Season-2016/17 – turning point for the Ukrainian market of rapeseed and by-products

Source

APK-Inform

12572

During the first five months of 2016/17 MY, the Ukrainian market of rapeseed faced a significant reduction in production, processing and supply of the oilseed and its by-products on foreign markets. The present article focuses on the prospects of rapeseed yield and planted areas in the future, as well as the major factors of the oilseed market in the short term.

 

Rapeseed production: planted areas

In terms of the general rise in production of the major oilseeds in Ukraine, during three recent years the general harvest of rapeseed continued gradually reducing.

The need to observe crop rotation system, negative experience of rapeseed growing by many Ukrainian agricultural producers, and some other reasons, resulted in a situation that agrarians planted rapeseed (winter and spring) for the harvest-2016 throughout the areas of 695.8 thsd ha only, against 905.7 thsd ha in 2015, and 972.1 thsd ha in 2014 (according to APK-Inform estimations).

So, despite some increasing of the average yield of rapeseed in the current season to 2.56 t/ha (estimations of APK-Inform Agency), reduction of the planted areas and significant losses of winter rapeseed areas in the overwintering period contributed to the fall of rapeseed production volumes to 1.23 mln tonnes (down 32% compared with the previous season).

Also, the total supply of rapeseed decreased in accordance with the production dynamics. APK-Inform analysts estimated the index in 2016/17 MY at 1.28 mln tonnes, down 31% compared with the previous season.

  

As for distribution of winter rapeseed areas in 2016, which remained after overwintering, southern, western and some central oblasts keep the leading positions in the rating, because the main processors and exporters of oilseeds are located there. After wintering period, Khmelnytskyi oblast became the leader by the surviving planted areas in the current season, where agrarians planted the oilseed for the harvest-2016 throughout 42.8 thsd ha (down 37.5% compared with 2015). Also, Ternopil oblast demonstrated significant remained areas under winter rapeseed – 40.7 thsd ha, Odessa oblast - 37.6 thsd ha, and Lviv oblast - 35.7 thsd ha. And Vinnytsia oblast closed the TOP-5 with the areas under winter rapeseed at 34.6 thsd ha, and there is the large-scale processor of rapeseed located in the region (Vinnytsya Fat Products Factory OJSC). The planted areas under spring rapeseed in Ukraine are rather insignificant, but most oblasts started increasing such areas. To date, Lviv oblast became the leader by spring rapeseed areas, which increased the areas in almost 16 times - to 9.5 thsd ha, against 0.6 thsd ha in 2015.

Ukraine exports almost whole volumes of rapeseed produced in the country, due to high export demand and favorable price environment on the global market of the oilseed. Also, reduction of the global production of the oilseed is one of the major trends in the current season.

According to APK-Inform estimations, in the season-2016/17 the exports of Ukrainian rapeseed will reduce by 30.4% - to 1 mln tonnes, mainly due reduction of the production volumes in the country. Also, in July-November period Ukraine already exported 0.81 mln tonnes of the oilseed, down 37% compared with the same period last season.

 

 

The TOP-5 list of the major companies-exporters of rapeseed from Ukraine in the first five months of 2016/17 MY includes: Cargill CJSC (market share at 10%), NIBULON (7%), Mironivsky Hliboproduct (5%), Company Melagrain LLC (4%), and Vilia-Trade LLC (4%).

 

Price situation: favourable environment for agrarians

In July-September period, both domestic and export markets of rapeseed demonstrated a bullish price dynamics. Such trend mainly developed due to the forecast of rapeseed production decreasing in Ukraine and the world. In turn, Ukrainian agrarians somewhat slowed down sales of rapeseed, expecting for more favorable pricing environment. Thus, in September the bid prices on the domestic market increased by 600 UAH/t, and mainly varied at the level of 11`800 UAH/t EXW.

