Sugar production is the most profitable sector in agriculture

30 may 2017 | CityMagazine

Deputy Head of the Department for Expert Analytics of the Analytical Center Elena Razumova told CityMagazine about the realities and development prospects of import substitution in the Russian agricultural sector.

Elena Razumova
Elena Razumova
Department for Expert Analytics

This year investments in agriculture saw 13.8 % growth after falling for two years running (-12.5 % in 2015) while the food industry saw continued decline in investments, which fell there by 11.7 % (-15.5 % last year). "Such a high rate of growth in agriculture is first of all a result of the low base effect in 2014-2015 and, secondly, 2015 saw a record high return on sales in crop farming since 2004 (35.9 %). All these factors drew investors' attention in 2016," Ms. Razumova explained.

Investments are declining in meat production. "In cattle breeding returns on sales fell two years in a row despite the embargo, down to 10.5 % in 2016, and that is below the 2012 level of 11.2 %," the expert notes. "In the future demand for dairy raw materials and imbalances in their production are going to make the dairy segment a more attractive proposition for investors. However, we should not expect to see serious investments in meat production unless Russian meat producers somehow manage to penetrate foreign markets on a large scale."

The expert is of the opinion that today the most profitable sector in agriculture is sugar production. "The industry is benefiting from the serious decline in the output of sugar cane after a series of droughts in South East Asia in 2014 as well as from the weakening of the CIS counties," Ms. Razumova says. This, in her option, allowed Russian companies to increase sales of beetroot sugar both in the domestic market and abroad, primarily in the CIS. "There is demand for sugar and in the medium term, sugar production is going to be one of the key investment drivers when it comes to new projects," the expert is convinced.


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