Mansoor Maitah

Restoration and Growth of the Russian Sugar Market

The Russian Federation represents a very important stakeholder in the area of sugar beet production and consumption in Europe and Central Asia. The Russian population annually consumes over 5.9 million tonnes of pure sugar. After a long period of stagnation in the Russian sugar industry, the Russian Federation is now aiming to restore production capacities in the areas of both sugar beet growing and sugar production. The ambitious government programme has supported the growth of production potential. The government’s goal is to reduce Russian dependence on imports of sugar, especially white sugar. During the period 1992–2000, there was a fall in Russia’s own cultivation as well as processing capacities, competitiveness decreased, and dependence on imports increased significantly. By contrast, the period 2000–2014 was a resuscitation of the Russian market and economy. This was reflected in an increase in sugar beet production as well as growth in sugar production. Russia’s dependence on imports of sugar from abroad dropped considerably and changed the structure of traded goods containing sugar. This review highlights the most significant trends that have influenced the development of the Russian sugar beet industry and the current trade, in particular.

European Sugar Production and its Control in the World Market

The European sugar industry which mainly relies on sugar beet is unique with its production quotas, minimum beet price and trade mechanisms. This study aimed to outline and specify the current production structure of the sugar quota holder system in the European Union (EU) and to determine the competitiveness and level of concentration in the system which is operated by more than a hundred sugar factories owned by approximately fifty companies. The study reveals that EU quota holder system is highly concentrated in certain regions like Germany, France, Great Britain and The Netherlands regardless of sugar-producing destinations and individual factories and is controlled by the companies/alliances operating in these regions. The study also reveals that monopoly of these regions has created unfair competition in European sugar market.

The Development of World Sugar Prices

The globalization of the world economy is a phenomenon that has historical roots that began in the early 1970s, when the Bretton Woods and the Smithsonian agreements were created. This resulted in freely floating exchange rates and the gradual deregulation of financial markets. In addition, this increased market accessibility for individual and institutional speculators. By increasing market price fundamentals, the price volatility of numerous commodities (including agricultural commodities) has increasingly grown in specific sectors of the financial markets. This is particularly true in agricultural commodity markets. This change has become a possible financial incentive for speculators. Due to the high degree of distortion and government protection, the sugar market has resisted this speculation for quite some time. However, in the context of the recent financial crisis of 2008 and 2009, this market segment could not escape the “incursions” of speculative capital. Sugar prices have “surged” upwards significantly. This is not only due to speculators, but it also due to the growing demand for biofuels. Sugar prices during the period of 2000 to 2016 saw unprecedented price fluctuations. The world sugar price has risen from about 11 cents (in early 2000) to more than 65 cents per pound of raw sugar (2010/2011). Speculative funds (hedge funds), which in recent years have made transactions on average of about twenty million tons of sugar a year, played a major role in this fluctuation. However, their impact on the price of sugar does not lie in the fact that these funds are pushing for a rise or a fall in the price of sugar, but their effect is that these funds cause in particular, price fluctuations in sugar because they attempt to profit on this fluctuation in prices. The impact of speculation on falling or rising prices is significant. In the above period, the number of “price fluctuations” has almost doubled in comparison with the previous period.

Assessment of similarities between model behaviour and actual product from economic and technical perspectives

This paper assesses the proximity of the degree of similarity between the behaviour of a model and the actual product from technical and economic criteria. The methodology is best illustrated by using the example of a power boat and a sail boat model. The first portion deals with technical aspects, using the cybernetic theory of similarities - classification of the relationship between the model and the actual product (isomorphic or homomorphic). Since the similarity was assessed in the field of aerodynamics, the Bernoulli equation was used to derive the conditions of isomorphism for flow in the actual object. This defines the boat model from the technical point of view. The objectives of the experiment in this study were two-fold. The first objective is to identify the formula for the deduction of the technical and economic criteria of the product model (in this case, a sail boat). The second objective is to use factorial design for identification of the parameters that affect the decisions about the choice of the model (homomorphic vs. isomorphic).