We should note that export-oriented companies demonstrated quite significant interest in purchasing of the oilseed raw materials as opposed to oilseed processors, which in the beginning of the season had some problems with sales of rapeseed oil, and realized all raw material purchases in rather moderate way. Also, many exporters had high interest in purchasing of non-GMO rapeseed, due to the higher prices on the global market.

 

 

In the reporting period, the export market demonstrated high price volatility in accordance with the global trends. The maximum bid prices for rapeseed in the ports (430 USD/t) were fixed in November 2016 after a significant price leap (over 20 USD/t), due to high level of demand. At the same time, in late November the prices lowered due to influence of the global trends, and in the beginning of January 2017 they were relatively stable due to low trading rates and lack of supply.

 

Oilseed processing

According to APK-Inform estimations, in the current season the processing volumes of rapeseed will drop by nearly 50% in comparison with last MY, and reach 180 thsd tonnes. Therefore, the production volumes of rapeseed oil and rapeseed meal/cake will almost halve. The situation will develop due to low demand from the main importers of Ukrainian rapeseed by-products.

But despite some decline in attractiveness of rapeseed processing in Ukraine, the processing capacities in the country continue increasing. To date, in Sumy oblast oilseed processors started rebuilding the former Romny Combined Feed Plant into a new plant for processing of soybeans, rapeseed and sunflower seed, to be launched in the second half of 2017. Also, the company ViOil planned to construct a new plant for rapeseed and soybean processing at the territory of Chernivtsi Fat-and-Oil Plant OJSC, with the daily capacity of 1.5 thsd tonnes and 1.1 thsd tonnes, respectively. However, in the autumn of 2016 the company reported about stoppage of the project. In September 2016, the company D-Mix opened a new plant for oilseed processing in Chilczyce, Lviv oblast, with the annual capacity of 50 thsd tonnes.

Also, the companies Zapad-Agroinvest (Ternopil oblast) and Yablunetske grain receiving station (Zhytomyr oblast) reported about modernization of their production lines.

In July-November of 2016, the list of major processing plants of rapeseed included PE Oliyar (market share at 40% of the general processing of rapeseed), Vinnytsya Fat Products Factory OJSC (26%), Zapad-Agroinvest (11%), Gradoliya (10%), Agrotechnika Pan Kurchak (6%), Krasnogorsk Oil Mill (3%), Yasensvit (2%), Nizhyn Fat Processing Plant OJSC (1%).

 

Rapeseed oil

For several running seasons, Ukrainian producers continued increasing the production volumes of rapeseed oil. High demand on the global market became the main reason for such trend development. At the same time, the season-2016/17 was a turning point, because one of the largest global importers of rapeseed oil - China - reduced its import volumes. In turn, large carry-over stocks of rapeseed in China, and rapeseed oil sales from the state reserves, caused the reporting fall of foreign purchases. As a result, in the beginning of the season there was a significant imbalance of demand / supply prices for the product on the Ukrainian export market.

According to APK-Inform forecasts, in 2016/17 MY rapeseed oil production in Ukraine will reduce by 50%, and total 77.18 thsd tonnes, including 77 thsd tonnes for exports (against 154.84 thsd tonnes in 2015/16 MY).

Due to unfavorable pricing environment and low interest from the largest importers of rapeseed oil, Ukraine had to change its sales geography. So, during the first five months of the season-2016/17 Ukraine shipped the main volumes of rapeseed oil to Poland (18.2 thsd tonnes), Lithuania (14.2 thsd tonnes), the Netherlands (9.9 thsd tonnes), France (6 thsd tonnes) and Italy (5.3 thsd tonnes), which was the main country-importer of Ukrainian rapeseed oil in 2015/16 MY. China took the seventh position only with the purchased volumes at 2.5 thsd tonnes, against 31.24 thsd tonnes in the same period last season. According to APK-Inform figures, in July-November period of 2016/17 MY Ukraine exported 61.49 thsd tonnes of rapeseed oil, down 49% compared with the same period in 2015/16 MY.

