15 December 2011
Ukrainian sugar plants produced 2.1 mmt of beet sugar in 11M11, up 43.8% yoy, UkrStat reported on Wednesday. The season for beet sugar production in Ukraine started at the end of September and ends in early December-January, depending on sugar beet availability. Yegor Samusenko: We keep our view that Ukraine will produce 2.4 mmt of sugar this season (more than the Agriculture Ministry’s forecast of 2.1-2.2 mmt), which combined with 0.3 mmt in stocks at the start of the season should result in supply of 2.7 mmt. With annual consumption of 1.9 mmt, this would result in record end of season stocks of around 0.8 mmt. As a result, we expect the domestic sugar price in Ukraine to be on par with LIFFE this season (vs. a historical premium around USD 100/t). Given that at current price levels, the least efficient producers are effectively selling their sugar at cost and still have to lock up significant working capital in inventories, we expect a new wave of consolidation on the sugar market soon. We anticipate market leaders, namely Astarta (AST PW), Kernel (KER PW), Agroprodinvest, Ukrlandfarming and Mriya (MAYA GR) to consolidate up to 75% of the market in 2012-2013, from 40% in 2010. See our Astarta note dated November 17, 2011 for details.