Required Report - public distribution

**Date:** 9/30/2005

**GAIN Report Number:** RS5069

RS5069

**Russian Federation**

**Sugar**

**Sugar Semi-Annual Report**

**2005**

**Approved by:**

![](media/image1.wmf)Allan Mustard

American Embassy, Moscow

**Prepared by:**

Erik Hansen and Mikhail Maksimenko

**Report Highlights:**

Russia is forecast to produce 2.25 million metric tons (MMT) of sugar
from beets in marketing year (MY) 2006. Sugar beet planted area
decreased in MY 2006 but harvested area continues to grow as farmers
increase their use of technology and inputs. Raw sugar imports increased
in MY 2006 to fill reduced domestic stocks. As a result, refined sugar
production increased by 28 percent in January-June 2005 compared to the
same period in 2004.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Semi-Annual Report

Moscow \[RS1\]

\[RS\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 3](#production)

[Table 1. Production of sugar beets, calendar year
3](#table-1.-production-of-sugar-beets-calendar-year)

[Production Subcategory 4](#production-subcategory)

[Table 2: White sugar production, calendar year
4](#table-2-white-sugar-production-calendar-year)

[Consumption 4](#consumption)

[Trade 4](#trade)

[Table 5: Russia -- Imports 170111 Cane, Raw, Solid Form, Quantity in MT
5](#table-5-russia-imports-170111-cane-raw-solid-form-quantity-in-mt)

[Stocks 5](#stocks)

[Policy 5](#policy)

[Policy Subcategory 6](#policy-subcategory)

[PSD Table 7](#psd-table)

[PSD Table 8](#psd-table-1)

# Executive Summary

Russia is forecast to produce 2.25 million metric tons (MMT) of sugar
from beets in marketing year 2006 thanks in part to ideal weather
conditions. Sugar beet planted area decreased in MY 2006 but harvested
area grew as farmers increase their use of technology and inputs. Raw
sugar imports increased in MY 2006 due to higher production of
sugar-containing products and reduced stocks. At the same time, sugar
beet acreage decreased in MY 2006 due to the late arrival of spring in
the beet planting regions. Refined sugar production increased in MY 2005
as a result of higher raw sugar imports in January-August 2005.

# Production

Thanks in part to ideal weather conditions, total sugar production in
2006 is forecast to increase to 2.25 MMT. As of October 2005, 8.7 MMT of
sugar beets were harvested from 320,000 hectares of land (39 percent of
total), up an impressive 1.2 MMT compared to last year. In addition, the
average sugar beet yield was 27.4 metric tons (MT) per hectare, or 1.1
MT more than in 2004. (Note: Marketing year 2006 refers to the time
period beginning September 2005 and ending August 2006. The beets are
harvested in the beginning of this marketing season, generally September
or October, and processed into sugar from November until March. USDA
marketing year 2006 corresponds to calendar year 2005 in Russian
statistics in terms of beet production.)

From January-July 2005, Russia produced 28 percent more refined sugar in
comparison to the same time period in 2004. This is a result of higher
raw sugar imports. Production of most sugar-containing products have
increased as well. For example, the production of confectionary products
increased by 6 percent, production of sparkling wine increased by 23
percent and soft drink production increased by 15 percent. At the same
time, wine production decreased by 30 percent in comparison with 2004.

Sugar beet planting area decreased in MY 2006 but harvested area
continues to grow as farmers increase their use of technology and inputs
and use well developed contractual relationships with processors to
build more consistent and efficient farming operations.

