HIGH SUGAR PRICES ARE DISSOLVING AS RUSSIAN IMPORTERS "MIX IT UP'

HIGH SUGAR PRICES ARE DISSOLVING AS RUSSIAN IMPORTERS "MIX IT UP'

The high cost of domestically produced sugar has intensified competition between importers and pushed the price of sugar lower, said Vladimir Totsky, agricultural expert at the Moscow commodities exchange.

When the government withdrew sugar import subsidies from state importers in July a sugar boom began for private traders. By the beginning of September the price of sugar a metric ton was at 570,000 to 580,000 rubles. Prices quickly fell, however, as more and more sugar began to arrive from abroad.St. Petersburg trader Kondor was offering sugar at 480,000 rubles a metric ton on Tuesday.

Prices in Moscow are slightly higher than in St. Petersburg, at about 500,000 rubles per metric ton, because St. Petersburg traders can deliver sugar straight from the port there, cutting their overheads.

The competition means traders have to keep lowering their minimum consignments, Mr. Totsky said. At present about 80 percent of importers are offering consignments of 50 metric tons or more, which has reduced their profit margin to about 3 percent to 5 percent. Mr. Totsky believes the trend will continue, causing the majority of small-scale importers to go out of business.

Although the ruble has been sliding against the dollar, imported sugar prices are expected to drop further, by 7 percent to 8 percent in the next few weeks, to about 450,000 rubles per metric ton.

Mr. Totsky said Tuesday there are already traders in Moscow offering consignments of 500 metric tons at $370 per metric ton c.i.f. Moscow, 2 to 3 weeks delivery with payment on arrival.

Russian ports and railways are having trouble coping with the flood of sugar. At the port of Kaliningrad, vessels with 40,000 metric tons of imported sugar were waiting to unload at the end of last week, while the port of St. Petersburg was 70,000 metric tons behind in its unloading schedule.

In stark contrast are regions in the north of Russia and in Siberia, which are suffering sugar shortages because of transportation problems.

The high level of imported sugar is bound to deal a severe blow to domestic sugar refining industry. High production costs and transportation expenses mean domestically-refined sugar costs 1.5 times more than imported sugar.

"At the moment our refineries are busy processing the sugar beet harvest, but they will be left with nothing to do when that is finished. Cuban deliveries of raw sugar will be drastically reduced next year," Mr. Totsky said. "Our Latin American suppliers have decided that selling us raw sugar is not worth their while."

"The government considered for a while introducing high import duties for white sugar in order to protect domestic refineries, but now they seem to have given up the idea," Mr. Totsky said. The government realizes that sugar produced by domestic refineries will be so expensive that prices would soar and eventually, even with high import duties, imports of refined sugar would be much more profitable, he said.