 8,824 8,215 7,595 - 7.54 aramel olasses From The Extraction Or Refining Of 1703 T M 13,698 12,194 4,874 - 60.03 Sugar Source of Data: Customs Control Committee of the Ministry of Finance
Posted: 21 October 2012

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