Information for fruit and vegetables business in CIS
Russia: sugar auction earning became the highest ever
Russian budget earned nearly $1 billion from yesterday's raw sugar import duty auction. Sugar traders, on the opposite, may incur losses, as average price of a lot exceeded the initial one 3.5 times. As a result, for companies the difference between sugar imports within the quota and over the quota has disappeared.
The third auction for sale of raw sugar import quota, held at Metals Exchange on September 25, has become unprecedented: average price per lot (25,000 tonnes) reached $100.6 per tonne, the total sum of earning -- $397.5 million. Total amount of quota, offered for sale, was 3.95 million tonnes. Duty rate for raw, imported within the quota in 2003 will be EUR 95 per tonne, for over-the-quota imports - EUR 200 per tonne (in effect since October 1, 2002) and EUR 230 (since July 1, 2003).
At the first like auction in 2000 the amount of quota sold was 3.65 million tonnes. Average price per lot (25,000 tonnes) reached $69 per tonne, state budget earned $209 million.
At the next year's auction traders were acting more cautiously. Average price per lot slipped to $56 per tonne and state budget received just $184.6 million.
This time the companies, who purchased quotas, will most probably have to lobby raising the duties for over-the-quota raw imports again.
According to sugar traders themselves, auction participants put a nice sum into it - some $800 million. Therefore, price per lot was expected to approximate to a maximum degree the ceiling of EUR 90-100 per tonne, above which the struggle for under-the-quota raw imports would become senseless.
The auction outcomes proved unexpected even for its participants. The first lot was sold at EUR 104 per tonne, after which the price froze dead at the mark EUR 102 per tonne. Out of 51 participating companies there were only 10 who ventured to purchase more than 10 lots.
Altogether, 38 participants bought quotas. As in previous years the leaders were such firms as Siukden (26 lots, according to Agency RSI), State Company Rusagro (19 lots), Razguliay-UKRROS (15 lots) and Cargill (12 lots).
Analysts assume that auction results will make companies increase sugar prices. According to the Head of Analytical Service with the International Sugar Company Denis Sokolov, sugar price will reach $500 per tonne. He says there are two possible scenarios: it can happen either as early as in November, or in February-March. He also thinks that companies will start buying out beet sugar on a mass scale. It can be bought now at $420 per tonne ex-works and can be sold at $450 as early as in January. This will also provoke a rise in sugar prices.
Head of Moscow office of United Food Company Sergey Mironov says: "For all practical purposes, the companies should raise prices already now. If just yesterday sugar cost RUR 13.6 ($0.43) per kilogramme, in 2003 only the cost of its production will already be as much as RUR 14.7 per kilogramme." Therefore, it's hard to say how the auction participants will finish the next year. Most probably, the situation of 2001 will be repeated, when everybody ended up with losses, Mironov thinks.
Commercial Director of Sugar Department with Rusagro Company Aleksey Kniazev revoices his colleague, predicting that in 2003 companies will have to work with zero profits or maybe even with losses.