Most companies estimate the season-2016/17 for the Ukrainian market of sunflower seed as the record period. The market breaks records in the sphere of oilseed planted areas, harvest volumes and export figures. At the same time, the season is characterized with unexpected impact factors...
The Head of business management of the agricultural department at the company Mironivsky Hliboproduct, Grigory Kopilevich, and the Head of export sales department, Yuri Shlonchak informed APK-Inform journalists about the situation and prospects of development of the oilseed market in the new season.
- Information note
Mironivsky Hliboproduct (MHP) is a vertically integrated company, founded in 1998. The agricultural holding combines production capacity of the whole processing chain of meat production - from forages growing and production, hatching eggs, cattle and poultry breeding, to processing and sale of finished products.
Three oil-pressing enterprises realize processing of sunflower seed - PJSC Myronivsky Plant for Manufacturing Groats and Feeds with the capacities of 1050 tonnes/day, LLC Katerynopilsky Elevator with the capacities of 620 tonnes/day, and LLC Vinnitsia Poultry Farm with the capacities of 1500 tonnes/day.
In 2015, the company LLC Katerynopilsky Elevator put into operation the first oil extraction plant in MHP structure for soybeans processing, ensuring all needs of the holding company in soybean meal required to produce animal feed.
- Grigory Yakovlevich, we would like to start a talk with a rather controversial and topical issue as for the beginning of the season. In Your opinion, what will be the sunflower seed harvest in Ukraine in 2016/17 MY?
Grigory Kopilevich: According to our estimations, in the current season Ukraine is expected to harvest the record volumes of sunflower seed, which will vary within the range of 13-13.5 mln tonnes. Due to losses of winter crops, Ukraine increased the planted areas of more marginal crops. In May-July of 2016, the company`s specialists estimated the harvest volumes at more than 14 mln tonnes. However, the results of the first days of the harvesting campaign confirmed that sunflower production will be lower compared with the originally forecasted ones, as well as the further rates of harvesting works, including the enterprises of MHP.
- How much the growth of harvest volumes would influence the pricing of oilseed raw materials in the market segment in the current season?
G.K.: I do not think that increasing of the number of offers on the market of sunflower seed and soybeans in Ukraine can cause any lowering of oilseed raw material prices. To date, agrarians harvested sunflower throughout 84% of the planned areas, and the market will not face any significant inflow of the oilseed. In terms of the absence of active reduction of prices for oilseed by-products (oils, meals), then sunflower is likely to keep its prices at the stable level. In such situation, there are several factors, influencing at price formation.
First of all, agrarians expect for changes in the taxation since the beginning of 2017. It is believed that the Government will cancel the existing special regime (for crop production: 15% of VAT remain at the special account of producers, and 85% of VAT are transferred to the budget) and impose the standard VAT at 20%. Then we can expect for significant sales until January 2017. At the same time, if the existing VAT regime for agricultural producers keeps unchanged, then there are no preconditions for development of the peak sales activity.
Secondly, at the present moment agrarians start harvesting corn, and the growth of sunflower supply is caused by the limited storing capacities of agricultural producers. Therefore, if in the reporting period there are observed active sales of oilseed raw materials, then it is sunflower seed - capital-intensive crop. At the same time, it is rather difficult to forecast the course of agricultural producers.
- How do You estimate the quality of sunflower seed of the harvest-2016? Did You face any quality deviations while accepting the oilseed?
G.K.: The qualitative indicators of sunflower seed of the harvest-2016 are rather high (oil content at 46-50%, on dry basis). During the harvesting campaign, agrarians often supply sunflower seed directly from the fields without any preliminary treatment. Therefore, heavy impurities usually reach 8% and the moisture content - 12%. Modern technical equipment for cleaning and drying installed at our enterprises, allows successfully solving such challenges, and provides high rates of acceptance of sunflower raw materials.
- Also, the company MHP sales grains and oilseeds grown at its own fields. Yuri, how do You estimate the demand for rapeseed and its by-products on the export market in the current season?
Yuri Shlonchak: In 2015, the dry weather conditions slowed down the planting campaign of rapeseed. Ukraine reduced its rapeseed harvest volumes by 0.5 mln tonnes compared with the previous year. Also, Europe demonstrated the fall of rapeseed production by 2 mln tonnes. The reporting situation supported the oilseed prices in the current season. Traditionally, in the beginning of the season we actively sold rapeseed at forward contracts with delivery in the ports, but since August 2016 the prices on the western border of Ukraine reached the premium level, and we shifted the sales towards Poland.