## 

## Table 1. Production of sugar beets, calendar year 

+---------------+-------+-----------+-----------+--------------------+
|               | 2002  | 2003      | 2004      | End of September,  |
|               |       |           |           | 2005               |
+---------------+-------+-----------+-----------+--------------------+
| Sugar beet    | 809   | 924       | 863       | 811                |
| area,         |       |           |           |                    |
|               |       |           |           |                    |
| 1,000         |       |           |           |                    |
| hectares      |       |           |           |                    |
+---------------+-------+-----------+-----------+--------------------+
| Sugar beet    | 15.7  | 19.4      | 21.7      | 8.7                |
| harvest, MMT  |       |           |           |                    |
+---------------+-------+-----------+-----------+--------------------+
| Yield,        | 21.9  | 22.8      | 27.6      | 27.4               |
| MT/hectare    |       |           |           |                    |
+---------------+-------+-----------+-----------+--------------------+

*Source: Russian Federal State Statistics Service*

## 

## Production Subcategory

## Table 2: White sugar production, calendar year

  -------------------- -------------------- -------------- ---------------
                       2003                 2004           January-June
                                                           2005 as % of
                                                           January June
                                                           2004\*

  Total                5,841                4,852          128

  Including: From      1,901                2,251          N/a
  sugar beets                                              

  From raw sugar       3,940                2,601          N/a
  -------------------- -------------------- -------------- ---------------

*Source: Pishchevaya promishlennost,(Food Industry magazine), #2, 2005*

*\*Russian Statistic Service*

# Consumption

The overall volume of sugar consumption in Russia is increasing. The
long-term trend is for increasing use of sugar in processed and
convenience food products and a slight reduction in sugar used in home
canning. Russian candy and confectionary production continues to grow.
For example in 2005, the production of confectionary products increased
by 6 percent, production of sparkling wine increased by 23 percent and
soft drink production increased by

15 percent.

# Trade

From 2002-2004, raw sugar imports were decreasing. It started to grow
beginning the first quarter of 2005 and has continued to rise steadily.
The reason for this change is that sugar consumption increased while
stocks were decreasing due to low imports. Russian sugar imports in MY
2006 are forecast at 4.2 MMT, up 5 percent from the previous year.
Imported raw sugar is forecast to be over 80 percent of total imports.

Russia remains the world's largest raw sugar importer with raw sugar
imports making up more than half of total supply. In some years,
imported raw sugar accounted for as much as 70 percent of total supply.
Brazil overtook Cuba as the biggest raw sugar exporter to the Russian
Federation in 2005.

The Russian sugar industry continues to claim that there are significant
amounts of sugar coming into Russia through various mechanisms to avoid
the sugar tariff. Industry experts state that over one million tons of
third-country sugar is imported through neighboring countries and
illegally take advantage of no or reduced duties. A governmental inquiry
into this allegation has confirmed this to be true and has recommended
enforce Russia's regional trading agreements (i.e., country-of-origin
clauses) and to work to fix loopholes in the sugar- containing products
tariff structure.

Table 3: Russian sugar imports, MT, 2002-2004

  --------- ------------------------- ------------ ------------ ------------ --
  ** **     **Description**           **Jan-Dec    **Jan-Dec    **Jan-Dec    
                                      2002**       2003**       2004**       

            \--The World\--                                                  

            17 SUGARS                 4,866,373    4,600,944    2,893,410    

            1701 CANE/BEET,SOLID FORM 4,591,627    4,247,785    2,783,317    

                                                                             

   170111   CANE,RAW,SOLID FORM       4,428,179    4,096,783    2,582,927    
  --------- ------------------------- ------------ ------------ ------------ --

Source: World Trade Atlas

**Table 4: Russian sugar imports, MT, in MY 2005**

  --------------------------------- ----------- ------------ ------------
  **Description**                   **4th Qtr   **1st Qtr    **2nd Qtr
                                    2004**      2005**       2005**

  \--The World\--                                            

  17 SUGARS                         670,421     564,586      1,463,991 

  1701 CANE/BEET,SOLID FORM         640,765     538,774      1,434,172

  170111 CANE,RAW,SOLID FORM        597,840     493,170      1,393,696
  --------------------------------- ----------- ------------ ------------

