Ukraine. Oilseeds and Products Update. Nov 2015 Nov. 27, 2015
The beginning of marketing year 2015/16 features higher production volumes for sunflower seeds and soybeans, while rapeseed production is lower compared to the previous marketing year. Productivity of already planted winter rapeseed would strongly depend on the improvement of weather conditions. A buildup of processing capacities for all major oilseeds and forecasted decrease for domestic feed consumption might translate into the growth in exports of processed oilseeds products from Ukraine.
Marketing year (MY) 2014/15 for oilseeds is over. Sunflower seed production reached over 11 million metric tons (MMT), soybeans - 3.7 MMT and rapeseed - 1.7 MMT at the beginning of MY 2015/16. Farmers have winter rapeseed planted, but its productivity is uncertain due to unfavorable weather conditions.
Ukraine continues to buildup processing capacities for all major oilseeds. This might translate into the increased export volumes of processed products, especially for soybeans and rapeseed. The decreased poultry population in agricultural enterprises might even increase the export trend for meals due to the decreased domestic feed consumption.
At the time of this report, MY2014/15 is over for all major oilseeds. According to the information provided by the Ministry of Agricultural Policy and Food of Ukraine (MAPF) in 2015, farmers harvested over 11 MMT of sunflowerseed, 12 percent above the previous year; over 3.7 MMT of soybeans, which is comparable with the previous year's figure; and 1.7 MMT of rapeseed, which is 22 percent below the previous year.
According to the MAPF, as of November 17, 2015, farmers planted 647 thousand hectares of winter rapeseed, which is roughly 3 percent below areas planted for this crop for the same date last year. The productivity of this crop will depend on whether the current weather conditions featuring significant precipitation rates will be able to mitigate the unfavorable late-summer and early-autumn drought conditions.
Rapeseed exports were slightly below 2MMT for MY2014/15 and over 65 percent of this volume was to traditional European Union (EU) markets. At the same period Pakistan remained the second-largest buyer, purchasing 421 thousand MT for this period, increasing its imports by 80 percent compared to MY2013/14. Export prices for this crop remained relatively stable in MY2014/15, but were lower compared to the previous marketing year as the result of weakening world oil prices. Domestic prices started picking up at the beginning of MY2015/16 over the news of the smaller crop.
Total volume of rapeseed oil exports reached 111 thousand MT in MY2014/15, growing by 89 percent compared to the previous marketing year. This increase may be attributed to growing domestic crush capacity which is expected to reach 16 MMT in 2015, according to the estimates of oilseeds industry representatives. Another factor is the liberalization of import duties by the EU (see Policy section for more details), the destination for almost 60 percent of rapeseed oil exports from Ukraine in MY2014/15. China was the second-largest market for this product with over 40 thousand MT, which is an overwhelming increase compared to next to zero volumes in MY2013/14.
Given Ukraine's growing oilseed crush capacities and the strong dependence of rapeseed exports to the EU market correlating with biodiesel production there, the Chinese market might play an important role for Ukrainian rapeseed oil exports in MY2015/16.
Rapeseed meal exports totaled 133 thousand MT in MY2014/15 or 65 percent above the previous marketing year. Over 84 percent of this amount or 112 thousand MT was shipped to the EU, while Israel retained second place on the list of importing countries with slightly over 18 thousand MT.
Sunflower seed exports were slightly above 45 thousand MT in MY2014/15, which is approximately 35 percent less compared to exports in the previous MY. Such a decrease in exports could be attributed to both decreased volumes of production of this crop in MY2014/15, as well as the buildup of domestic crush capacities that give exporters of this crop a competitive edge due to existing export duties. The European Union remained largest export destination for sunflower seed, buying over 31 thousand MT, or around 70 percent of total exports from Ukraine.
Sunflower oil exports remained at 3.9 MMT in MY2014/15, which is just 7 percent below the previous MY. Such steady flow of exports might be attributed to slight recovery of world prices for this commodity in MY2014/15, after a significant slump in MY2013/14. India retained its status of the largest importer with around 1.5 MMT, while the EU managed to gain the second position with 587 thousand MT, and China took third place with 451 thousand MT in MY2014/15.
Over the last few years, China has become an important export designation for Ukrainian producers, increasing 4 fold in sunflowerseed oil shipments in MY2014/15 compared to MY2011/12. However, the growth of future exports to China will strongly depend on its overall economic performance in 2016. The Chinese middle class is the main consumer of this product and the disposable income level of this group may have a major driver for import volumes.
The Middle East continues to be a destination for sunflowerseed oil exports, accounting for almost 765 thousand MT in MY2014/15, or a 17 percent increase compared to the volume shipped in previous MY.
