Sugar is a socially significant product, it has to be produced in Russia

How our country switched to full self-production of sugar

 The sugar beet harvesting season is over in Russia and its processing is going nip and tuck. In December, the industry enterprise traditionally sums up the results of the year. Over the past two decades Russia has become the world's largest beet sugar producer and leading exporter of processed sugar products: pulp and molasses. Viktor Aleksakhin, the executive director of GC of Prodimex, the leader of Russian sugar industry, told Izvestia how the Russian sugar beet industry managed to achieve such results and how Russian producers managed to maintain the growth rate.

— What results should be expected further to the current harvest campaign?

— This season we are planning to process about 7.5 million tonnes of sugar beet and produce more than 1 million tonnes of sugar. The year was not easy for farmers, primarily due to weather conditions. In successful, productive years, we produce more than 1.5 million tonnes of sugar. I should mention that this year's crop was harvested as soon as practicable and with minimal losses.

— What characteristics of the Russian sugar industry ensured such a progress in import substitution?

— This is a historical tradition for Russian sugar farmers: the state hears the business and meets its halfway. Even Peter I granted special privileges and conditions to the merchants in 1718 for the construction of sugar plants in Russia, cooking sugar and its free sale. In order to protect against foreign competitors, he also ordered to "prohibit the import of sugar to Russia from foreign countries", and to sell sugar made by Russian plants. So, the history of import substitution in the Russian sugar industry is over 300 years old.

At the beginning of the 21st century, state support still helped such an industry type to develop after the tough 1990s. Thus, since 2004 a flexible duty on raw sugar was imposed, as well as a prohibitive import duty on white sugar of $340 per tonne. Since 2013 a common customs tariff of the Eurasian Economic Union was introduced. In 2010 the Food Security Doctrine of the Russian Federation signed into force, according to which the country should ensure its own production of not less than 80% of sugar (5.2 million tonnes of 5.7 million tonnes consumed annually).

It was government support that became the starting point of the industry's revival: independent beet sowing and a Russian sugar production out of it has become more profitable. According to expert estimates, during 1997-2016 period there was almost a fourfold increase in sugar beet breeding productivity in Russia and it is raising intensively almost every year.

The development of Russian sugar beet production has historically been connected to food, technological and economic independence from interventionism and was seen as a way to solve social and economic issues: industry development, increasing employment opportunities and improving the level of professional qualification of people. Sugar plants were built as city-forming enterprises with an extensive social services.

Concerning the overall performance of the industry in the country, Russia is the largest producer of beet sugar in the world and the leading exporter of secondary production which are pulp and molasses. According to the Union of Russian sugar manufacturers, the industry has achieved and exceeded the target of sugar self-sufficiency for 80% of consumption established in the Food Security Doctrine. The industry provides employment opportunities for more than 100 thd. people, and sugar plants as the city-forming enterprises participate in ensuring a decent standard of living in the rural area.

— Since the 90s of the last century, government policy has changed, requirements for the social part of business have increased. Have they been burdensome to the company's financial system?

— Not at all, the sugar industry is provided with the governmental tools to complete the governmental tasks. The thing is whether we are ready to cooperate, to hear each other. As for the requirements for social part of business, it is a matter of high responsibility of Russian companies: towards the state and people.

We understood this since the development of import substitution was not a priority task for the government. Our company has been functioning since 1992 and has been occupied with in the import of white sugar. Within five years, the company became a leader in this sector, and a decision was made to develop a full production cycle in Russia: to cultivate beets, process them and produce sugar. It is since then that we have started acquiring and modernizing sugar plants. It was not an easy decision, considering the economic environment in 90s and the status of the sugar beet industry in general. Sugar is a socially significant product, it should be produced in Russia. We understood it as entrepreneurs and as Russian citizens.

Since then the history of Prodimex as agricultural Group of Companies has become. Since then the history of Prodimex as agricultural Group of Companies has become. from 15 thd. ha. in 2004 to 154 thd. ha. in 2019. Our Group of Companies has been the largest country sugar manufacturer and the industry leader for many years. Nowadays, the GC includes 14 sugar plants in 8 Russian regions. The total volume of sugar beet processing is more than 9 million tonnes a year. Our enterprises produce more than 1 million tonnes of sugar annually.

— You said that sugar beet was not the only crop you cultivated, and that was due to the specialties of the technological process. Which one?

— Sugar beet is a complex industrial crop that cannot be sown in the same field twice in a row. Traditionally it is sown not more often than once in four years, and the best forecrop are winter cereals, pulse crops, corn. Therefore, our specialists have implemented a five-year crop rotation planning system.

Today we sow wheat, barley, peas, corn, sunflowers, rapeseed, flax and soy except sugar beets. We are constantly expanding the scale of sowing. While in 2015 the harvesting volume of cereal and pulse crops was 1 mln. t., today it is already 1.8 mln. t.

—  What are the company's current land resources?

— Now, the company controls one of the largest land banks in the country: total area of cultivated land is more than 800 thd. ha. The sowing areas are located in the most developed agricultural regions of Russia: in Voronezhskaya, Belgorodskaya, Kurskaya, Lipeckaya, Tambovskaya and Penzenskaya oblasts, in Krasnodarsky and Stavropolsky krai. GC of Prodimex ranks 2 in Forbes’ largest landowners of Russia.

— Is working the land intensively could harm the environment? Is it possible to combine an active development with sustainable development?

— Any dynamically developing company must follow the principles of sustainable development and we take measures to it. Conclusion: we have managed to a grater extent to reduce fuel consumption per hectare by using modern high-technology machines and mechanisms. We have also reduced the quantity of units of equipment per hectare.

In the Central Black Earth Region, where Prodimex's main land assets are located, over 80% of the ploughland is chernozem of high potential fertility. It is the country's soil "gold reserve" and we treat it with exceptional care. We are developing conservation farming and fighting against soil degradation. Our agricultural enterprises strictly follow the schedule of succession cropping in the crop rotation.

We were the first in Russia to establish an enterprise for desugarization of molasses in 2011 to produce sugar and betaine, an innovative product used in medicine, animal husbandry and cosmetology. These technologies make manufacture procedures wasteless.

The quality of the GC's enterprises products is being regulated. We cooperate with leading Russian and international companies with special requirements to product quality. Acquiring companies conduct certified audits regularly. Additionally, the enterprises themselves undergo certification audits in accordance with international standards. For example, three sugar plants taking part of our GC, Olkhovatsky, Liskinsky and Uspensky, are members of the Sedex platform, that was created to exchange ethical data between suppliers and Ecovadis company. It demonstrates compliance with ethical and social principles.