Russia faces rising sugar prices, shortages as traders divert shipments
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[April 02, 2022] By
Maytaal Angel
LONDON (Reuters) - Commodity traders have
started diverting sugar shipments away from Russia, according to
industry sources and shipping data, a move set to further boost soaring
domestic prices and ratchet up pressure on the Russian government to
cool food inflation.
Russia needed sugar imports this year after two successive shortfalls in
the beet crop, and disruption to shipments will result in shortfalls as
the country battles panic buying of sugar and other staples, industry
experts said.
Sugar is widely used in Russia, including for fruit preservation and
making vodka.
Many Russians have been stocking up on the sweetener and other staples
after unprecedented Western sanctions imposed on Moscow following its
Feb. 24 invasion of Ukraine battered the rouble and sent food prices
soaring.
Russia's Deputy Prime Minister Viktoria Abramchenko told state TV
Rossiya 1 on Wednesday the country has enough sugar stocks to meet
demand before the new beet crop arrives in September.
But industry data points to tightness given Russia's last two sugar
harvests came in below the required 6 million tons. This tightness will
only will be exacerbated, experts say, if sugar shipments to Russia
remain constrained.
"Its difficult," said an executive at one of the world's largest soft
commodity trade houses. He said that even if a client uses a
non-sanctioned Russian bank, rouble depreciation has made trade
prohibitively expensive, with insurers ratcheting up premiums for ships
going into the Black Sea.
Two industry sources told Reuters that trade house Sucden recently
diverted two shipments of South American raw sugar bound for Russia.
Sucden declined to comment.
The sources did not give further details, but industry data show a ship
called Osiris, chartered by Sucden with 43,000 tons of Brazilian raw
sugar originally destined for Russia, is currently heading for Vatika
Bay, Greece.
Another ship called the Argyroula, chartered by Sucden with 33,000 tons
of Mexican raw sugar originally destined for Russia, is now heading for
Riga, Latvia.
Trader Louis Dreyfus Company told Reuters its vessel Pu Lan Hai, which
left Brazil in late February with 45,000 tonnes of raw sugar destined
for Russia, will now leave part of the cargo in Egypt and the rest in
Georgia.
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An employee stocks packages with refined sugar at Znamensky Sugar
Plant, owned by Russian farming conglomerate Rusagro (Ros Agro Plc),
in the settlement of Znamenka, in Tambov region, Russia October 13,
2017. REUTERS/Sergei Karpukhin
In a bid to ease sugar price inflation before the war, Russian authorities set a
duty-free 2022 quota for 300,000 tons of white and raw sugar imports. They have
since banned sugar exports until Aug. 31.
The measures have yet to bear fruit. Official data shows the consumer price
index for sugar in Russia soared 46% between Jan. 1 and March 25.
Russia has so far received 44,000 tons of raw sugar imports as part of the quota
set earlier this year.
Traders say the country has just a few months to ship in the rest of the quota
because its mills will be required to process Russia's own beet crop after that.
"Some volumes will continue going to Russia, people will find ways, but I don't
think business will continue as usual," said a source at one of the world's
largest sugar trade houses.
According to trader Czarnikow's head of analysis Stephen Geldart, Russian sugar
stocks are at critically low levels and the country risks localized shortages
without imports.
Russia's Federal Anti-Monopoly Service (FAS) has meanwhile renewed its efforts
to keep sugar price gains in check.
It launched an investigation last month into sugar producer Prodimex, accusing
it of illegally "coordinating the economic activity" of retailers that led to a
surge in prices.
FAS earlier this year agreed with sugar producers to keep factory gate prices no
higher than 47 roubles ($0.5378) a kilogram, said Geldart, but the agreement has
seemingly failed to alleviate sugar price inflation.
($1 = 87.4000 roubles)
(Reporting by Maytaal Angel in London; Additional reporting by Reuters
correspondents; Editing by Nigel Hunt and Jan Harvey)
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