Challenges ahead

Ukraine remains one of the key suppliers of oils and fats products to the European market despite the current war affecting its infrastructure and export routes.

The country is seeing a noticeable shift towards the export of oilseeds, due to limits on domestic processing. In the July-February period of the 2022/23 marketing year (MY), for example, Ukraine exported 7.6M tonnes of oilseeds, with almost 75% going to EU countries.

Oilseeds forecasts in 2023

Over the past few months, bid prices for Ukrainian oilseeds have been under pressure resulting from logistical pressures at western land borders, delayed inspections and passage of vessels through the Black Sea grain corridor, and a gradual decline in demand from European importers due to sufficient stocks.

However, despite these issues, the liquidity of oilseed crops remains relatively high in the 2022/23 MY, creating the

Ukraine has been moving away from exports of sunflower oil to sunflowerseed, due to its war with Russia inflicting limits on domestic processing. Logistics also remain a weak point because of uncertainty over the Black Sea export corridor and pressure at its western land borders conditions for a rise in oilseed planting.

The oilseed hectarage is expected to rise during the 2023 spring planting campaign, although it will still be among the lowest level since 2016, as significant areas remain occupied by Russian troops.

APK-Inform Agency forecasts that the oilseeds planted area in 2023 will rise by 6% to 8.45M ha, accounting for 98-99% of the country's harvested area, compared with 95% in 2022. This increase will mainly be due to a fall in the area under grains in Ukraine, as well as the liberation of some territories in 2022 but will, to some extent, depend on the speed of

Svitlana Kyrychok

demining in liberated areas.

Total oilseeds production in 2023 is forecast to rise to 20.1M tonnes compared with 18.4M tonnes in 2022 (see Table 1, below).

Sunflowerseed production may increase by 15% to 12.7M tonnes, due to an expansion in planted area to 5.57M ha (+12% y-o-y). This will still be one of the lowest levels since 2016 and will depend on the ongoing war with Russia, weather conditions and seed supply.

Soyabean production may reach a four-year high this year to total 4.2M tonnes (+10%). The planted area under this crop is expected to expand by 7% to 1.7M ha, due to increased exports and the preservation of fairly high processing, as well as less dependence on the import of seed material compared to other oilseeds.

Rapeseed production in 2023 may fall but not significantly. The rapeseed planted area may reach 1.2M ha, 18% lower y-o-y. However, taking into account the significant loss of rapeseed hectarage in the spring of 2022 as a result of hostilities, the harvest area in 2023 may decrease by only 1% y-o-y. Rapeseed production in 2023 may become one of the third largest in history, amounting to some 3.2M tonnes (–9% y-o-y).

Sunflowerseeds

During September-February in the 2022/23 MY, Ukraine processed around 6.5M tonnes of sunflowerseed, the lowest level for the last seven seasons.

This was mainly due to Russian attacks on the country's energy sector infrastructure, and the slow operation of the Black Sea grain export corridor due to delayed inspection of ships in Istanbul. The crisis in the energy sector also affected port operations – slowing down unloading and trans-shipments –and significantly increasing the queues of vehicles and trucks in port areas.

As a result, the actual shipment pace was significantly lower than the volumes declared for export, and domestic sunflowerseed demand remained reserved, as plants were forced to reduce processing in order to adapt to the operation of ports.

In addition, the attractive bid prices for sunflowerseed from importers and the downward price trend in the export market of sunflower oil significantly reduced the ability of domestic processors to compete for raw materials.

APK Inform forecasts that sunflowerseed processing in the 2022/23 MY will remain unchanged at 10.5M tonnes, of which about 62% has already been processed.

Meanwhile, sunflowerseed exports from Ukraine reached a new high of 1.54M tonnes during September-February of the 2022/23 MY. This resulted in a more rapid reduction of stocks, which fell by 37% y-o-y at the beginning of March 2023, the lowest level for the last eight seasons.

Sunflowerseed exports are set to remain at 2.4M tonnes in the 2022/23 MY, 65% of which has already been shipped (see Figure 1, left).

In the last few months, there has been a gradual reduction in the export of oilseeds from Ukraine, due to the sufficient supplies in Europe, as well as increased pressure on logistics when exporting through the western Ukrainian border. Sunflowerseed exports in February fell by 15% month-on-month to 165,000 tonnes, the lowest level since May 2022.

Almost 80% of Ukraine's total oilseed exports has gone to EU countries (see Figure 2, left). Leading importers are Bulgaria (429,000 tonnes or a 28% import share) and Romania (406,000; 26% import share) [see Figure 1, left]. In addition to the EU, Turkey is also an active buyer of Ukrainian sunflowerseed.

In February 2022, an agreement on a free trade zone was signed between Ukraine and Turkey, which allowed Turkey to import up to 50,000 tonnes of Ukrainian sunflowerseed duty-free.

In addition, in January 2023, Turkey reduced the import duty on sunflowerseed and oil to zero, which will allow increasing purchases of the two products.

Sunflower oil

Ukraine was the top global exporter of sunflower oil before Russia's invasion on 24 February last year. However, the high cost of logistics, the blocking of the country's deep sea ports and the increase in delivery times have significantly limited the value of Ukrainian sunflower oil.

