It’s a well known fact that Russia is doing its darndest to become self-sufficient in sugar. They’ve expanded beet-growing areas to such an extent in such a hurry that they’ve far surpassed their own slicing and storage capacity, meaning that as the season ends, they’re quickly losing beet quality and production will soon level off.
But this season’s beet crop has been undertaken with such gusto that there can be nothing less than a worldwide round of applause for what they’ve achieved in so little time. If the country can manage to mobilise the investment needed to get processing and storage up to what’s needed for this sugar miracle to appear, then they may well be on their way to achieving their goals of self sufficiency.
In theory, the government has approved subsidies to modernise 18 refineries and plans to build five more since the country hasn't built a new sugar-processing plant in the last 25 years, and 60% of the processing equipment is worn out. It only has the capacity to process 310,000 metric tonnes of beets per day yet the crop this season was seen at a whopping 50.5 million tonnes.
Even with the Institute for Agricultural Market Studies, IKAR, saying that farmers failed to harvest about 9% of this year’s beet crop because of adverse weather, and at least 12% of the beets that were gathered will be lost while in storage, they’re still estimating 5.1 million tonnes of sugar production. That’s equal to Ukraine’s record 1989/90 crop and about the same as the entire CIS’s sugar production this season combined.
This season’s miracle production is a huge increase over last year’s failed crop that only reached 2.7 million tonnes, and surpasses by a long shot the high in 2008 of 3.48 million tonnes. The extra sugar availability has meant a complete shift in market dynamics as demand for imports slips to almost nothing. Comparatively speaking, that is.
Whereas it wasn’t long ago that Russia was the world’s largest sugar importer, it now is likely to need imports of less than 1 million tonnes for this season. It’s good timing too, since Brazil doesn’t have much capacity to send to Russia, and whatever it may have it is happy to divert to China instead.
With imports no longer an issue, but lack of storage continuing to be a major infrastructural debacle, the question has now turned to exports. Though the deputy prime minister may have gotten ahead of himself by declaring recently that the country had suddenly become a net sugar exporter, it has gone beyond the joking around of sea-based exports that were tested out earlier in the season. As of the end of December, the country had managed to export an amazing 180,000 tonnes of beet sugar to destinations across the former Soviet territory but also as far as Belize, Syria and Japan.
This major ramp up in sugar production is only getting started, however. The farmers have shown that they can produce when there’s demand, which is impressive considering that local sugar prices have fallen by more than a third just since August. So now it’s up to the government to stimulate the investment in processing and storage, as well as to improve transport infrastructure to move the sugar around to where it’s needed—be that at home or central Asian markets or even further afield.
But as with all things that Russia does, its actions have a distinct and direct effect on what happens to its sugar-producing neighbours. With its own sugar production equaling that of the other CIS countries, countries who depended on exporting at least some of their own production to Russia, no longer will have the opportunity. So what happens to all that sugar?
Belarus seems to still be on a production expansion plan, with production reaching 560,000 tonnes or so this season. Production there is wrapping up in the next few weeks, with a beet crop that was more than 20% higher than last year’s helped by an additional 2 percentage points of sugar content on average across the country. Last year the country exported 70% of its production—much of that to Russia—but now where will it go?
Next door, in the Ukraine, the government there has seen the writing on the wall. Beet production is going gangbusters there as well, but the country only consumes about a quarter of what it produces. So instead of worrying about potential export markets that could replace its biggest customer, Russia, like Europe who may or may not cooperate on a free trade area when it comes to sugar, it will instead look towards ethanol production. The country’s agriculture minister says that within the next four to five years, the extra 40 million tonnes of beets produced annually could instead be turned into about 4 million tonnes of biofuels.
Russia doesn’t have a patent on concerted efforts and making agricultural miracles come true. The Ukraine still has plenty of room to grow in terms of regaining its former glory as a leading beet producer, and with ethanol in its sights, it could become an ethanol exporter to the EU rather than a sugar one. Now that’s something few could complain about, while leaving Russia to get on with its own quiet sugar revolution.