Oilseed season-2013/14 - year of records

Source

APK-Inform

1912

 

2013/14 MYprovided bothpleasant surprisesandunexpecteddisappointments to the fat-and-oil industry. Butdespite all difficulties and obstacles, the fat-and-oilindustry of Ukraine- one of the few, whichcontinues showingthe growthrates, and once againconfirmed its status ofthe world largestproducer and exporter ofhigh-qualitysunflower oil.Stepan Kapshuk, General Director of the AssociationUkrOliyaProm, kindly agreed totell usabout theresults of the season-2013/14 for enterprises of the industry,and prospects of the newseason.

 

- Stepan Pavlovich, the season-2013/14has already completed.What featuresof the industrywould You highlight?

First of all, I want to say that the reporting marketing year is quite different because we work in terms of extreme instability. Butdespite the fact, theyear for thefat-and-oil industry will become a "year of records”, according to our forecasts! The fat-and-oil industry showsthe growth of production rates by 130-140%. It is the result of the record harvested volumes of sunflower seed and other oilseedsin 2013 - nearly 16 mln tonnes. Therefore,it is forecasted thatthe specialized enterpriseswill produce 4.3 mln tonnes of sunflower oil, and the exports will total nearly 4 mln tonnes. And taking into account small-scale workshopsproducing sunflower oil, the generalproduction volumes would reach 4.4-4.5mln tonnes. For the first time, Ukraine will achieve such results.

As for the other oilseeds, I would like tohighlight the successes of soybean market. They mainly concern the growth ofoilseed processing to0.8 mln tonnes, andeven to 1 mln tonnes.According to our preliminary data, in the season-2013/14domestic enterprisesprocessed nearly 160 thsd tonnes of rapeseed. Inmy opinion, in the nearest future the trend for growth of the processingvolumes of such crops assoybeans and rapeseed,will continue.

 

- Like no other Youknownot onlythe achievements ofthe industry,but also the difficultiesfaced byfat-and-oil enterprises.Whatproblematic issueswould Youlike tomention?

Beginning of the harvesting campaign can be estimated as somedifficulty. In particular, rainyweather conditions,which not only trouble the harvesting campaign, but also affected the qualitative indices of the raw material (moisture content, oil content). The enterprises faced a shortage of capacities for drying the received raw materials. The policy of agrariansconcerning the price formation- constraining of sales expecting for price rising, led to the fact that the sellers became the losers, taking into account weakening of the national currency against USD. As a result, in addition to problemswith the quality ofoilseed raw materials, the processing enterprises facedsome deficit of supply of sunflower seed of the harvest-2013 in the beginning of the harvesting campaign.

I would call the collapse of prices for sunflower oil, sunflower meal as another "disappointment" of the season-2013/14. In late August the prices of sunflower oilreached its minimum during several recent years - 735-745 USD/tFOB.

Many experts say thatrapeseed was the major disappointment of the year - namely,the price situation on the export market of rapeseed in the reporting period.

 

- At the same time, the processing volumes of rapeseed increased.How do Youthink whatwas the primary cause?

First of all, it is the profitability on the markets of finishedproducts, not only oil, but also rapeseedmeal. The demand for rapeseed meal isgrowing, primarilyfrom European countries - Poland, the Netherlands, the Baltic countries. Of course, it influenced the processing volumes of rapeseed. And I think thatthe current level of 160 thsdtonnes is not the limit. The domestic processing enterprises will be able to consume even200-300 thsd tonnes of rapeseed in the future.

 

- The draft law registered in the Verkhovna Rada of Ukraine, on imposition of the 3%-duty on crude sunflower oil exports, can be attributedas one of theunpleasant momentsof the season-2013/14. I would like tohear Your opinionon the issue.

It is really unpleasant fact, especially since to date thefat-and-oil industrydemonstrates not only improvementof the production indices,but also increasing of sunflower oil andsunflower meal export rates. And taking into accountthat crude sunflower oil is the export-oriented product, which bringsforeign exchange earningsto the state budget, which is especially importantin the current difficult economic situation, it is nonsense for me. At the same time, authors of the draft law justify the reporting measures with the need to increase production of refined sunflower oil. Yes, partially we agree that it is necessary to increase the production of refined sunflower product, but the feature ofworld trade shows that mainly crude oil is in demand on the international market. At the same time, mainlyUkraine and Russia are competitorson foreign markets of the Black Sea region, and we can really lose the niche market to Russia, despite all our struggle for the market for several years. Therefore, I believethat the draft law will not be supported, especially taking into account the fact that the monthlysunflower oil exports totals 300 mln USD, andit is the additionalfactor to stabilize the exchange rate of the national currency.

 

- How do You thinkwhether such event assigning ofthe economic partof the Association Agreementwith the EUwill influence thefat-and-oilindustry?

