Page 116 - RusRPTNov20

seasons, which saw an oversupply internally and in increase in exports (20% of production in MY20). For the season that kicked off in September, we see a 30% y/y decline in sugar production to 5.5mnt due to the reduced beet planting area and adverse weather conditions for yields and content. The figure compares with the stable 6mnt of consumption annually and creates a tight supply-demand balance, amid high stocks of 1.5mnt at the beginning of the farming year. Prices reacted accordingly and surged 85% y/y in September-October to RUB36/kg (compares with the RUB45/kg of quota plus global price). Global sugar prices in October increased 14% y/y to $310/t or RUB24,140/t on blended $RUBof 77.50. The aforementioned global price assumes an import cane quota of $270/t, implying 87% of the cane price, is imports to Russia resume. We anticipate more details on the state trade regime for cane, while lower import tariffs could have downside risks to prices and imply a structural change to beet growing and sugar refining.
Russian state support for the fishing fleet will not include subsidies for buildingcrab-fishingvessels​,K​ ommersant​dailyreportedonOctober9, citing the project of the Ministry of Industry and Trade. As reported by ​bne IntelliNews,​ the government has ​reshuffled the lucrative crab market,​ with the government redistributing 50% of all fishing quotas in 2019. Large players that benefitted from market shake-up ​have pushed for a reform in the fishing industry​. Overall the ministry reserved RUB25.4bn, RUB22bn, and RUB25.3bn for the support of domestic shipbuilders in 2021, 2022, and 2023, respectively, cutting the previous plan by RUB7.4bn. The subsidies for fishing companies for acquisitions of new vessels have also been cut. Analysts and industry players surveyed by the daily not that the crab fishing companies have contracted 15 new vessels worth RUB22.2bn and now risk losing the subsidies and absorbing the loss. They also note that crab and other fishing vessels require high-precision equipment and environmental standards, which could be beneficial for developing domestic ship-building competencies. At the same time the giant shipyard Zvezda (operated by Russian oil major Rosneft and state-controlled bank Gazprombank) would nevertheless get RUB31bn worth of additional subsidies by 2025 for building gas tankers, Kommersant notes.
The meat consumption in Russia remained flat year on year in 9M20 at 7.8mn tonnes, with pork being the only segment seeing increase in volumes ​(up by 5% y/y to 2.9mn tonnes), with other segments seeing a marginal decline, VTB Capital wrote on October 9 citing the data by the National Pork Union. As reported by ​bne IntelliNews​, agriculture was one of the few sectors to ​post robust growth​ in the coronavirus (COVID-19) hit 2Q20. "In 2019, meat consumption in Russia stood at 11.2mn tonnes, implying 77kg per capita, which is 3% above the biological norm," VTBC analysts remind. VTBC believes that the "flattish" trend year to date comes from the staple nature of consumption amid real incomes being under pressure (-4% y/y lower in 1H20) as well as the disruptive nature of pork production on prices. In 9M20, pork output increased 10% y/y to 3.1mn tonnes as industrial players added
116 ​RUSSIA Country Report​ November 2020 www.intellinews.com