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. Last Updated: 07/27/2016

Sugar Traders Facing Price Collapse in 2003

Russia, the world's largest sugar buyer, faces a glut and price collapse next year after its import quota system was undermined at this week's annual auction, traders and analysts said Thursday.

Competition at Wednesday's state auction made discounted import quota prices almost as expensive as imports outside the quota system, as importers sacrificed profit margins in a desperate bid to maintain market share.

But analysts said the auction's winners could now start pushing the state to raise import tariffs on nonquota imports in an effort to avoid massive losses.

"The results of the auction show that it will be impossible to avoid nonquota imports next year, when most of the players will make losses on their operations," Rusagro sugar branch commercial director Alexei Knyazev said.

Russia, which consumes around 5.5 million tons of white sugar a year, refined only 1.62 million tons from domestically grown beets last year. It produced 4.96 million tons of sugar from imported raws in 2001.

In Wednesday's auction, all the rights to import 3.95 million tons of raw sugar in 2003 were sold for an average price of 102 euros per ton, bringing 405 million euros ($397 million) into state coffers, up from 200 million euros last year.

The winners now have to pay an average price of 0.197 euros per kilogram to import sugar within the quota, the price consisting of 0.102 euros per kilogram they paid at the auction and a discount tariff of 0.095 euros per kilogram.

But to import sugar above the quota a tariff of 0.20 euros per kilogram will apply between Jan. 1 and June 30, 2003. From July 1 until Dec. 31 the rate will rise to 0.23 euros.