Russian sugar market fights recession

Moscow-based consultancy Market Advice​ carried out the survey in an effort to find out more about the current state of the industry and the challenges it is facing. In doing so, the agency quizzed key personal from the 30 biggest international and domestic importing companies.

In particular, the survey results indicated a difficult time for the industry, which is currently having to stand up against a glut on the world market. Accordingly, nearly a third of those questioned reported that the sugar market in Russia witnessed significant recession in 2003, with importers and producers facing losses because of low sugar prices.

In contrast, 25 per cent of the respondents indicated that either none or only a slight recession had taken place in the course of the last year, with 20 per cent of the respondents mentioning that the market had shown stable development.

The challenges of 2003 have led to significant reshuffles amongst the executive boards of many leading sugar companies. Both Marina Golovanova, general manager of sugar trading company Rusagro, and Dmitry Lashin, head of the sales depertment at the Russian sugar company, lost their positions as a direct result of disappointing results.

Some 60 per cent of respondents also confessed that they were currently facing economic difficulties with respect to sugar importation. Most cited probibitively high duties as a major hurdle to continued profitability.

Furthermore, around 40 per cent said that they had faced transportation difficulties, with unreliable train services and idle time spent at borders being the biggest hurdles. However, around a third of the respondents said that they had not faced any difficulties with sugar importations.

With rising tariffs, finance has become a key issue to the survival of many of the key players in the Russian sugar industry. Dutch agricultural bank Rabobank came out on top of the list of financial institutions providing sugar importers with the most comprehensive support. Less than a third of those questioned said they used the RF Savings Bank (Sberbank), and less than a quarter were clients of the Nikoil bank.

Undoubtedly 2004 is going to be a challenging year for the sugar industry in Russia. However, the fact that the Russian government has decided to abolish annual sugar import quotas and that domestic sugar beet harvests are continuing to increase may well lighten the load. Currently high demand for processed sugar is being driven by the growing snacks and confectionery sector, but with a greater availibility of raw sugar and the lower tariffs, the industry might be feeling more positive one year from now.