###### Source: World Trade Atlas

# Table 5: Russia -- Imports 170111 Cane, Raw, Solid Form, Quantity in MT

+---------+---------------+--------------+-------------+-------------+
| ** **   | ** **         | ** **        |             |             |
|         |               |              |             |             |
|         |               | **January -  |             |             |
|         |               | June**       |             |             |
|         |               |              |             |             |
|         |               | ** **        |             |             |
+---------+---------------+--------------+-------------+-------------+
|         |               |              |             |             |
+---------+---------------+--------------+-------------+-------------+
| *       | **Country**   | **2003**     | **2004**    | **2005**    |
| *Rank** |               |              |             |             |
+---------+---------------+--------------+-------------+-------------+
| 0       | \--The        | 2,301,250    | 1,426,817   | 1,886,866   |
|         | World\--      |              |             |             |
+---------+---------------+--------------+-------------+-------------+
| 1       | Brazil        | 833,405      | 665,936     | 1,492,522   |
+---------+---------------+--------------+-------------+-------------+
| 2       | Cuba          | 655,060      | 677,271     | 185,167     |
+---------+---------------+--------------+-------------+-------------+
| 3       | Colombia      | 20,450       | 30,718      | 49,167      |
+---------+---------------+--------------+-------------+-------------+
| 4       | Costa Rica    | 0            | 0           | 46,046      |
+---------+---------------+--------------+-------------+-------------+
| 5       | Thailand      | 422,753      | 5,500       | 29,772      |
+---------+---------------+--------------+-------------+-------------+
| 6       | Honduras      | 19,000       | 0           | 28,490      |
+---------+---------------+--------------+-------------+-------------+
| 7       | El Salvador   | 88,549       | 45,619      | 23,126      |
+---------+---------------+--------------+-------------+-------------+
| 8       | Nicaragua     | 68,067       | 0           | 21,500      |
+---------+---------------+--------------+-------------+-------------+

###### Source: World Trade Atlas

# Stocks

Sugar stocks will increase due to higher imports and stable domestic
sugar beet production.

# Policy

On June 20, 2005, Russian Prime Minister Mikhail Fradkov approved a
protocol on the gradual removal of trade barriers within the CIS. The
Russian Foreign Ministry has approved the draft protocol elaborated by
the Ministry of Economic Development and Trade (MEDT) and other related
executive bodies. Minister Fradkov said it would be expedient to sign
the protocol at the next meeting of CIS leaders. The draft protocol
envisions the cancellation of excise taxes for white sugar by January 1,
2007 and for ethyl alcohol, wine grapes, vermouth and other fermented
beverages by January 1, 2012.

## Policy Subcategory

The Russian sugar producers managed to encourage MEDT to start
investigating possible violations by Belarus regarding illegal sugar
shipments. If violations are detected, Russia will introduce a \$149
variable levy per MT of imported sugar from Belarus. The Russian Sugar
Union insists that the variable levy be introduced immediately. The
investigation will last from nine to 12 months. During the
investigation, Belarus is only permitted to export to Russia (duty free)
sugar beet sugar. Cane sugar is subject to levy of \$340 per MT.

