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10 I Companies & Markets bne September 2017 Sugar, sugar – up in Ukraine
and down in Russia
Ben Aris in Berlin
Two of the biggest sugar producers in eastern Europe – Russia’s Rosagro and Ukraine’s Astarta – have had very different experiences in the first half of this year. Ukraine’s sugar business is sweet, but Russia's has gone sour.
It’s reporting season and it has been a hard season for farmers and food producers. This year May was plagued by storms that turned fields across the regions into quagmires. The upshot
is the harvest in Russia and Ukraine has been delayed by any- thing between three days and three weeks, depending on the region and the product. And it is still not clear how badly the poor weather will hit yields.
However, the impact on the bottom lines of firms produc-
ing sugar has been very different in Ukraine and Russia, which highlights the differences between the two markets for agricultural goods. Ironically, Ukraine benefits from its very backwardness, while the top Russian firm, although having a much bigger business, is being hurt by its own sophistication and the increasingly tense competition from a much more developed market.
In general, Russia is on course to bring in a good harvest of at least 110mn tonnes of grain, down on last year’s record
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119mn tonnes, but still above five-year averages. The May showers have brought more mud than flowers for the Rus- sian economy: last year agriculture was the only sector to grow; this year it contracted by just under 1%. Particularly painful was a spike in fruit and veg prices (the price of a cabbage jumped from RUB30/$0.50 to RUB80 in some regions) which has caused inflation to tick up 0.3% points in the last month, causing a headache for the Central Bank of Russia (CBR).
Ukraine is having similar problems, but there the impact
on growth has been even larger. The early harvesting has also started in Ukraine and is also a bit late, but agricultural production has fallen a lot harder, down 4.6% year-on-year in June, with the pace of decline accelerating from 3.0% y/y in May. All-in-all agricultural production was down 2.1% y/y in the first half of the year, but the season is not over and so there is still time to make good for the slow start.
Rosagro – sweet disappointment
The effect on the companies has been mixed. Russia’s Rosa- gro, the country’s second-largest agro-company that sports a youthful management and no-nonsense attitude to producing from field to supermarket shelf.