- We are informed that Your company deals with production and processing of high-oleic sunflower seed. How much the market segment is profitable in comparison with processing of traditional sunflower?
Yu.Sh.: The market of high-oleic oil is conjunctural. In the beginning of last season, the price premium for high-oleic oil compared with the standard oil totaled 150-180 USD/t, in June the premium almost disappeared, and to date the index totals nearly 60 USD/t. We believe that the demand for high-oleic oil will remain on the market, despite increasing of high-oleic sunflower seed production in the world, but do not expect for any high premiums in the current season.
- The company MHP is in the TOP-10 of the largest companies-processors of sunflower seed, and exporters of sunflower oil in Ukraine. How do You estimate the future prospects of the companies in the oilseed segment?
G.K.: Our company plans to continue operating in the TOP-3 in both oilseed processing capacities (sunflower seed, soybeans), and the production of oilseed by-products (sunflower meal and soybean meal), as well as the exports of oilseed by-products. According to our estimations, in the future the production volumes of animal feed will increase, but sunflower meal and soybean meal are the most important components of animal feed. So, we do not forecast any reduction of oilseed processing volumes at our enterprises.
- How much did the profitability of oilseed processing change during several recent seasons?
G.K.: In terms of the current price formation for sunflower seed and current prices for oilseed by-products, it is impossible to reach high margins. I would like to see the prices for raw materials at much lower level, but not all oilseed processors are conformed with the available stocks of oilseed raw materials. Therefore, they prefer increasing the bid prices in terms of the limited number of offers.
The situation on the market of soybeans and its by-products is quite interesting. In our country, almost all plants for soybean processing, except for Oliyar plant (Lviv oblast), are banned to export fodder products to Belarus due to African swine fever. To date, the export market demonstrates unfavorable pricing environment for soybean meal on CPT and FOB terms. Also, the domestic market of soybean meal shows the bearish trend. During September, the offer prices decreased from 13`800 UAH/t to 12`500 UAH/t EXW. In terms of increasing of the supply of new crop soybeans, we expect for further reduction of the prices for the oilseed and its by-products.
- In Your opinion, how will the situation with Ukrainian sunflower and soybean meals sales to the Republic of Belarus develop in terms of the supply cutoffs due to African swine fever?
Yu.Sh.: As far as I know, in the nearest future the Belarusian market of proteins will remain closed for the exports of fodder products (meals/cakes) from most oblasts of Ukraine.
G.K.: It is difficult to comment on the situation. There are almost no movements in that process. Our company plans to develop the supply of soybean meal on the European market.
- How efficiently does Your enterprise use the capacities for soybean processing?
G.K.: The nominal capacities of the soybean processing plant at Katerynopilsky Elevator total 1000 tonnes/day. To date, the plant processes 700 tonnes/day of soybeans, i.e. the capacities are loaded at 70-75%. The enterprise completely meets all needs for forages at the expense of soybean meal production, the remaining volumes of the product (nearly 50%) are sold on the domestic and export markets. We supply whole volumes of soybean oil on foreign markets. If the price situation for soybean oil and meal is interesting, and the oilseed processing becomes marginal, we will load the capacities at 100%.
- Yuri Grigorievich, the company MHP sells sunflower by-products not only on the domestic market, but also on foreign markets. How did the export structure of oilseed by-products change in recent years? What market is considered to be the most perspective and why?
Yu.Sh.: Ukraine is rather young player in the global trade of oilseed by-products. We are rapidly increasing our production and exports of vegetable oils and meals, continue developing new markets. During several recent years, we significantly increased the exports of vegetable oils from Ukraine to the People`s Republic of China. We see the high potential for the export growth to the region. As for sunflower by-products, then India, China, Europe and the Middle East are the traditional major importers of our products. We mainly focus on the Asian and European markets.
- Your company is one of the producers of sunflower cake with high oil content. What are the main benefits of the product?
Yu.Sh.: We use sunflower cake for production of animal feed. Since the poultry diet requires a certain quantity of fat for energy balance, we decided to develop the technology of partial oil extraction. Thus, forages production becomes more cost-effective than the production of oilseed meal and adding of oil to it.
- Thank You for the interview. And in conclusion, what do You expect from the new season?
Yu.Sh.: I expect for the good harvest with excellent quality, active sales of the products and increasing of the marginal revenue. I wish successful and fruitful work to all market participants.
Interviewed by Viktoria Zelenaya, APK-Inform
