Ukraine to boost sugar output 66% yoy to 2.1 mln mt

Ukraine expects to harvest 18 mln mt (+80% yoy) of sugar beets this fall, which corresponds to sugar output of 2.1 mln mt (+66% yoy) over the 2010/11 season, Interfax reported yesterday, citing Ukrtsukor, the association of Ukrainian sugar producers. Although the summer drought has not yet had an adverse impact on crops, it should favor an earlier start to the refining season, while the abundant harvest is set to load 77 sugar refineries vs. 56 in 2009/10. Ruslan Patlavskyy: The sugar output forecast fully covers Ukraine’s annual consumption of 1.8-2.0 mln mt, which should put downward pressure on domestic sugar prices this fall, which we estimate to decline by 18-20% to USD 740/mt by yearend. As a result, we expect this to have negative implications on the 4Q10E financials of major domestic sugar producers: Astarta (WSE: AST PW), Ukrros (UX: UROS UK) and indirectly to Mriya (FSE: MAYA GR), which grows sugar beets. At the same time, the expected price decline is in line with our expectations and we leave our forecasts for these companies unchanged.