Банкеръ Weekly

Briefs

SUGAR TO GROW EXPENSIVE NEXT AUTUMN

The regulations of the European Union (EU) sugar market will become valid in Bulgaria, too, as soon as the country joins the European community. In the EU Regulation 12/60 is currently effective, by which the European Commission has set the lowest prices of sugar beet and white sugar. After 2007, Bulgaria will have to apply these prices on its domestic market which will automatically result in higher prices. The value of one ton of white refined sugar in the EU is now EUR627. However, that's the producer's price. The transport costs and retailers' profit added, one kilogram will hardly cost less than BGN1.50-1.80.In fact, the EU regulations will be in force until 2007. Then new rules will be adopted and new lowest prices of inputs and end-products introduced. Anyway, prices will grow higher, experts claim.One serious problem that Bulgaria will face after 2007 will be the fields of sugar beet that farmers will be able to crop. Until two decades ago, Bulgaria used to produce a sufficient amount of input. For example, the enterprise of Gorna Oryahovitza depended entirely on beet grown in the region. But the situation has changed long time ago. From 1993 till 1999 there were periods in which less than a thousand decares were cropped. It's only in the past two or three years, because of the mill's changed policy of buying beet, that the fields increased. According to the latest data from the System for Agricultural Market Information (SAMI) the 2003/2004 harvest will reach some 40,000 tons.The subsidies launched to sugar beet producers last year should be an incentive for the branch. In 2004, the Agriculture State Fund is going to provide another BGN300,000 with the same objective. Subsidies will be paid after September 15 and farmers will get BGN15 for each ton of beet sold at BGN39. The new financial assistance will enable producers to increase beet fields by some 12,500 decares more, Agriculture Fund experts forecast.Regarding the negotiations with the EU and Bulgaria's quotas, the optimum annual output of beet in the country will amount to 50,000-60,000 tons, experts say. In order to get such a crop, however, farmers need to sow 350,000-400,000 decares which, at least now, seems hard to achieve. The rest of the necessary input will come from import. As proposed by the Union of Sugar and Confectionery Producers, Bulgarian enterprises use an annual quota of 250,000 tons of unrefined imported sugar. Now it is sufficient, but one day it may force the price of the commodity up above the expected value. A similar situation happened a month ago, when an import company bought the entire 2004 quota available and forced the rest to follow the price it determined on the domestic market. The quotations of white sugar on the domestic commodity exchange prove that. In early January (7-9) 2004, the price was BGN730/ton, and in May (12-14) it went up to BGN780-820/ton, VAT included.From the beginning of January till May 26, the average sugar retail price fluctuated around BGN0.81-0.92/kg. The lowest average price across the country, BGN0.81/kg, was registered in May 17-14, while the highest one, BGN0.92/kg, was registered on April 28. Till May 26, the lowest price was reported in Razgrad - BGN0.68/kg, and the highest one - in Vidin, Vratza, and Montana - BGN1.10/kg.Brokers forecast that prices will go up slightly next autumn. The average retail price is expected to vary from BGN0.85 to BGN0.97 per kilo and in various regions distanced from the sugar mills it will definitely go beyond BGN1/kg.

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