Highlights

Soybean and rapeseed planted areas are projected to grow for MY2017/18. Sunflowerseed area will likely shrink. Excess crush capacity will stimulate more crush for soybeans and rapeseed, and further boost exports of oil and meal for those crops from Ukraine.

Executive Summary

Overall, the oilseed planted area in Ukraine in marketing year (MY) 2017/18 is forecast to decrease mainly due to lower planted areas under sunflower (down 14 percent, reaching 5.2 million hectares (mln ha) compared to 6 mln ha for MY2016/17). Although sunflower seeds offer the best profitability for farmers, they cannot maintain ever expanding areas due to exponential growth of production costs when crop rotation requirements are not met. For this reason, crop area has remained relatively stable during the last five years.

The decrease of sunflower area will likely be partially offset by an increase of planted area under soybeans to 2.2 mln ha for MY2017/18, a 19-percent increase compared to the 1.8 mln ha planted in MY2016/17. It should also be noted that crop rotation constraints are not a significant limiting factor for soybean area, as is the case for sunflowers.

Rapeseed planted areas for MY2017/18 are forecast at the level of 900 thousand ha, a 97-percent increase compared to the 457 thousand ha planted in MY2016/17, which was a record low for Ukraine. The expansion of production area under this crop could be triggered by the hike of domestic prices caused by the lack of the product on the market in 2016. This could have encouraged farmers to start actively planting winter rapeseed, which contributes over 90 percent of the total output of this crop. In 2015 oilseed crops in Ukraine maintained relatively strong profitability and this trend is expected to continue. It should be noted that the increased profitability for all major crops is largely attributed to constant competition between exporters and crushers for stocks available on the domestic market.

It is anticipated that agricultural crop production in 2017 will be impacted by the following factors:

-competition between exporters and crushers over stocks available on the market;

-excess of crush capacity forcing processors to maintain competitive prices;

-local currency (Hryvna - UAH) continues its devaluation favoring exports of oilseeds as well as products of processing thereof (oils and meals);

-stabilized political situation in the country translating into the slow but renewed economic growth for national economy;

- reduced state support for agricultural producers in the New Tax Code for 2017.

The above-mentioned factors are deterministic to Ukraine’s farmers who would have lower transaction costs for doing business as well as being able to plan for production costs for the 2017 season. They will likely receive competitive domestic prices for their products. At the same, time decreased state support might lead to reduced volume of the turnover funds at the beginning of the spring 2017 planting season, when farmers rely on those funds to ensure completion of planting for spring crops.

Macroeconomic Impact

Ukraine’s present political and economic crisis has led to a significant devaluation in the local currency (Hryvna – UAH) and a number of trade-related problems associated with the devaluation’s inflationary tail-end effect. The National Bank of Ukraine (NBU) for years sought monetary policies aimed at maintaining stable exchange rates. The target currency for this approach was the U.S. dollar, despite the fact that trade with U.S. was not significant compared to trade with the Russian Federation before 2013, or the current trade with the EU. The policy of a fixed exchange rate limits trade activity. Trade imbalances have depleted the country’s foreign currency reserves, which may lead to periodic currency crises that outweigh the positive impact of a stable exchange rate. Significant political and economic shocks undermined UAH stability in 2014, resulting in an abrupt devaluation that is still continuing, although at moderate rate, into the beginning of 2017.

Moderate inflation of the national currency had a favorable influence on business models for local farmers, as well as chemical and seed importers. In 2016 the market has recovered from the shocks experienced during the last couple of years and farmers invested heavily into cash crops that could be sold on international markets for hard currency, including grains and oilseeds.

Commodities:

Oilseed, Sunflowerseed

Production:

Production of sunflowerseed in Ukraine in MY2017/18 is forecast to decrease to 11.2 MMT, 18 percent lower compared to the 13.7 MMT produced in MY2016/17 in accordance with the official report by the SSSU. This forecast for production volume is based on the assumption that sunflower planted area in MY2017/18 will remain similar to that of MY2015/16.

It should be noted that sunflower areas in Ukraine remained relatively stable within the last five years, varying between slightly below 5 mln ha (2013) up to almost 5.3 mln ha (2014). However, 2016 was the exception to this pattern. In the fall of 2015 farmers abstained from planting winter wheat due to decreasing domestic prices as well as unfavorable weather conditions that could have resulted high winterkill rates. For more details about weather conditions for autumn 2015, As a result, they allocated available areas and resources for sunflower seed production in spring 2016, which translated into the surge of sunflower production for MY2016/17.

Thus, it can be argued that production area for this crop has reached its optimum level, dictated by crop rotation patterns, and area will likely remain stable barring drastic changes in global demand for this crop from domestic processors or significant changes in demand for its derivative products.

