Market of high-oleic sunflower seed and oil in Ukraine in 2016

Source

APK-Inform

29540

 

 

Positive dynamic is peculiar for Ukrainian market of high-oleic (HO) sunflower. Planted areas under HO sunflower and its share in total planted area under sunflower are growing annually.

According to APK-Inform estimation, Ukraine planted 260 thsd ha with HO sunflower in 2016/17 MY up by 90 thsd ha (53%) on year. In total planted area under sunflower the share of HO variety totaled 4.3% in 2016/17 MY.

 

 

 

Production from this area reached 630 thsd tonnes, however about 20-30% of the HO sunflower crop usually are referred to conventional sunflower due to discrepancy with high quality standards of high-oleic variety. Content of oleic acid (not less than 82-84%) is the main criteria. Poor quality of seeds or mixture of HO sunflower with conventional sunflower seeds, unfavorable edaphoclimatic conditions, failure to follow growth technology etc. can lead to lower level of oleic acid.

Ukraine can produce 473 thsd tonnes of high-oleic sunflower in 2016/17 MY (+50% on year).

 

Index, `000 tonnes

14/15

15/16

16/17 F

Production

61,9

80,8

121,2

Imports

1,5

1,1

1,1

Total supply

65,4

83,9

124,3

Domestic consumption

2,1

1,9

2,3

Exports

61,3

80,0

120,0

General distribution

63,4

81,9

122,3

Ending stocks

2,0

2,0

3,0

 

Under current situation on HO sunflower market when we see significant decline of buying interest, lower demand prices, decrease of feedstock purchasing prices and lower premium we suppose that only about 60% of crop (274 thsd tonnes; +50% on year) will be processed and sold as HO sunflower oil and remainder as conventional sunflower oil or blend oils.

More favorable market situation can allow to process more HO sunflower as capacities let to handle 200 thsd tonnes more.

The market of HO sunflower oil in Ukraine is fully export-oriented and directly depend on global demand.

According to forecasted processing of HO sunflower at 374 thsd tonnes in 2016/17 MY, production of HO sunflower oil can reach about 120 thsd tonnes, against 80 thsd tonnes season ago (+50%).

Such production growth will lead to higher exports – record 120 thsd tonnes (+50%), as well as domestic consumption can increase by 20%.

Potentially, Ukraine can produce and export up to 200 thsd tonnes of HO sunflower oil in 2016/17 MY depending on global consumption.

The imports of HO sunflower oil is low (1-1.5 thsd tonnes) and includes cooking fat containing HO sunflower oil. This fat is used on the domestic market.

Agrarians prefer using imported seeds in terms of growing of high-oleic sunflower in Ukraine.

According to APK-Inform estimations, in 2015/16 MY Ukraine imported 2.2 thsd tonnes of seeds of high-oleic sunflower hybrids, an increase of 2.5 times compared with the previous season.

In monetary terms, the imports of seeds totaled almost 20 mln USD (up 2.3 times).

During 2 recent seasons, the geography of countries-producers of high-oleic sunflower seed, imported to Ukraine, significantly changed.

So, in 2015/16 MY the seeds of Turkish origin became the leaders in the import structure - more than 50% of the market, against 19% in the previous year. In physical terms, the imports increased in 7 times.

The US seeds took the second position - 27%, which share significantly fell from 47% in 2014/15 MY. However, in physical terms the imports increased by 44%.

The seeds of French origin increased their market share from 10% to 16%, and the delivery volumes increased in 3.8 times.

In 2015/16 MY, the import of seeds from Argentina was absent, Hungary - significantly declined. At the same time, the imports from Spain and Romania increased, but the volumes were not significant at all.

In 2014/15 MY and 2015/16 MY, market participants processed 93% of the general imported seeds of high-oleic sunflower with various products for pre-planting treatment (seed protectants). Only nearly 5% of the volume of seeds were not treated with agrochemicals at all.

In 2015/16 MY, the hybrid Tutti (Syngenta) became the most popular imported hybrid of high-oleic sunflower, with its share in the general import structure at 31%. In 2014/15 MY, the reporting hybrid took the 6th position in the rating of import volumes, and the hybrid Ilona KL (Dow Seeds) was the leader - 21%.