# 

+----------+----------+--------+----+--------+-----+--------+------+
| # P      |          |        |    |        |     |        |      |
| SD Table |          |        |    |        |     |        |      |
+----------+----------+--------+----+--------+-----+--------+------+
| **C      | *        |        |    |        |     |        |      |
| ountry** | *Russian |        |    |        |     |        |      |
|          | Fede     |        |    |        |     |        |      |
|          | ration** |        |    |        |     |        |      |
+----------+----------+--------+----+--------+-----+--------+------+
| **Com    | **Sugar  |        |    |        | (1  |        |      |
| modity** | Beets**  |        |    |        | 000 |        |      |
|          |          |        |    |        | HA  |        |      |
|          |          |        |    |        | )(1 |        |      |
|          |          |        |    |        | 000 |        |      |
|          |          |        |    |        | MT) |        |      |
+----------+----------+--------+----+--------+-----+--------+------+
|          | 2004     | R      | 20 | Es     | 2   | Fo     | UOM  |
|          |          | evised | 05 | timate | 006 | recast |      |
+----------+----------+--------+----+--------+-----+--------+------+
|          | USDA     | Post   | US | Post   | U   | Post   |      |
|          | Official | Est    | DA | Est    | SDA | Est    |      |
|          | \[Old\]  | imate\ | Of | imate\ | Of  | imate\ |      |
|          |          | [New\] | fi | [New\] | fic | [New\] |      |
|          |          |        | ci |        | ial |        |      |
|          |          |        | al |        | \   |        |      |
|          |          |        | \  |        | [Ol |        |      |
|          |          |        | [O |        | d\] |        |      |
|          |          |        | ld |        |     |        |      |
|          |          |        | \] |        |     |        |      |
+----------+----------+--------+----+--------+-----+--------+------+
| **Market |          | 0      |    | 0      |     | 0      | MM/  |
| Year     |          | 9/2003 |    | 9/2004 |     | 9/2005 | YYYY |
| Begin**  |          |        |    |        |     |        |      |
+----------+----------+--------+----+--------+-----+--------+------+
| Area     | 1000     | 1000   | 0  | 1000   | 0   | 980    | (    |
| Planted  |          |        |    |        |     |        | 1000 |
|          |          |        |    |        |     |        | HA)  |
+----------+----------+--------+----+--------+-----+--------+------+
| Area     | 920      | 920    | 0  | 950    | 0   | 950    | (    |
| H        |          |        |    |        |     |        | 1000 |
| arvested |          |        |    |        |     |        | HA)  |
+----------+----------+--------+----+--------+-----+--------+------+
| Pr       | 17000    | 19300  | 0  | 21700  | 0   | 21000  | (    |
| oduction |          |        |    |        |     |        | 1000 |
|          |          |        |    |        |     |        | MT)  |
+----------+----------+--------+----+--------+-----+--------+------+
| TOTAL    | 17000    | 19300  | 0  | 21700  | 0   | 21000  | (    |
| SUPPLY   |          |        |    |        |     |        | 1000 |
|          |          |        |    |        |     |        | MT)  |
+----------+----------+--------+----+--------+-----+--------+------+
| Uti      | 17000    | 19300  | 0  | 21700  | 0   | 21000  | (    |
| lization |          |        |    |        |     |        | 1000 |
| for      |          |        |    |        |     |        | MT)  |
| Sugar    |          |        |    |        |     |        |      |
+----------+----------+--------+----+--------+-----+--------+------+
| U        | 0        | 0      | 0  | 0      | 0   | 0      | (    |
| tilizatn |          |        |    |        |     |        | 1000 |
| for      |          |        |    |        |     |        | MT)  |
| Alcohol  |          |        |    |        |     |        |      |
+----------+----------+--------+----+--------+-----+--------+------+
| TOTAL    | 17000    | 19300  | 0  | 21700  | 0   | 21000  | (    |
| UTI      |          |        |    |        |     |        | 1000 |
| LIZATION |          |        |    |        |     |        | MT)  |
+----------+----------+--------+----+--------+-----+--------+------+
|          | \_       | \_     | \_ | \_     |     | \_     |      |
+----------+----------+--------+----+--------+-----+--------+------+

