What causes the instability of sugar prices
The increase in world sugar prices in the first half of 2010 was caused by a reduction in production due to worsening weather and problems with shipment (due to heavy rains) in the leading importing countries: Brazil, India. But already an unprecedented harvest of sugar crops has been announced in these two countries. In the second half of 2010 and in 2011.
(according to experts) sugar prices (despite some fluctuations) will generally decline.
The instability of prices on the world market is caused on the one hand by a large harvest in Brazil and India and this threatens to collapse prices on the new York stock exchange to 13-15 cents per pound of sugar, and on the other hand, the large capacity of the Asian market (Indonesia) will be able to stop the decline in prices. Despite this, there are forecasts of a decline to 11.8 cents per pound.
Russian producers are protected from fluctuations in world sugar prices by the flexibility of import duties on raw sugar.
During the last 2 years, the wholesale price of sugar has changed repeatedly and quite strongly, sometimes more than 2 times. But according to the experts ‘ forecast, prices will decrease in the 2nd half of 2010 and will remain at the same level for about 22 rubles per 1 kg until the end of the year.
The decline in wholesale prices is caused by two main reasons (the forecast of ICAR experts – Institute of agricultural market conditions-confirms the forecast of Soyuzrossakhar):
reduction of import duties by 2.8 times (reduction of wholesale prices in may);
the record sugar beet harvest in 2010 is 15% higher than in 2009 (the decrease in wholesale prices by October can be up to 20 rubles / kg or up to 18 rubles/kg).
Due to the drought in the Central regions of Russia, the forecasts for the harvest were somewhat uncertain, but now that the Kuban actively started harvesting sugar beet and this crop promises to be very good, the forecasts for the favorable situation of the domestic sugar market have become somewhat more confident. Confidence in success is also added by the fact that this year much more areas were sown with beet (1.1 million hectares, in comparison. 820 thousand hectares in the past year) than last year. Also, the fact of aridity has a positive effect on the quality of sugar beet root crops: its sugar content increases significantly. According to the forecasts of Soyuzrossahar, sugar production will increase to 4 million tons compared to 3.3 million last year (total sugar consumption in Russia is 5.5 million tons).
Experts recommend buying sugar in may: there is a sale of the remains of the previous season, and in October, the volume of sugar beet produced is known and the volume of sugar production is predicted, prices, as a rule, have already been determined and formed by this time.