Generally, Ukraine imports nearly 30 different hybrids of high-oleic sunflower seed, including various samples for examining.

In 2015/16 MY, the company Syngenta took the leading positions among the companies-breeders of imported seeds of high-oleic sunflower in Ukraine - 45%. The company's share significantly increased, as opposed to 23% in the previous season. In physical terms, the import volumes grew in 5 times.

The share of the major breeder of the season-2014/15 - Dow Seeds - reduced from 51% to 19%. The deliveries in physical terms remained unchanged.

Generally, the seeds market is characterized with constant increasing of the number of companies-breeders operating on the Ukrainian market.

In 2015/16 MY, directly the company Syngenta imported the major volumes of seeds of high-oleic sunflower - 45%.

The distribution company Eridon took the second position in the rating of importers - 12%, against 26% in the previous season. At the same time, the deliveries in physical terms increased by 13%.

Generally, the market of seeds is characterized with some growth in the number of market players, which are the official distributors of hybrids of foreign selection on the Ukrainian market.

Rather limited number of permanent market players operates on the market of domestic processing of high-oleic sunflower seed in Ukraine. But every year, new players come to the list.

So, the list of regular companies-processors includes such large-scale multinational corporations - ADM, Cargill, Wilmar.

In addition, such national companies cover its stable market share – Group of companies Olkom (PJSC Kyiv Margarine Factory), Melitopol oil-extraction plant, Avis, Vioil, UkrOliya.

Also, there is a number of smaller companies-processors working with raw material high-oleic sunflower under concluded contracts for veg oil, depending on the season conditions.

The export of high-oleic sunflower oil from Ukraine is growing.

The country supplied to foreign markets record 80 thsd tonnes of the product in 2015/16 MY, up 30% on year.

APK-Inform estimate potential of Ukrainian export in 2016/17 MY at 120 thsd tonnes (+50% or more) that can be possible, due to higher feedstock production and wider export geography.

Europe is the main destination for Ukrainian HO sunflower oil. Its share in total exported volume reached 92% in 2015/16 MY. TOP-5 importers (the Netherlands, the UK, Italy, Spain and France) commonly bought 78% of the product. Last years the share of European countries totaled about 70%.

The geography of Ukrainian HO sunflower oil export is getting wider. Number of countries-importers reached 21 in 2015/16 against 15 in 2014/15 MY. The Netherlands, Italy, France, Germany entered the list of European importers. Estonia, Portugal, Austria significantly increased HO sunflower oil imports. At the same time, shipments to the UK, Belgium and Switzerland declined.

Demand for HO oil in China declined to 2% in total imported volumes against 21% before. However, in near future China as well as Middle East and Asia can be rather prospective markets due to plans for mandatory usage of HO oil in fast-food chains and partial replacement of palm oil.

ADM Ukraine and Cargill are the undisputed leaders of HO sunflower oil exports due to reliable marketing channels. Their shares are 35-40% and 15-20%, respectovely. These 2 companies covers more than 50% of the total exports of HO sunflower oil from Ukraine.

Over the last 2-3 years, the number of companies-exporters increased. They are both veg oil producers and traders.

  

 

Ukraine has a potential for further increase of planted area under HO sunflower. At the same time, necessity to isolate HO sunflower seeding from conventional sunflower restrict the potential. Thus, cultivation of HO sunflower is prospective for agricultural holdings that have closed cycle production chain “field-processing”, wide land resources, sufficient funds for technology compliance and own processing capacities or stable market for sunflower selling.

Thus, further planted area under HO sunflower in Ukraine will depend on demand from inner processors.

Taking to account current sunflower crushing capacities Ukraine has a good potential for HO sunflower processing. Higher export demand for HO sunflower oil, increase of inner consumption of products containing HO oil are the key drivers for higher production.

Optimization of HO sunflower production process requires signing of forward contracts with processors. This minimizes risks for farmers and he has access to funds, technologies and needed resources (seeds, fertilizers etc.) for the most efficient production. 

The global market of HO sunflower oil is going away from being niche and high-premium, it is turning to wide market segment. Ukrainian market of HO sunflower oil is export-oriented, thus global trends directly influence on it.

 

Julia Ivanitskaya, oilseed analyst at APK-Inform Agency

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