On the eve of the end of June 1, the agreement on fixing prices for sugar, the Ministry of Agriculture began to consider new measures to regulate the market, among them – the creation of an intervention fund to stabilize prices, as well as the continuation of quotas for duty-free imports. In addition, the regulator wants to switch processors to purchase raw materials from the state-controlled United Grain Company (UGC), which will allow local sugar factories to supply retail products. Businesses are skeptical about the measures and are preparing for “outrageous” sugar prices in 2022.
The government is considering new measures to regulate the sugar market. We are talking about the creation of an intervention fund, as well as the approval of an annual quota for duty-free imports. This was stated by the deputy head of the Ministry of Agriculture Oksana Lut at a meeting with major manufacturers of confectionery and soft drinks on May 13. “Kommersant” has an audio recording of the meeting. The Ministry of Agriculture confirmed that they consider it expedient to form a sugar reserve for uninterrupted supplies and maintaining stable prices in the market. But the zeroing of the import duty was called a one-time measure there. The trade block of the EEC told Kommersant that they have not yet received official proposals to establish an annual quota.
The authorities began regulating the market in late 2020, after criticizing the rise in prices by President Vladimir Putin. At the same time, manufacturers and retailers agreed to fix the selling price of sugar at 36 rubles. per 1 kg, retail – 46 rubles. for 1 kg. The agreement ends on June 1. The Ministry of Economy has already announced that there are no plans to extend it. In addition, from May 15 to August 31, 2021, a duty-free quota for sugar imports in the amount of 350 thousand tons is in effect. The right to sell this product can only be obtained by companies that meet a number of criteria, in particular, with a share of the Russian Federation in the capital of at least 50%. According to Kommersant’s sources, OZK will most likely become a trader (50% plus 1 share from the state, the rest – from Demetra-Holding of VTB Group, Marathon Group of Alexander Vinokurov and Sergei Zakharov and Agronova of Taimuraz Bolloev).
The representative of UGC said at the meeting that the company is ready to ship 25 thousand tons of sugar by June 1 to industrial consumers at 43.5–46 rubles. per 1 kg including VAT with delivery to Moscow. Oksana Lut recommended that companies consider the proposal.
This year, the sowing of sugar beet is lagging behind, and this, given the completion of the price-fixing agreement, may lead to a rise in sugar prices, said Ms. Lut. According to her, the Ministry of Agriculture will recommend to factories in the regions to sell sugar primarily to retail chains. Dmitry Rylko, General Director of the Institute for Agricultural Market Studies, explains that due to cold and rainy weather, beet harvesting in the south may not start at the end of July, but closer to the end of August, which will delay the launch of factories, and this period is characterized by a peak demand for sugar from outside. industrial consumers. OZK, Soyuzrossahar and Soyuznapitki did not answer Kommersant’s questions.
Vyacheslav Lashmankin, Executive Director of the Association of Confectionery Industry “Askond”, says that sugar accounts for 15–90% of the cost of confectionery products and due to price increases, small and medium-sized enterprises operate with zero or even negative profitability. According to him, after the decision was made to temporarily zero import duties, a number of companies began to study offers in foreign markets.
Kommersant’s interlocutor in a large manufacturer adds that contracts for sugar with key players are concluded for one or two years, and the proposed prices of OZK “do not look very attractive.” According to him, the regulator could allow the sale of concessional sugar to several traders competing on price. In general, the interlocutor of Kommersant notes, it is already clear that as a result of all restrictive measures, difficulties with the harvest and imbalances in the market, the cost of sugar in 2022 will be “outrageous”. It will not be possible to solve the problem at the expense of the intervention fund this year. According to Dmitry Rylko, the current volumes have been contracted, it is necessary to wait for a new harvest or buy expensive imported sugar.
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