Sugar producers may again be required to fix prices

The Ministry of Agriculture has warned the largest sugar producers about the risk of a new agreement that limits the price of this product. Such a development of the situation is possible if in the first quarter of 2023 the level of the wholesale price for this product will be higher than 50–53 rubles. for 1 kg. This was announced on December 26 by Deputy Minister of Agriculture Oksana Lut at a meeting. Vedomosti was told about this by two of its participants.

According to them, it was attended, in particular, by Prodimex companies (Naturiqa, Prodimex brands),Rusagro“(“Russian sugar”, “Chaykofsky”), “Dominant”, JSC “Crystal”, Agrocomplex im. N. I. Tkacheva. The reason for the meeting was the sharp rise in the wholesale price of sugar from 19 to 25 December. Loot reported a 10-15% increase in the price of this product, depending on the manufacturer and region, participants in the meeting relay her words. Viktor Aleksakhin, General Director of Prodimex, explains this, among other things, by the depreciation of the ruble. Representatives of other companies did not provide operational comments. The Ministry of Agriculture also did not respond to a request from Vedomosti. Soyuzsahar, which unites manufacturers, declined to comment. A request to the Ministry of Industry and Trade also remained unanswered.

According to the National Commodity Exchange, compared to the previous week (December 12 to 18), sugar in the Central Federal District rose in price by 7.2% to 49,636 rubles. per 1 ton including VAT. The industry publication Sugar.ru writes in its market review that wholesale prices stopped at the level of 52–53 rubles by the end of last week. for 1 kg. This is higher than last year, when sugar cost 46–47 rubles, Lut said at the meeting. In her opinion, such dynamics indicates a jump in prices on the market, which may provoke “increased attention to the industry” from the government of the Russian Federation. The result of this attention will be the signing of a new price agreement. Prodimex took a number of measures, which made it possible to stabilize the cost at the level of 50 rubles. per 1 kg, Aleksakhin said, but did not talk about specific measures.

The agreement in question was signed by the Ministry of Industry and Trade, the Ministry of Agriculture, sugar producers and retail chains on December 16, 2020, after Russian President Vladimir Putin publicly drew attention to the rise in prices for a number of products. The parties agreed that the wholesale cost should not exceed 36 rubles. for 1 kg, and retail – 46 rubles. for 1 kg. The agreement was valid until June 1, 2021.

At the meeting, Lut called an acceptable range of sugar prices in the region of 50-53 rubles. for 1 kg. She did not advise him to exceed, say the interlocutors of Vedomosti. In addition, the Deputy Minister called on manufacturers not to keep sugar in warehouses. Wholesale price of 50–53 rubles. for 1 kg of sugar is quite a realistic scenario, says Natalya Nazarova, director of the Institute for the Development of Entrepreneurship and Economics. According to her, producers are still dependent on imported seeds, and this year the calculations and logistics have become more complicated. The costs of sugar factories are included in the cost of production, so that the cost of sugar was already above 53 rubles. in May, reminds Nazarov.

The networks are not experiencing problems with the supply of sugar, says a Vedomosti source in one of the retailers. Its production in the 2022/23 season will amount to 6.07 million tons, follows from the forecast of the Institute for Agricultural Market Studies, and consumption in the Russian Federation – 5.75 million tons.

The new agreement could stabilize prices for its duration, although previous experience shows that this measure is not the most effective, says Nazarova. According to her, immediately after the end of the agreement, the average cost of sugar rose to 56 rubles. per 1 kg, and during the rush demand in February – March 2022, prices reached 85-86 rubles. The extension of the duty-free import of raw sugar into Russia can help stabilize the situation, adds Nazarova. Lut said at the meeting that a quota of 300,000 tons has been set for this year, but so far only 207,900 tons have been selected. In this regard, the Ministry of Agriculture plans to initiate a transfer of the balance to 2023.