Sunflowerseed production volumes could be increased only through use of more advanced hybrids and improved farming technologies; and since the national economy stabilized in 2016 producers are increasing their costs for imported agricultural inputs, including high-quality hybrid seeds . As such, Post forecasts MY2017/18 sunflowerseed yields will be slightly above the five-year average. The forecasted yield is subject to future revisions, depending on actual weather conditions during the growth period.

During the past few seasons Post has been adjusting sunflower production quantities reported annually by the SSSU to produce estimates that, in USDA’s view, better reflect the true situation of the industry in Ukraine. Ukraine’s historic sunflower oil exports were one of the most significant pieces of data used to support these production estimate calculations. Other data like domestic sunflower oil consumption (which has been relatively steady year over year), as well as industry data and other sources, were used to estimate the most reasonable sunflower seed, oil and meal production estimates.

Consumption:

Almost all sunflowerseed produced in Ukraine is crushed domestically, which has been the case over the last decade since export duties for sunflowerseed were introduced in 1999. A small share of sunflowerseed is consumed raw for food and by the confectionary industry. Crush and consumption statistics for the last few seasons were revised by Post to correspond with officially reported sunflower oil production and exports, and to better reflect industry trends.

The sunflower seed crush for MY2016/17 is forecast to reach 13.4 MMT, a 15-percent increase compared to the previous MY, which is proportional to the growth in sunflowerseed production numbers. The only factor that might significantly lower crush numbers for Ukraine is a significant decrease and/or total abolishment of the 10 percent export duty for sunflower seeds through changes in legislation. Crush volume for MY2017/18 is estimated on the level of 10.9 MMT, a 19-percent decrease compared to the previous MY and in-line with lower estimated production.

Trade:

The combination of export tariffs and excess domestic crushing capacity makes Ukraine a marginal sunflower seed exporter. This is confirmed by decreased exports from 280 thousand MT of sunflower seed in MY2011/12 down to 45 thousand MT in MY2014/15. Although sunflower seed exports increased to 83 thousand MT for MY2015/16, and is forecast a further increase to 200 thousand MT for MY2017/18, this trend is likely supported by fast and inexpensive logistics for small batches of seeds designated to the EU, which is the single largest market for this commodity.

Seed imports during September– December 2016 for spring plantings remained higher compared to the same period of the previous year and reached similar volume as for MY2014/15. This suggests that farmers made planting decisions early and signed contracts for seed shipments in advance. Another factor that may have led to early seed imports could be that Ukrainian authorities responsible for seed certification/registration underwent a restructuring process at the beginning of 2017. Leading seed importers might have initiated imports earlier to get shipments processed under the former rules and avoid uncertainties related to the government’s new certification process. In MY2015/16, the Ukrainian market for imported sunflower seed was split between producers from the U.S. – 31.2 percent of total import volume; Turkey – 32.7 percent; and the EU – 25.2 percent. The same market share distribution was observed at the beginning of MY2016/17. It should be noted that for September-December 2016, export volume from Turkey increased 4 times compared to the same period of 2015; EU exports increased 2.6 times; and the U.S. by 33 percent. The growth from Turkey and EU Member-States could be attributed to the fact that their geographic proximity to Ukraine allows shorter timelines of delivery allowing a great deal of flexibility for farmers who are making planting decisions between December-March.

Oilseed,

2015/2016

2016/2017

2017/2018

Sunflowerseed

Market Begin Year

Sep 2015

Sep 2016

Sep 2017

Ukraine

USDA

Official

New Post

USDA


Official

New Post

USDA

Official

New Post

Area Planted

0

5185

0

6016

0

5200

Area Harvested

5500

5481

6200

6191

0

5100

Beginning Stocks

122

122

101

108

0

74

Production

11900

11857

13750

13756

0

11220

MY Imports

22

22

15

20

0

20

MY Imp. from U.S.

5

7

5

7

0

7

MY Imp. from EU

0

5

0

5

0

5

Total Supply

12044

12001

13866

13884

0

11314

MY Exports

83

83

150

200

0

150

MY Exp. to EU

20

51

50

150

0

120

Crush

11700

11650

13400

13450

0

10900

Food Use Dom. Cons.

50

50

50

50

0

50

Feed Waste Dom.

110

110

110

110

0

110

Total Dom. Cons.

11860

11810

13560

13610

0

11060

Ending Stocks

101

108

156

74

0

104

Total Distribution

12044

12001

13866

13884

0

11314

Commodities:

Oilseed, Soybean

Production:

The soybean planted area in Ukraine in MY2017/18 is forecast to increase to 2.2 mln ha, 19 percent higher compared to the 1.8 mln ha planted in MY2016/17. Production is projected to reach 4.6 MMT in MY2017/18 under the assumption of expected yields at the average level for five previous years. This would result in an 8-percent increase compared to the 4.3 MMT produced in MY2016/17. The following factors would favor an expansion of soybean production in Ukraine:

- Good profitability on soybean production during previous years

- Strong demand from exporters as well as excess domestic crushing capacity that ensures competitive farm-gate prices;

-Low costs for Ukraine’s soybean exports due to geographic proximity to its major consumers in Turkey, the EU and Egypt;

-Favorable soil moisture and other climatic conditions for the production of soybeans in Ukraine (mainly north-central regions).

