Sugar Market: Stable Prices, Threats, and Perspectives

Last week, wholesale sugar prices mostly remained stable. The demand for sugar was low, but this can be explained by the market's inertia, which did not adequately react to significant fluctuations in the ruble exchange rate. Since the beginning of November, the ruble has fallen by 18%, but by now has already recovered half of this decline.

High world sugar prices and the devaluation of the ruble should stimulate an increase in sugar prices, both from an economic standpoint and common sense. Another factor affecting price hikes will be high inflation, which is likely to significantly exceed the Central Bank's target for 2024.

There are several negative factors hindering the rise in sugar prices, including excess production in the season and high cost of money. With a key rate of 21% (which is expected to continue rising in the coming days) and a commercial rate even higher, it becomes disadvantageous to hold money in the form of sugar. Selling sugar today and placing the money on deposit becomes more profitable. Investing loan funds in sugar also seems doubtful. This is negative for the market, as the lack of long-term inventory planning weakens price stability for seasonal goods.

Over the past 12 months, the total volume of sugar consumption has remained above 6 million tons for the second month in a row. By our estimate, as of the end of October, this figure reached 6.05 million tons.

The calculated cost of white sugar from raw materials (including VAT and duties) is $905.74/ton (or 94.41 rubles/kg).

As of December 5, 2024, the cost of imported sugar was:

• in Uzbekistan - $761.8/ton (69.50 rubles/kg in Krasnodar, including delivery, without VAT and duties);
• in Kazakhstan - $694.8/ton (67.94 rubles/kg in Krasnodar, including delivery).

According to Sugar.ru portal's estimation, in November, the volume of sugar imports from Belarus remained at the October level, totaling about 30 thousand tons.

Export rates for Russian white sugar declined at the end of the month, indicating that the volume of exports in November was lower than in October. In total, around 85 thousand tons of white sugar were exported in November (by rail and road transport). Kazakhstan remains the main recipient of Russian sugar, receiving over 55 thousand tons in November.

We forecast that the export of Russian sugar to neighboring countries will continue in the coming months. There are several reasons for this: firstly, there are no new deliveries of raw materials for sugar production in the Caucasus and Central Asia; secondly, the high cost of money in Kazakhstan makes short operations with Russian white sugar more profitable than buying and processing cane raw materials.

The increase in export of Russian beet raw material in November compensated for the decrease in white sugar exports. During the month, Russia exported over 40 thousand tons of raw materials, including to Kazakhstan, where Russian raw material was not previously supplied.

The total volume of exports of Russian sugar and raw materials in November remains at the level of the previous month - 125 thousand tons. Over the first 4 months of the current season, a total of 375 thousand tons were exported.