Page 137 - RusRPTMay21

As a result, the government forced producers and retailers to sign up to price caps. For sugar, they fixed the wholesale price at 36 rubles per kilogram and the retail price at 46 rubles per kilogram. That’s roughly 28 percent below market rates. Sugar producers have estimated that the price freeze will cost them 10 billion rubles ($140 million) per year.
In mid-March, the government promised to offset these losses to the tune of five rubles per kilogram of sugar (reducing losses by about a half). But in order to access this money, sugar producers must change their relationship with retailers. We’re still waiting for the details of how the subsidy scheme will work, but as soon as the plan was announced producers stopped selling to avoid unsubsidized losses.
Publicly, retailers and producers blamed each other for the crisis. Behind closed doors, however, they pointed the finger at the government. “They did all this for the sake of 30 rubles (40 cents) per person each month,” one senior manager at a leading sugar producer complained to The Bell, referring to the projected savings for consumers as a result of the price caps.
Businesses are urging the state to avoid wrecking the market with regulation, and instead offer food stamps for the poor. Politically, though, this would not be popular. Instead, this week brought confirmation that the price caps are here to stay: the restrictions on the cost of sugar were extended until June — and on sunflower oil until September.
The Ministry of Agriculture could draw up refinery-based sugar supply quotas based on the regional needs of various retail channels and historical production levels, according to Izvestia at the start of April.
The initiative targets a smoother sugar supply in Russia while price capping regulations are in place. Chains had previously shared negative feedback on the volumes coming from producers, which are waiting for state subsidies and have accumulated stocks, according to RBK. The regulation could add to the list of price stabilisation measures, which already include price caps of RUB 36/kg in wholesale and RUB 46/kg in retail, as well as the proposal of tariff free imports of 350,000t this season from the Eurasian Economic Union.
In MY 21 (September/August), Russia is to refine 5.2mnt of sugar vs. consumption of 5.9mnt. Beginning stocks stood at 0.9mnt and that implies a tight supply-demand balance, which means that producer prices have almost doubled YoY in 1Q21 to RUB 38/kg. We await the final implementation for the quotas, as well as those for the new season, that could potentially add uncertainty volumes.
137 RUSSIA Country Report May 2021 www.intellinews.com