Soybean profit margins for agricultural producers in Ukraine over the last seven years were positive, and for the last three years they significantly surpassed that of rapeseed and grains. The similar level of profitability might be expected for 2017. This makes the crop more attractive to local farmers since production costs and technologies are less expensive compared to other crops (e.g. sunflower).

Production of Genetically Engineered (GE) crops in Ukraine is still not allowed since none have passed the official registration and approval process. However, industry rumors still indicate that soybeans continue to be produced in the country.

Soybean domestic consumption in MY2017/18 is forecast to reach almost 2 MMT, a 23-percent increase compared to MY2016/17 estimates that totaled 1.6 MMT. This assumption is based on a scenario of growth of soybean crush (up to 1.3 MMT for MY2017/18) stemming from average sunflower seed production and excess crush capacity (discussed in Production section for this crop). This should force crushers to buy more soybeans from the market to ensure efficient utilization of their facilities. Typically over 20 percent of soybeans produced in Ukraine are consumed by the domestic crushing industry and a decrease of sunflower seed supply would be substituted with soybeans for crush.

Trade:

Over half of all soybeans produced in Ukraine are traditionally exported. For MY2017/18 soybean exports are forecast to reach 2.6 MMT, 3 percent below the 2.7 MMT estimated for MY2016/17. The prices for soybean meal is the main factor influencing the ratio between soybean exports and those destined for processing in Ukraine. Soybean meal accounts for over 80 percent of output from soybean processing. Decreased global prices for this product would likely result in increased exports of unprocessed soybeans. Over MY2015/16, as well as the first half of MY2016/17, domestic farmers enjoyed relatively stable prices for soybeans with a few hikes associated solely with volatility of the national currency.

For MY2015/16 over 80 percent out of 2.4 MMT of soybeans exported were shipped to a number of buyers in the Middle East and Africa, and for MY2016/17 exports flowed to the same geographical areas. Soybean imports were minimal varying between 3-5 thousand MT during last three year and consisted of mainly planting seeds. Those imports grew during last few years in-line with the expansion of production areas under this crop.

Oilseed, Soybean

2015/2016

2016/2017

2017/2018

Market Begin Year

Sep 2015

Sep 2016

Sep 2017

Ukraine

USDA

Official

New Post

USDA

Official

New Post

USDA

Official

New Post

Area Planted

2140

2147

2300

1847

0

2200

Area Harvested

2137

2124

1854

1854

0

2100

Beginning Stocks

166

166

133

104

0

68

Production

3932

3919

4280

4280

0

4620

MY Imports

5

5

0

5

0

6

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

4103

4090

4413

4389

0

4694

MY Exports

2369

2369

2600

2700

0

2620

MY Exp. to EU

800

328

900

432

0

500

Crush

900

945

950

950

0

1300

Food Use Dom. Cons.

1

1

1

1

0

1

Feed Waste Dom.

700

671

700

670

0

700

Total Dom. Cons.

1601

1617

1651

1621

0

2001

Ending Stocks

133

104

162

68

0

73

Total Distribution

4103

4090

4413

4389

0

4694


Commodities:

Oilseed, Rapeseed

Production:

The farmers have already planted almost 900 thousand ha of winter rapeseed. Traditionally, over 90 percent of all rapeseed sown in Ukraine is winter rape, thus these areas would form the foundations for future harvest. Given that autumn and winter weather conditions were generally favorable, the Ministry of Agricultural Policy and Food of Ukraine (MAPF) reported almost no winterkill as of mid-February 2017. However, MAPF’s report indicates almost 20 percent of rapeseed as weak and trim, which might require replanting some of these areas in the spring 2017.

Based on this information, Post’s rapeseed planted area forecasts set at 900 thousand ha for MY2017/18 – 96 percent above the MY2016/17 level. Based on forecast production area around 800 thousand ha and average yields, production of rapeseed is forecast to reach 2.1 MMT for MY2017/18 – 82 percent higher than the production volume in MY2016/17, when low production volumes resulted from abnormally dry weather in fall 2015, preventing farmers from planting winter rapeseed. For more details about weather conditions for autumn 2015. Domestic rapeseed crush volumes mainly depend on processors’ ability to accumulate stocks of other oilseeds (soybeans and sunflower seeds) to ensure seamless operation of their crushing facilities. Should they be low on stocks, they are willingly competing with exports. Growth of overall oilseed crush capacity in Ukraine drives production and subsequent exports of rapeseed oil and meal. The rapeseed crush in MY2017/18 is forecast to reach 750 thousand MT, 2.4 times higher compared to the estimated 220 thousand MT for MY2016/17. This assumption is valid under scenario of average sunflower seed production volumes for MY2017/18.