In the reporting period, the list of major companies-exporters, which covered nearly 75% of the product exports, included TH Majola, PE Vektor-M, LLC Agrointer, LLC Bessarabia-Agro, LLC Gradoliya, and the company Zapad-Agroinvest.

 

 

As for the price situation on the export market of rapeseed oil, during five months of the season the market segment demonstrated a bullish trend, despite rather unfavorable price situation in the very beginning of the marketing year.

In June 2016, the bid prices for new crop rapeseed oil mainly varied within 650-680 USD/t FCA (EU-28). But market participants did not observe any real contracting at such prices. At the same time, in the same month of the previous year there were rather high trading and purchasing rates, due to high demand for the product and somewhat limited supply.

But since mid-September 2016, the export market started reducing the number of rapeseed oil proposals. The offer/bid prices increased by nearly 20 USD/t. So, the bid prices for rapeseed oil varied within the range of 765-770 USD/t DAP. At the same time, the offer prices reached 800 USD/t DAP, and 750-780 USD/t FOB.

 

 

As for the beginning of January 2017, several companies in the western part of Ukraine processed rapeseed raw materials. The companies reported about high demand for the product during several recent months, due to reduction of the proposals on the export market of rapeseed oil.

 

Rapeseed meal/cake

According to APK-Inform analysts, in 2016/17 MY the production of rapeseed meal/cake in Ukraine will reduce to 95.4 thsd tonnes (down 50%). Therefore, the exports will fall to 93 thsd tonnes (down 50%). At the same time, during the first five months of the current season Ukrainian companies already exported 66.6 thsd tonnes of rapeseed meal/cake.

In July-November of the current MY, Lithuania, Spain, Poland, Israel and Morocco formed the TOP-5 of major countries-importers of Ukrainian rapeseed by-product.

In the reporting period, the companies PE Vektor-M (the general market share of 21%), LLC Company Agroinvest (15%), LLC First Logistic Company (13%), LLC Bessarabia-Agro (9%) and LLC Gradoliya (9%) became the main exporters of rapeseed meal/cake from Ukraine.

 

 

During several recent seasons, on the global market of protein products the supply significantly exceeds demand, and the segment of rapeseed meal/cake is no exception. Therefore, in the beginning of the season-2016/17, when the market usually experiences a supply shortage of rapeseed meal, trading and purchasing activity rates were low. According to market operators, such situation was not typical for the reporting stage of the season and had its impact on the production and export volumes.

In the beginning of the season-2016/17, the bid prices for Ukrainian rapeseed meal varied within 205-210 USD/t FOB/DAP. The bid prices for rapeseed cake totaled 190-200 USD/t DAP. On the domestic market, several companies announced the prices for rapeseed meal/cake within 6`100-6`200 UAH/t EXW, while the domestic shipments were rather minimum.

So, in 2016/17 MY the Ukrainian market of rapeseed and its by-products will face rather difficult conditions, as evidenced by the forecasts of lower production and export volumes in comparison with several previous seasons. At the same time, the second half of the current season is traditionally expected to be less active than the first one, because market participants already exported and processed the major volumes of rapeseed.

However, despite reduction of the planted areas, considerable losses of winter rapeseed areas in the winter 2016 and decreasing of production volumes in the season-2016/17, the forecasts for the harvest-2017 are still quite positive. According to the Ministry of Agrarian Policy, as of January 5 winter rapeseed sprouted throughout 833.1 thsd ha (92.6%), including 42.6% of the areas in good condition (355.2 thsd ha), 39.8% - satisfactory condition (331.6 thsd ha), and 17.4% - weak and thinned condition (144.9 thsd ha), 0.2% - losses (1.4 thsd ha). Therefore, APK-Inform analysts forecast increasing of rapeseed harvest by 68%, which will favorably influence the export volumes and processing rates in the new season.

 

Viktoria Zelenaya, APK-Inform Agency

 

Advertising

Enter