Back to the roots: Ukraine increases sunflower exports instead of sunflower oil

Ukraine, the world’s largest producer and exporter of sunflower oil, with a market share of more than 50%, will drastically reduce its presence in it and, most likely, lose its leadership at least in terms of production. Instead of the supply of finished products from the country, the export of sunflowers, which are processed abroad – mainly in Bulgaria and Turkey – is increasing.

While the world was closely following the fate of Ukrainian grain, and international organizations led by the UN were making maximum efforts to restore its export, the second most important segment of the Ukrainian agricultural sector – the oil industry – was effectively left to fend for itself.

At the same time, the state of affairs in it was, by some parameters, more threatening than that of grain producers: a significant part of the MEZs ended up in the occupied territories, the surplus of finished products is equivalent to the needs of the domestic market for several years, and traditional sales markets and the specifics of transportation do not allow to fully use the opportunities of the railway .

All this has led to global stress in an industry that is just beginning to reap its consequences.

Due to a significant reduction in oil production in the next season (starting in September), a paradoxical situation may arise, when the volume of export will be greater than the volume of oilseed processing.

According to the estimates of the association “Ukroliyaprom”, according to the results of the last 2020/2021 MR (September – August), the total volume of oil production in Ukraine reached 6.126 million tons, of which 5.8 million tons are sunflower, 0.21 million tons – soybean and 116 00 tons – rapeseed oil.

According to the deputy director of the National Research Center “Institute of Agrarian Economy” Mykola Pugachev, most of the enterprises will not be involved in the season due to their proximity to the front and/or location in the occupied territories, and the production of sunflower seeds will be halved – to 8-8.8 million tons against 15 million tons in previous seasons.

“If 6.5 million hectares of sunflower were sown in Ukraine in 2021, then this year only 72.0% of last year’s – 4.6 million hectares,” he said. This is at least 10 years.

Out of a hundred enterprises in the industry, no more than two dozen are in the active phase of production

Processing of oil crops is an export-oriented industry, up to 90% of the produced volume was exported mainly by sea. The sea route is practically non-alternative, primarily due to the geographical structure of supplies. According to the results of the last season, about 27% of exports went to India.

In the pre-war period, at least 0.5 million tons of sunflower oil per month were exported from Ukraine per season. During the war – from March to July 2022 – only 750,000 tons of oil were exported, which is half as much as during the same period last season.

As a result, since the beginning of the war, oil has lost its dominant position in the structure of exports of the oil and fat industry, yielding to raw materials. If in the spring of last season oil accounted for 43% of the industry trade, then in March-July 2022 – only 28%. At the same time, the share of sunflower in the export structure increased to 38% compared to zero last year.

The sunflower export forecast for the current season is at least 1 million tons. This is an unprecedented indicator for more than 10 years. The main buyers of oil raw materials are Turkey, which accounted for a fifth of all supplies, as well as the EU countries – Bulgaria, Romania and Hungary (in total, about 72% of Ukrainian sunflower exports).

Reduction of the area under sunflower and, accordingly, its harvest, active export of raw materials, enterprises that fell out of the production cycle as a result of the occupation – all this will lead to the fact that Ukraine will probably lose the world leadership in the production of sunflower oil for at least a year.

Whether it will retain its leadership in exports thanks to its huge transitory reserves of oil depends on the intensification of maritime trade.

Tags: Ukraine, sunflower oil, export, Production, sunflowers, UN, producer, UkrOliyaProm Association