Trade:

In MY2016/17, domestic rapeseed prices grew on the news of lower-than-expected production volumes. This crop is extensively used for biofuel production, especially on the EU market. In MY2015/16, Ukraine exported almost 1.4 MMT of rapeseed, a 27-percent decrease compared to the previous MY. The same downward trend was observed for July-December 2016, a 33-percent drop from the same period in 2015. This might be associated with decreased demand from the EU, which remains the single largest customer for Ukraine’s rapeseed as well as low crop production volume. The EU purchased 1.4 MMT in MY2015/16 or 77 percent of total export volume and it is expected to remain a top buyer in the new season.

For MY2017/18, rapeseed exports are forecast at 1.3 MMT, a 47-percent increase from the 920 thousand MT estimated for MY2016/17. Typically, around 80 percent of sales occur in the first four to five months of the season. This assessment is based on an expected increase of production volumes.

Oilseed, Rapeseed

Oilseed, Rapeseed Market Begin Year

Jul 2015

Jul 2016

Jul 2017

Ukraine

USDA

Official

New Post

Official

USDA

Official

New Post

Official

USDA

Official

New Post

Official

Area Planted

684

682

640

457

0

899

Area Harvested

677

682

450

450

0

809

Beginning Stocks

18

18

1

2

0

14

Production

1744

1756

1154

1154

0

2104

MY Imports

2

2

4

2

0

2

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

2

0

2

0

2

Total Supply

1764

1776

1159

1158

0

2120

MY Exports

1437

1437

900

920

0

1350

MY Exp. to EU

1200

1115

900

644

0

945

Crush

325

325

255

220

0

750

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom.

1

12

1

4

0

4

Total Dom. Cons.

326

337

256

224

0

754

Ending Stocks

1

2

3

14

0

16

Total Distribution

1764

1776

1159

1158

0

2120


Oil, Palm

Production:

Production of sunflower oil has increased in Ukraine over the last decade fueled by growth in the production of sunflower seeds – from 3.5 MMT in 2000 to 5 MMT in MY2015/16. Ukraine has turned into a major world market supplier of sunflower oil and is set to remain in this position for the coming season. By the end of MY2016/17, sunflower oil production in the country is estimated to reach almost 5.8 MMT, a 15-percent increase compared to MY2015/16 due to larger production volumes of sunflower seed. And for the coming MY2017/18, sunflower oil production in Ukraine is forecast to slightly decrease to 4.7 MMT, under the assumption that there will be decreased production areas, along with average yields expected.

Demand for sunflower oil from foreign markets was the main factor behind expanding sunflower crushing capacity in Ukraine. This commodity has been providing Ukrainian producers unbeatable profits for almost a decade. With stable prices, sunflower seed and oil producers in Ukraine have made relatively good profits from these products compared to grains and sugar beet producers.

Total oilseed crush capacity in Ukraine at the beginning of 2017 reached 18.5 MMT from 16.5 MMT a year earlier. That expansion resulted from construction of two new facilities as well as modernization of five existing ones during 2016. The total number includes around 3.5 MMT of crush capacity capable of processing soybeans, as well as over 2MMT for rapeseed. The majority of newly-built processing facilities are capable of processing various oilseeds including sunflower, soybean and rapeseed. This allows producers to switch between different crops depending on availability of the particular oilseeds on the market, which helps keep prices stable on the market. As a result, processors can keep their facilities running while decreasing their reliance on sunflower seed producers only. That flexibility has a positive impact on their profit margins.

It should be also noted that estimates of total crush capacity in Ukraine vary widely between 16.2 to 20 MMT per year. The reason is that the many small enterprises, as well as crushing facilities that do occasional oilseeds crushing when profit margins become favorable, cannot be accounted for with sufficient precision.

Sunflower oil production estimates were reviewed and changed for several preceding seasons. Undeclared sales of sunflower seed are said to exist in Ukraine, so suspected underreporting of this oilseed and oil production is an issue every season. To revise sunflower seed, oil, and meal production estimates, USDA relies mainly on official commodity export data and on estimated domestic sunflower oil consumption numbers.

Soybean oil production continues climbing in-line with growing overall crop production; it peaked at 173 thousand MT in MY2015/16. For MY2016/17, it is forecast to reach 174 thousand MT, almost identical to MY2015/16. The rapid build-up of sunflower crushing facilities has caused underutilized capacities. Thus, the majority of newly-built processing facilities are capable of processing various oilseeds, including sunflower, soybean and rapeseed. This allows producers to switch between different crops depending on availability of the particular oilseed on the market. As a result, processors can keep their facilities running and decrease dependence on sunflower seed producers. The added flexibility has a positive impact on their profit margins. As a result this trend, Post forecasts soybean oil production to reach 238 thousand MT for MY2017/18 –a 37-percent increase compared to the previous MY – based on expected average sunflower seed production volumes for MY2017/18 as discussed in the Production section for Sunflower Seed.