The fact is that Ukraine supplies sunflower oil to the EUfor a long time, andUkrainian oilhas established itself asthe high-quality product. I would like to stresstwo important points in the economicpart of the Agreement: zero import duties for the supply of sunflower oilto the EU countries, andzeroing of the export duties on sunflowerseed during a transitionalperiod of 15 years.15 years is quite long period, butthe zero export duty is not profitablefor the Ukrainianfat-and-oil industry. Judge for yourself, annually Europe purchases 500-600 thsd tonnes of sunflower oil from Ukraine. But in terms of the zero duty on the raw materials,the demand in sunfloweroil will disappear. It will be possible to buy sunflower seed, and process the raw material at its own facilities. Andthe fact that Europe purchases 90% of Ukrainian rapeseedand 70% of Ukrainiansoybeans, is a good example of such possible development. As for zeroing of the import duties on sunflower oil, many experts expected the zeroduties will lead to outflow ofsunflower oil supplies to Europe. However, it did not happen.

 

- StepanPavlovich, is there developedany mechanism forreducing the export dutyuntil its complete cancellation?

As far as I know, there is aschedule according to whichthe customs duty is replaced by some kind of additional charge. After ratification of the agreement andits entry into force,there should be worked out a mechanism of its collection in one-year period.

 

- Since August 25, 2014, the action of the EC Regulations #1151/2009 dd. 27.11.2009 "On application of the special conditions governing the import of sunflower oil originating in or consigned from Ukraine due to contamination risks by mineral oil” is canceled. Would You comment Your attitude to the fact?

To be honest, it is a surprise, a pleasant surprise from the European Union. Ukrainealways demonstrates to the world that it produces the high-quality product -sunflower oil. And when in 2009the EU proposed a mechanism for tightened control, which includes testing of each batch of sunflower oil at the specially accredited laboratories,which provide the health certificate, we were significantly surprised, since it was the onlyfood product which required the health certificate. During 5 years there were nocomments or complaints about the qualitative indices of Ukrainianoil. Once again it confirms the significant work realized at Ukrainian fat-and-oilenterprises: establishment of HACCP,laboratories.Therefore, cancellation ofthe health certificate will simplify the workof companies-exporters, but internal control at the enterprises willremain quitestrengthened in order to keep the status of producerof high-quality commodities.

 

- The military operations, which are providedin eastern Ukraine, have already ledto complete stoppageof some enterprises. In Your opinion,will stoppage of fat-and-oil enterprises in the zone of the anti-terroristic operation causereductionof sunflower oilandsunflower meal production?

It is a tragedy what is happening in the East of Ukraine for every Ukrainian. 2-3enterprises are located in Donetsk and Lugansk oblasts. Theywill not work in the current conditions, since they sufferedcertain damage, which is not so easy to fix. Nevertheless,it is also not possible to workin the area of combat operations. To date harvesting of sunflower seed in the reporting oblasts is one of the importanttasks foragricultural enterprises, which will provide nearly 1 mln tonnes of the oilseed. So, there is the significant issue: how to harvest and take out the sunflowerseed volumes from the reporting oblasts,and supply them to the enterprises in the neighboringoblasts (Kharkiv, Poltava, etc.), which are ableto process the oilseed. I would notexpect that the sunflower oil production willsignificantly decrease. Yes, the index may reduce by nearly 200 thsd tonnes, but it will not affectthe domestic market.

 

- StepanPavlovich, how do You considerwhether the growth of prices for Russian natural gas for Ukraine either sentence for the Ukrainian enterprises, or the chance to develop new energy-saving technologies?

To date enterprises of the fat-and-oilindustry practically do not use natural gas, and provide90% of the heat energy by burningsunflower seed husks. Every year enterprises of the industrysave 400 mln cubic meters of gas. Butonly two enterprises have the opportunity forcomplete covering their needs in the electricity of their own production. Therefore, limiting of the supply of electricity to enterprises of thefat-and-oil industryby nearly 30% isa very serious concern, as it mayprovide not only food, but also environmental disaster. Also, the issue of establishment of energy-saving technologies, installation of boilers and turbinesthat will generatemore electricity, is quite important.But it is a long-term process, whichis dramatized bydeficit of crediting resources. In addition,there are active customs duties for the imports of energy-efficient equipment, which unfortunately, ourmachine-building enterprises can not produce.

 

- Would You kindly share Yourvision forthe newseason?

We enter the new season with thedifficulties associated withcrediting. Banks do not want to give credits to sunflower seed buyers. Iflast season the deficit of high-qualitysunflower seed affected operation of the enterprises, then in the beginning of the present season, we may face a lack of financial resources for purchasing of new crop sunflower seed. At the same time, the Government worsens the situation with non-paymentof the VAT.

As for the harvest. It is quite early totalk about the new cropsunflower seed and soybeans at the present stage. The only thing Ican say is that according to our data, the qualitative indices of sunflowerseed became worse comparedwith the same periodlast season. The complaints mainly deal with the qualitative indices of oil content, which at the current stage of the harvesting campaign vary within40-42%. In addition, the yield ofsunflower seed will be lower compared with last season, especially in Dnipropetrovsk, Zaporozhye, Odessa, Kherson oblasts. To datethe average yieldin Ukraine totals 1t/ha. Therefore, our preliminary forecast onthe harvest of sunflower seed totalsnearly 10 mln tonnes.There is expectedanother record soybean harvest - nearly 3-3.5mln tonnes. Rapeseedharvest reached nearly 2 mln tonnes, whichprovides the general production of oilseeds in 2014at 15.5 mln tonnes.

 

Interviewed byAnna Platonova

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