Bid prices for Ukrainian sunflower oil have continued to decline in February and March, also affected by external factors such as a large supply of Russian oil; US Department of Agriculture forecasts of a rise in global exports in 2022/23; as well as the expectations of a high sunflowerseed crop in Argentina.

In September-February of the 2022/23 MY, Ukraine exported around 2.7M tonnes of sunflower oil, of which 42% went to EU countries (see Figure 3, left).

The most significant reduction in exports was observed in China (–10%), Egypt (–77%), India (–59%), Iraq (–52%), Saudi Arabia (–83%) and the UK (–69%).

India used to import around 2M tonnes of Ukrainian sunflower oil each season, but almost completely ceased purchases after Russia's invasion of Ukraine, opting for cheaper alternative vegetable oils and sunflower oil from Russia and Argentina.

For the 2022/23 MY, Ukraine may export 4.15M tonnes of sunflower oil, due to lower production and the blocking of its main shipping routes.

Rapeseed

Ukraine had a record rapeseed harvest of 3.5M tonnes this season, resulting in strong exports which totalled 3.3M tonnes during July-February of the 2022/23 MY.

Around 90% of exports went to the EU, a 68% increase, due to competitive prices, territorial proximity and well-established logistics.

At the same time, taking into account the difficulty of forming sufficient export batches of rapeseed oil or meal when unloading from ports, the volume of rapeseed processing in the current season may only amount to 170,0000, down 59% y-o-y.

Market bid/offers for Ukrainian rapeseed have been almost unchanged for several months and are under pressure from the downward price trend in the global oilseed market. In addition, increased forecast rapeseed production for 2022/23, as well as optimistic forecasts for EU production, may further push down prices.

Soyabeans

Ukraine exported 1.9M tonnes of soyabeans during the September-February period of the 2022/23 MY, a high for the last three seasons.

Around 981,000 tonnes or 51% was exported to the EU, a record high which allowed Ukraine to rise to third place from fourth among suppliers of soyabeans to the region, with a 13% volume share.

According to APK-Inform estimates, around 600,000 to 700,000 tonnes of soyabeans may still be exported from Ukraine by the end of the current season, but the pace of shipments will depend mainly on global demand, which has begun to weaken owing to current stocks and an increase in the supply of South American soyabeans.

Domestic soyabean processing of about 837,000 tonnes in the first half of the current season is only 8% lower y-o-y, which is quite a good indicator for the industry, taking into account the reduction in domestic meal consumption due to significant losses in the livestock and poultry sector as a result of hostilities.

Soyabean exports in the 2022/23 MY may reach 2.6M tonnes (+83% y-o-y), while the volume of processing may fall to 1.4M tonnes (–3%).

Looking ahead

Import demand for Ukrainian oilseeds will be affected by factors such as new oilseed crop supply from South America and stock levels in the EU.

The uncertainty regarding the expiry date of the Black Sea Grain Initiative

(BSGI) will boost the supply of raw materials in the Ukrainian market and spur traders towards more active sales to avoid accumulation of products.

The BSGI was brokered with Russia and Ukraine by the United Nations (UN) and Turkey in July last year to allow agricultural exports from the Ukrainian deep sea ports of Odessa, Chornomorsk and Pivdennyi.

The initiative was extended on 18 March but Russia has indicated that it has only agreed to a 60-day deal, with any further extension beyond mid-May dependant on the removal of some Western restrictions.

Under current conditions, Ukrainian farmers are being forced to sell oilseeds at reduced prices because logistics remain too expensive and risky.

At the same time, a record Russian sunflowerseed harvest may be exported from the country, not only in the form of oil, but also seed, as the government is considering reducing or eliminating export duties due to excessive supply and low prices on the domestic market.

Such a decision will create additional pressure on the global oilseeds and vegetable oils market, including Ukraine. ●

Russia is set to overtake Ukraine as the world's largest sunflower oil exporter, although supplies of imported agricultural machinery and seed could be an issue in the future Elena Smirnova

The Russian oils and fats sector looks set to benefit from the spoils of war and the country is poised to become the new global leader in sunflower oil exports, overtaking Ukraine, which Russia invaded on 24 February.

The disrupted Ukrainian sunflower sector – concentrated in the country's east and southeast region which has been the most heavily bombed and shelled area throughout the invasion – saw a 25% year-on-year drop in oilseed harvests in 2022, according to US Department of Agriculture (USDA) figures. The sunflower sector also switched significantly to exports of sunflowerseed rather than processed oil, due to damage and disruption to its crushing and refining plants.

Meanwhile, Russia has benefited from favourable prices partly inflated by the fall in Ukrainian sunflower oil exports.

“Last year, Ukraine retained its leadership in the world market in terms of sunflower oil exports,” Oil and Fat Union of Russia executive director Mikhail Maltsev told Oils & Fats International (OFI). “In 2023, Russia may become the new world leader, increasing its global sunflower oil supply by 70% compared to 2022, to 4.7M tonnes.”

The union also forecasts that total