The majority of soybean crushers had underutilized capacity due to lower demand on the domestic market for soybean meal, which is more expensive compared to sunflower meal. The potential growth of soybean crush is tightly interlinked with the processors’ ability to sell soybean meal both to the domestic market and overseas consumers.

Rapeseed oil largely remains a niche product for Ukraine’s crushers. Its demand goes from the EU – for biofuel production; and Asian countries – for food. MY2015/16 rapeseed oil production peaked to 130 thousand MT, a 35-percent increase over volumes produced in the previous MY. This is an indication that many large crushers in Ukraine are now able to process rapeseeds in their facilities, and thus included this product in their portfolio to ensure that capacities were not standing idle. Rapeseed oil production in MY2017/18 is forecast to reach almost 300 thousand MT, 2.4 times higher compared to the 88 thousand MT estimated for MY2016/17. This growth is based on SSSU’s information about increased areas under this crop.

Consumption:

Consumption of various vegetable oils in Ukraine has been quite constant over the years. Ukraine’s slowly declining population is the main reason for the decreased use of oils in the food production industry. Another recent factor is the producers’ inability to supply the Crimean Peninsula and the zone of conflict in Donetsk and Lugansk regions.

This trend was especially visible for palm oil, which is used for production of vegetable oil and fats, and indirectly in the confectionary and food processing industries in Ukraine. The decreased consumption of these products by the domestic market, as well as the slash in exports to traditional markets in ex-USSR countries, and especially the Russian Federation, resulted in a major fall in domestic consumption of palm oil and triggered a subsequent cut of its imports to Ukraine.

Soybean and rapeseed oils have never been popular food products for Ukrainians, though sunflower oil traditionally is a staple food used in salads as well as for baking and frying purposes. Ukrainians are not used to consuming soybean or rapeseed oils for household food preparation. Thus, these oils are mostly destined for exports as value-added products, while soybean and rapeseed meal is fed to animals.

However, there is an observed increase in consumption of soybean and rapeseed oils in the last few years in the country, mainly coming from food processing and other industrial uses. This trend can be explained by the fact that these oils are now produced in Ukraine in larger quantities and have become available for domestic consumption at competitive prices.

Trade:

During September-December 2016, Ukraine exported about 1.8 MMT of sunflower oil, a 23-percent increase from the same period of the previous year. In MY2015/16, Ukraine exported almost 4.5 MMT of sunflower oil. Ukrainian sunflower oil is exported to over a hundred countries across the world. The EU, India, China, Egypt, Iran, and Turkey are the traditional top buyers, with India usually collectively purchasing between 20 and 30 percent of annual sales from Ukraine. However, the share of China and other East and Southeast Asian countries has been on the rise in recent seasons and this trend is projected to continue into the rest of MY2016/17.

Overall sunflower oil exports from Ukraine in MY2017/18 are forecast to reach 4.2 MMT, 21 percent below the level of 5.3 MMT estimated for MY2016/17 – when exports are expected to peak, driven up by high sunflowerseed production.

In MY2015/16, Ukraine exported 152 thousand MT of soybean oil. China became the largest export destination and bought almost 82 thousand MT. Poland become the second leading destination, buying over 46 thousand MT, while the EU as a whole bought almost 61 thousand MT. As of September-December 2016, the dynamics are changing and the EU became the new largest buyer with almost 22 thousand MT, followed by India at18 thousand MT. This shift came as a 90 percent decrease in export volumes to China occurred.

Ukraine is expected to continue exporting soybean oil to various destinations in the coming seasons, driven by growing soybean crush capacity as well as growing production areas under this crop– stimulated by competitive prices offered to farmers by crushers that need to keep their capacities running. Under this assumption soybean oil exports are forecast to reach over 227 thousand MT in MY2017/18, which is 31 percent higher compared to the 173 thousand MT estimated in MY2016/17. Ukraine’s rapeseed oil exports grew significantly, from 255 MT in MY2010/11 to over 155 thousand MT in MY2015/16. Almost 60 percent of this volume was exported to the EU, while almost 30 percent went to East and Southeast Asia – mainly to China. Exports to the EU market are oriented more to biofuels production, while exports to Asian countries are used for human consumption. In July-December 2016, rapeseed oil export reached 63 thousand MT, 50 percent lower than the same period of 2015; and over 90 percent of this volume went to the European markets. For MY2017/18, Ukraine is forecast to export 290 thousand MT of rapeseed oil, 2.4 times higher compared to the 85 thousand MT estimated for MY2016/17. This reflects the expected surge of rapeseed production for MY2017/18 in contrast the poor crop for MY2016/17

