Denis Ternovsky, Expert at Economic Policy Foundation, explained the reasons for sugar prices reduction in a commentary for Izvestia. He believes that a surplus has been formed in the market due to high projected production volumes, not only in Brazil but also in India and Thailand.
"Moreover, the market is under pressure of declining sugarcane ethanol production in Brazil. Consequently, its conversion into sugar is increasing up to 52.1%, compared to previous 48.1%. The reason is that sugarcane ethanol is being actively replaced by cheaper corn ethanol, whose production will increase by 20%," he explained.
According to Denis Ternovsky, global sugar price situation traditionally has little impact on Russia, but at the same time, global prices partially influence domestic prices through exports.
"Russian prices are falling in line with global prices, however, this is primarily due to the strengthening of the ruble this year," the expert believes.
He also noted that total sugar expenditure, both net and as part of other products, averages approximately Rb3.000 per person per year. Therefore, fluctuations in sugar prices will not have a significant impact on consumer spending.
Furthermore, according to the expert, the opposite effect, e.g. rising prices for confectionery products, is more likely. This is due to the rise in other cost components: cocoa, equipment and its maintenance, transportation, packaging, energy, and other factors.