+------------+-------+---------+----+---------+----+---------+------+
| #          |       |         |    |         |    |         |      |
|  PSD Table |       |         |    |         |    |         |      |
+------------+-------+---------+----+---------+----+---------+------+
| Country    | Ru    |         |    |         |    |         |      |
|            | ssian |         |    |         |    |         |      |
|            | Feder |         |    |         |    |         |      |
|            | ation |         |    |         |    |         |      |
+------------+-------+---------+----+---------+----+---------+------+
| Commodity  | S     |         |    |         | (  |         |      |
|            | ugar, |         |    |         | 10 |         |      |
|            | C     |         |    |         | 00 |         |      |
|            | entri |         |    |         | M  |         |      |
|            | fugal |         |    |         | T) |         |      |
+------------+-------+---------+----+---------+----+---------+------+
|            | 2004  | Revised | 20 | E       | 20 | F       | UOM  |
|            |       |         | 05 | stimate | 06 | orecast |      |
+------------+-------+---------+----+---------+----+---------+------+
|            | USDA  | Post    | US | Post    | US | Post    |      |
|            | Off   | E       | DA | E       | DA | E       |      |
|            | icial | stimate | Of | stimate | Of | stimate |      |
|            | \[    | \[New\] | fi | \[New\] | fi | \[New\] |      |
|            | Old\] |         | ci |         | ci |         |      |
|            |       |         | al |         | al |         |      |
|            |       |         | \  |         | \  |         |      |
|            |       |         | [O |         | [O |         |      |
|            |       |         | ld |         | ld |         |      |
|            |       |         | \] |         | \] |         |      |
+------------+-------+---------+----+---------+----+---------+------+
| Market     |       | 10/2003 |    | 10/2004 |    | 10/2005 | MM/  |
| Year Begin |       |         |    |         |    |         | YYYY |
+------------+-------+---------+----+---------+----+---------+------+
| Beginning  | 1050  | 1050    | 4  | 440     | 2  | 580     | (    |
| Stocks     |       |         | 40 |         | 80 |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Beet Sugar | 1930  | 1930    | 22 | 2250    | 21 | 2250    | (    |
| Production |       |         | 50 |         | 00 |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Cane Sugar | 0     | 0       | 0  | 0       | 0  | 0       | (    |
| Production |       |         |    |         |    |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| TOTAL      | 1930  | 1930    | 22 | 2250    | 21 | 2250    | (    |
| Sugar      |       |         | 50 |         | 00 |         | 1000 |
| Production |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Raw        | 3250  | 3250    | 27 | 3600    | 30 | 3500    | (    |
| Imports    |       |         | 00 |         | 00 |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Refined    | 420   | 420     | 10 | 700     | 10 | 700     | (    |
| Imp.(Raw   |       |         | 00 |         | 00 |         | 1000 |
| Val)       |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| TOTAL      | 3670  | 3670    | 37 | 4300    | 40 | 4200    | (    |
| Imports    |       |         | 00 |         | 00 |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| TOTAL      | 6650  | 6650    | 63 | 6990    | 63 | 7030    | (    |
| SUPPLY     |       |         | 90 |         | 80 |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Raw        | 10    | 10      | 10 | 10      | 10 | 10      | (    |
| Exports    |       |         |    |         |    |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Refined    | 100   | 100     | 1  | 100     | 1  | 100     | (    |
| Exp.(Raw   |       |         | 00 |         | 00 |         | 1000 |
| Val)       |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| TOTAL      | 110   | 110     | 1  | 110     | 1  | 110     | (    |
| EXPORTS    |       |         | 10 |         | 10 |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Human Dom. | 6100  | 6100    | 60 | 6300    | 60 | 6450    | (    |
| C          |       |         | 00 |         | 00 |         | 1000 |
| onsumption |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Other      | 0     | 0       | 0  | 0       | 0  | 0       | (    |
| Dis        |       |         |    |         |    |         | 1000 |
| appearance |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Total      | 6100  | 6100    | 60 | 6300    | 60 | 6350    | (    |
| Dis        |       |         | 00 |         | 00 |         | 1000 |
| appearance |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| Ending     | 440   | 440     | 2  | 580     | 2  | 570     | (    |
| Stocks     |       |         | 80 |         | 70 |         | 1000 |
|            |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
| TOTAL      | 6650  | 6650    | 63 | 6990    | 63 | 7030    | (    |
| DI         |       |         | 90 |         | 80 |         | 1000 |
| STRIBUTION |       |         |    |         |    |         | MT)  |
+------------+-------+---------+----+---------+----+---------+------+
|            | \_    | \_      | \_ | \_      |    | \_      |      |
+------------+-------+---------+----+---------+----+---------+------+
|            | \_    | \_      | \_ | \_      |    | \_      |      |
+------------+-------+---------+----+---------+----+---------+------+