In MY2015/16, Ukraine has already imported 193 thousand MT of palm oil, 42 more than the previous MY. This increase resulted from the partial economic recovery of Ukraine’s economy which required additional volumes for processed foods and confectionary products. Imports of palm oil for MY2016/17 are expected to slightly decrease to 170 thousand MT on the expected increase of sunflower oil for this period with gradual growth up to 180 thousand MT for MY2017/18. This scenario is likely, under the assumption that Ukraine will not have market access to the Russian Federation and other ex-USSR counties, which were the main destinations for Ukrainian processed foods and confectionary products before 2013.

Production, Supply and Demand Data Statistics:

Post’s estimates for domestic consumption of sunflower oil are 11 percent lower for MY2015/16 and 17 percent lower for MY2016/17, compared to USDA’s official data that is based on the general trend for decreased per capita vegetable oil consumption in Ukraine as well as decreasing population numbers.

Post’s estimates for domestic consumption of soybean oil are 47 percent lower than USDA’s official data, both for MY2015/16 and MY2016/17, as this product does not have significant popularity among domestic consumers.

Post’s numbers for production of rapeseed oil are 14 percent lower than USDA’s official data for MY2016/17 based on the lower crop production. This results in Post’s rapeseed oil export numbers 10 percent lower than USDA’s official data for MY2016/17.

Post’s numbers for domestic consumption of palm oil are 8 percent lower than USDA’s official data for MY2016/17, based on the assumption that it will be displaced by sunflower oil due to the higher production volumes of sunflower oil.

Oil, Sunflowerseed

Oil, Sunflowerseed

2015/2016

2016/2017

2017/2018

Market Begin Year

Sep 2015

Sep 2016

Sep 2017

Ukraine

USDA

Official

New Post

Official

USDA

Official

New Post

Official

USDA

Official

New Post

Official

Crush

11700

11650

13400

13450

0

10900

Extr. Rate, 999.9999

0.43

0.43

0.43

0.43

0

0.43

Beginning Stocks

163

163

120

164

0

110

Production

5031

5010

5762

5784

0

4687

MY Imports

1

1

2

2

0

2

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

5195

5174

5884

5950

0

4799

MY Exports

4500

4500

5100

5350

0

4200

MY Exp. to EU

450

1368

450

1605

0

1260

Industrial Dom. Cons.

30

30

30

30

0

30

Food Use Dom. Cons.

545

480

560

460

0

430

Feed Waste Dom.

0

0

0

0

0

0

Total Dom. Cons.

575

510

590

490

0

460

Ending Stocks

120

164

194

110

0

139

Total Distribution

5195

5174

5884

5950

0

4799

Oil, Soybean

Oil, Soybean

2015/2016

2016/2017

2017/2018

Market Begin Year

Sep 2015

Sep 2016

Sep 2017

Ukraine

USDA

New Post

USDA

New Post

USDA

New Post

Crush

900

945

950

950

0

1300

Extr. Rate, 999.9999

0.1856

0.1831

0.1853

0.1832

0

0.1831

Beginning Stocks

17

17

17

30

0

23

Production

167

173

176

174

0

238

0

0

0

0

0

0

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

184

190

193

204

0

261

MY Exports

152

152

160

173

0

227

MY Exp. to EU

65

61

80

90

0

110

Industrial Dom. Cons.

0

0

0

0

0

0

Food Use Dom. Cons.

15

8

15

8

0

8

Feed Waste Dom.

0

0

0

0

0

0

Total Dom. Cons.

15

8

15

8

0

8

Ending Stocks

17

30

18

23

0

26

Total Distribution

184

190

193

204

0

261

Oil, Rapeseed

Oil, Rapeseed

2015/2016

2016/2017

2017/2018

Market Begin Year

Jul 2015

Jul 2016

Jul 2017

Ukraine

USDA

New Post

USDA

New Post

USDA

New Post

Crush

325

325

255

220

0

750

Extr. Rate, 999.9999

0.4

0.4

0.4

0.4

0

0.4

Beginning Stocks

30

30

0

3

0

4

Production

130

130

102

88

0

300

MY Imports

1

1

1

1

0

1

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

1

0

1

0

1

Total Supply

161

161

103

92

0

305

MY Exports

155

156

95

85

0

290

MY Exp. to EU

30

94

30

80

0

190

Industrial Dom. Cons.

1

1

1

1

0

1

Food Use Dom. Cons.

5

1

5

2

0

2

Feed Waste Dom.

0

0

0

0

0

0

Total Dom. Cons.