Sunflowerseed meal exports reached almost 3.4 MMT in MY2014/15. Approximately 2.1 MMT, or 62 percent of total export volume was shipped to the EU, and 527 thousand MT to Belarus. Both of these destinations remain cost-efficient in terms of logistical costs and indicate a sustainable feed demand from animal production industries in these counties. During this period, Ukrainian exporters started to diversify their supplies, increasing shipments to Africa by almost 8 percent and to the Middle East by almost 3 percent.
The potential factor that might change the export geography for this product in MY2015/16 is Ukraine's reinstatement to the Generalized System of Preferences. This means that sunflowerseed meal originating from Ukraine has gained a competitive advantage into the US market. This has already resulted in opening up shipments to the US in August 2015.
Domestic sunflowerseed oil prices remained stable over the MY2014/15, however they are much lower compared to MY2013/14. This is mainly due to decreasing worldwide palm oil prices applying downward pressure on the whole market.
Soybean exports totaled 2.4 MMT in MY2014/15, 92 percent higher compared to the previous MY. Strong export growth is backed-up by ever increasing production volumes for this crop in Ukraine during the last few years. Among largest importers are Turkey, which purchased 920 thousand MT and the EU imported 527 thousand MT. Iran became an unexpectedly active player and bought almost 486 thousand tons of soybeans for this period. In general the Middle East became a major destination for Ukrainian soybean exports, accounting for over 1.6 MMT of shipments, increasing 4 fold compared to volumes for MY2013/14.
Export prices for soybeans remained relatively stable in MY2013/14 supported by increased demand from China on global markets. This trend is likely to continue into MY2015/16. Domestic prices were comparable to export prices; however, domestic prices sometimes exceeded export prices. Such fluctuations could be attributed to a strong demand for this crop from domestic crushing industry.
According to industry information, the processing capacities for soybean in Ukraine will reach 3.4 MMT in 2015, which is roughly equal to the production volumes of this crop. It is a significant increase compared to 2.5 MMT of capacity in 2014. This trend might further spark competition between soybean exporters and processors on the domestic market translating into an increase in domestic market prices and further expansion of areas under this crop by farmers.
Soybean oil exports reached 136 thousand MT in MY2014/15, and grew by almost 15 percent compared to the previous MY. The EU retained its status as major export destination, buying approximately 60 thousand MT. China became a new consumer and imported around 56 thousand MT during this period.
Soybean meal exports reached 212 thousand MT in MY2014/15, increasing 2.7 fold compared to the previous MY. Belarus retained its status as major consumer, purchasing over 110 thousand MT, increasing 4 fold compared to exports in MY2013/14. This hike in exports may be attributed to the closure of the Russian market to Ukrainian agricultural products, and some of these volumes may have been potentially rerouted to Belarus. In MY2014/15 Turkey unexpectedly became the second largest importer and bought almost 60 thousand MT, pushing the EU down to the third place with a mere 15 thousand MT of imports.
In April 2014, the EU enacted Regulation # 374/2014 providing unilateral reduction or elimination of Union customs duties on goods originating from Ukraine. In accordance with the Regulation, the import duties for a number of commodity positions have been decreased to zero, including: sunflowerseed oil (HS Code 1512), rapeseed oil (HS Code 1514) and soybean oil (HS 1507) from regular rates ranging between 3.2 - 9.6 percent. This measure should increase the competitiveness of Ukrainian oils on the European Market.
Ukraine streamlined its phytosanitary legislation through a set of norms intended to impose tighter deadlines for issuing quarantine certificates, ensuring public availability of information, introduction of risk assessment-based activities, and raising the level of responsibility for actions/inactivity by government officials. These amendments should potentially decrease logistics costs for a whole spectrum of products of plant origin (including oilseeds) exported from Ukraine.
Production, Supply and Demand Data Statistics
Higher than expected sunflower seed yield for MY2015/16 allowed for increased crush numbers and will definitely translate into increased exports of sunflowerseed oil and meal from Ukraine.
Estimated production volumes of sunflower seed has been increased up to 10.7 MMT, and rapeseed up to 2.2 MMT for MY2014/15, in order to match the official oil production figures reported by the State Statistics Committee of Ukraine (SSCU).
Rapid growth of soybean processing capacities has been mirrored by increased crush volumes for MY2015/16, as well as an expected increase of export volumes of soybean oil and meal. The expansion of sunflower seed crushing facilities might translate into larger crush numbers for rapeseed in MY2015/16 and exports of rapeseed oil and meal as well.
The deteriorating economic situation in Ukraine is translating into decreased animal numbers. According to the SSCU, the poultry population in agricultural enterprises, which is the main consumer of animal feeds, has decreased by 6 percent in the December – October 2015 period compared to the same period of the previous year. Should the situation continue, this may result in lower levels of domestic consumption for soybean, sunflower and rapeseed meals in MY2015/16, permitting even higher export volumes compared to the initial estimates.