6

2

6

3

0

3

Ending Stocks

0

3

2

4

0

12

Total Distribution

161

161

103

92

0

305

Oil, Palm


Oil, Palm

2015/2016

2016/2017

2017/2018

Market Begin Year

Jan 2016

Jan 2017

Jan 2018

USDA

New Post

USDA

New Post

USDA

New Post

Area Planted

0

0

0

0

0

Area Harvested

0

0

0

0

0

0

Trees

0

0

0

0

0

0

Beginning Stocks

1

1

10

4

0

3

Production

0

0

0

0

0

0

MY Imports

185

193

180

170

0

180

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

186

194

190

174

0

183

MY Exports

1

5

0

5

0

5

MY Exp. to EU

0

0

0

0

0

0

Industrial Dom. Cons.

5

5

5

6

0

6

Food Use Dom. Cons.

170

180

175

160

0

168

Feed Waste Dom.

0

0

0

0

0

0

Total Dom. Cons.

175

185

180

166

0

174

Ending Stocks

10

4

10

3

0

4

Total Distribution

186

194

190

174

0

183


Commodities:

Meal, Sunflowerseed

Meal, Soybean

Meal, Rapeseed

Production:

Sunflowerseed meal will continue to be produced in large quantities in Ukraine as a byproduct of oil production. In addition, more soybean meal is expected to be produced due to an increase in soybean production in the country and in response to growth of overall crush capacity. Rapeseed meal production, though insignificant, is anticipated to grow in-line with increased rapeseed oil production in Ukraine.

Consumption

Oilseed meal in Ukraine is used for poultry and animal production and a large share of it also exported. Sunflower meal is a traditional feed component in Ukraine. Soybean meal has been gaining popularity in the country with the establishment of large industrial poultry production facilities.

This has led to lower volumes of feed production and decreased domestic consumption of both soybean and sunflower meals. Reports by domestic poultry producers suggest that they are expanding use of sunflower meal in the diet of their poultry flocks. Post rebalanced feed consumption in favor of increasing sunflower meal while subsequently reducing usage of soybean meal. Roundup Ready MON 40-3-2, in the form of soybean meal, is the only GE event in the official registry of approved feed sources that contain agricultural biotechnology for a term of five years from 2013-2018.

Trade

In MY2015/16, Ukraine exported 3.8 MMT of sunflower meal to international markets, with over 55 percent shipped to the EU. The rest went to other traditional buyers: Belarus (508 thousand MT) and Turkey (over 363 thousand MT). Ukraine exported over 1.5 MMT of sunflower meal, a 12-percent increase compared to the same period of 2015. The list of major importers should remain unchanged for the current season.

For MY2017/18, sunflower meal exports from Ukraine are forecast to reach 3.9 MMT –20 percent below the 4.9 MMT projected for MY2016/17 – based on levels of sunflowerseed production for these MYs. Ukraine’s soybean meal exports are slowly growing in-line with the expansion of domestic soybean crush volumes. Another factor behind the export growth is stabilization of demand by local poultry producers. These factors have led to a significant decrease in soybean meal imports.

In MY2015/16, soybean meal exports reached 338 thousand MT. The majority of this volume was sold to the neighboring countries of Belarus, Turkey and Georgia. In September-December 2016, exports reached almost 93 thousand MT, which was comparable to the same period in 2015. For MY2017/18, soybean meal exports are forecast at 650 thousand MT, 91 percent above the 340 thousand MT expected for MY2016/17; and in-line with forecast growth of production volumes and crush.

In MY2015/16, Ukraine exported 188 thousand MT of rapeseed meal with 85 percent of exports going to the EU. The rest was supplied to Israel, which was the second-largest destination, importing 23 thousand MT of this product. According to export data for July-December 2016, exports reached 71 thousand MT, a 53-percent decrease compared to the same period of 2015. For MY2017/18, rapeseed meal exports are forecast at 434 thousand MT, 2.4 times higher compared to the 127 thousand MT expected for MY2016/17; and in-line with growth of production volumes and crush.

Production, Supply and Demand Data Statistics:

Post’s estimates for domestic consumption of sunflower meal are lowered 13 percent for MY2015/16, and 19 percent for MY2016/17, from USDA’s official data, based on decreasing animal numbers in the country. Post’s estimates for production of rapeseed meal are 14 percent lower than USDA’s official data for MY2016/17, based on decreased volumes of production of this crop. This also resulted in lowering Post’s export volume estimates by 15 percent for MY2016/17, compared to USDA’s official data.

Meal, Sunflowerseed

Meal, Sunflowerseed

2015/2016

2016/2017

2017/2018

Market Begin Year

Sep 2015

May 2016

Sep 2017

Ukraine

USDA

New Post

USDA

New Post

Crush

11700

11650

13400

13450

0

10900

Extr. Rate, 999.9999

0.41

0.414

0.41

0.414

0

0.414

Beginning Stocks

470

470

601

737

0

676

Production

4797

4823

5494

5568

0

4513

MY Imports

1

1

0

1

0

1

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

5268

5294

6095

6306

0

5190

MY Exports

3817

3817

4800

4900

0

3900

MY Exp. to EU

2200

2118

2500

2940

0

2340

Industrial Dom. Cons.

0

0

0

0

0

0

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom.

850

740

900

730

0

740

Total Dom. Cons.

850

740

900

730

0

740

Ending Stocks

601

737

395

676

0

550

Total Distribution

5268

5294

6095

6306

0

5190

Meal, Soybean

2015/2016

2016/2017

2017/2018

Market Begin Year

Sep 2015

Sep 2016

Sep 2017

Ukraine

USDA

New Post

USDA

New Post

USDA

New Post

Crush

900

945

950

950

0

1300

Extr. Rate, 999.9999

0.79

0.7894

0.7895

0.7842

0

0.7838

Beginning Stocks

85

85

31

75

0

71

Production

711

746

750

745

0

1019

2

2

2

1

0

1

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

1

0

0

0

0

Total Supply

798

833

783

821

0

1091

MY Exports

347

338

350

340

0

650

MY Exp. to EU

0

40

0

90

0

60

Industrial Dom. Cons.

0

0

0

0

0

0

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom.

420

420

400

410

0

400

Total Dom. Cons.

420

420

400

410

0

400

Ending Stocks

31

75

33

71

0

41

Total Distribution

798

833

783

821

0

1091

Meal, Rapeseed

Meal, Rapeseed

2015/2016

2016/2017

2017/2018

Market Begin Year

Jul 2015

Jul 2016

Jul 2017

Ukraine

USDA

New Post

USDA

New Post

USDA

New Post

Crush

325

325

255

220

0

750

Extr. Rate, 999.9999

0.5815

0.5815

0.5843

0.5818

0

0.5827

Beginning Stocks

0

0

0

0

0

0

Production

189

189

149

128

0

437

MY Imports

0

0

0

0

0

0

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

189

189

149

128

0

437

MY Exports

188

188

149

127

0

434

MY Exp. to EU

110

159

80

100

0

300

Industrial Dom. Cons.

0

0

0

0

0

0

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom.

1

1

0

1

0

3

Total Dom. Cons.

1

1

0

1

0

3

Ending Stocks

0

0

0

0

0

0

Total Distribution

189

189

149

128

0

437


Policy:

Agricultural Policy in Ukraine with regard to oilseeds and oilseed products has not changed much over the last year.

The Government of Ukraine maintains Resolution #164 that establishes guidelines for optimum crop rotations for various crops for different regions, including ones set for sunflowerseed (between 5 to 15 percent of total area) and rapeseed (between 3 to 10 percent of total area). Although this Resolution has no enforcement mechanism, it could result in inconsistency/inaccuracy of reported production numbers for sunflowers by farmers (discussed in the Production section for Sunflower seeds).

Over the last few years, Ukrainian lawmakers have taken numerous attempts to abolish the existing 16 percent export duty for sunflowerseed, which creates the underlying incentive for development of the oilseed crushing industry in Ukraine. There were no pending attempts to introduce such legislative amendments. However if the export duty is ever abolished, it will significantly change the ratio between domestic processing and subsequent exports of oils and meals vs. exports of raw oilseeds – in the favor of the latter. At present, some local businesses are interested in similar supports for domestic soybean crush development, as a number of local oilseed crushers already have the capacity to process soybeans. However this initiative has become highly improbable since Ukraine signed the Deep and Comprehensive Trade Agreement with the EU.

Among the requirements that Ukraine accepted upon WTO accession in 2008 was a commitment to reduce export duties on oilseeds. Consequently, over the last several years, sunflowerseed export duties were cut down to their current level of ten percent. No additional reduction is required by the WTO. Ukrainian legislation does not allow for the production of genetically engineered (GE) crops in the country. Also, the Ministry of Agricultural Policy and Food of Ukraine requires all planting seeds intended for import into the country to be tested for the GE presence. In order to promote the country’s image as a non-GE soybean supplier, the representative of the MAPF signed the Danube Soya Declaration in June 2015. This action did not have an immediate effect on the market, however it might be an indication that, in the long-term, Ukraine might follow the footsteps of the EU in a gradual opting out from production of biotech crops.

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 has increased the competitiveness of Ukrainian oils on the EU Market.

Since the beginning of 2017 the New Tax Code came into force removing farmers’ ability to accumulate the difference between VAT payable and VAT receivable on their accounts, which is estimated between 15-25 billion UAH (approx. 0.6-1 billion USD) per year. These funds will be substituted by an automatic monthly subsidy, disbursed proportionally based on VAT payable to the budget amounting to 5.5 billion UAH (approx. 200 million USD) to all agricultural producers for 2017.