The season-2016/17 became a turning point for the Ukrainian market of rapeseed. Reduction of the planted areas under rapeseed, as well as significant losses of winter rapeseed in the overwintering period, contributed to some decline in its production volumes to 1.19 mln tonnes (down 34% compared with the previous season). In the current season, Ukraine will increase the harvest volumes due to the growth of the oilseed planted areas and its yield figures. Despite rather optimistic analytical forecasts concerning the production and export volumes, Ukrainian rapeseed is still the most expensive one among major oilseed crops.
Season-2017/18: high yield provides record harvest
In early July 2017, southern oblasts of Ukraine started the harvesting campaign of rapeseed. Oilseed processors and traders of the region reported about receiving of the first batches of new crop rapeseed at elevators with high moisture (12-20%) and low oil content (36-43%). The demand rates were estimated as high. We should note that in the first ten-day period of August, Ukraine almost completed the harvesting campaign of rapeseed (98% of the plan).
According to Ministry of Agrarian Policy and Food, as of August 10 agrarians harvested 2.07 mln tonnes of winter and spring rapeseed throughout 750 thsd ha, with the average yield at 2.78 t/ha. It is worth noting that on the same date in 2016, agrarians harvested 1.08 mln tonnes of the oilseed throughout 414 thsd ha (91% of the plan), due to large-scale losses of winter rapeseed areas. The average yield totaled 2.61 t/ha.
According to APK-Inform estimations, in 2017/18 MY the general harvest of the oilseed will reach 2.1 mln tonnes (up 77% compared with 2016/17 MY), due to increasing of the planted areas under winter and spring rapeseed to 946.7 thsd ha, against 696.4 thsd ha last season. Also, in the current season the harvested areas will increase to 785.1 thsd ha, and the average yield - to 2.67 t/ha (2.53 t/ha in 2016/17 MY). Increasing profitability of rapeseed growing in Ukraine in 2013-2016 period contributed to the reporting enlargement of the planted areas. As for winter rapeseed, in 2016 the figure rose to 47.3%, against 9.5% in 2013, spring rapeseed - 13%, against 14.7% (according to the State Statistics Service).
Despite unfavourable weather conditions (snow, frosts), which developed in the second ten-day period of April 2017, in the current season the losses of winter rapeseed areas were much lower compared with last season. According to APK-Inform Agency, the losses totaled 149 thsd ha, or 16.5% of the general planted areas, against 240 thsd ha (37%) in 2016/17 MY.
In the current MY, Odessa oblast became the leader in the planted areas under rapeseed - 108.6 thsd ha, due to the export orientation of the oilseed and neighbourhood of the port locations.
According to APK-Inform estimations, in terms of the growing harvest volumes the exports of Ukrainian rapeseed in the season-2017/18 will increase by 69%, to 1.75 mln tonnes.
Last season, ADM Trading Ukraine (26%), AT Cargill (8%), Nibulon (5%), Mironivsky Hliboproduct (4%), and Vilia Trade (4%) were the leading companies-exporters of the Ukrainian oilseed.
High prices in the beginning of the season
Since Ukraine exports the major volumes of rapeseed, traders started announcing the preliminary starting bid prices for the crop-2017 in mid-April 2017, which varied within the range of 375-380 USD/t СРТ (delivery in July). In turn, bid prices of some oilseed processors for new crop rapeseed for forward contracts varied within the range of 370-400 USD/t CPT-enterprise.
At the same time, Ukrainian producers announced much higher starting prices for forward contracts at 410-420 USD/t EXW.
Generally, market participants estimated the rates of new forward contracts conclusion as rather high.
In July - the first half of August, the export market of rapeseed demonstrated relatively stable price situation, with minor adjustments due to the growth of EUR/USD exchange rates. For example, in the reporting period the bid prices formed the range of 400-417 USD/t СРТ and 425 USD/t FOB. Exporters reported about sufficient number of offers, and some large-scale traders even stopped purchasing oilseed raw materials until September.
The characteristic feature of the current season on the domestic market of rapeseed is that the crop is the most expensive one among major oilseeds (sunflower seed, soybeans).
In July - early August, the UAH bid prices formed depending on the export market situation. At the same time, the market mainly demonstrated a bullish trend. In the first half of August, the bid prices mainly varied within the range from 11`800-12`300 UAH/t EXW to 12`400-12`700 UAH/t CTP-port (traders). The bid prices of companies-processors mainly varied within the range of 11`900-12`250 UAH/t CPT-enterprise.
Rapeseed processing: low margin
For the second consecutive season, the rapeseed segment of Ukraine shows rather low margin, due to high purchasing prices for raw materials and the unfavourable price conditions on the export market of rapeseed oil.
In terms of the growth of rapeseed production, APK-Inform analysts forecasts increasing of the oilseed processing volumes to 300 thsd tonnes (up 89% compared with 2016/17 MY). But taking into account the low margin, many large-scale enterprises report that they plan to review their plans of rapeseed processing for the current season, and reduce the previously planned volumes. First of all, the situation depends on the high competition for oilseed raw materials, and rapeseed traders have more advantageous prices compared with processors.
"Many plants have reduced their programs of rapeseed processing. The first rapeseed batches demonstrated low oil content. The high demand for rapeseed for exports somewhat strengthened its foreign currency prices, - commented a trader of one of the major export-oriented companies. - Before beginning of the harvesting campaign the prices for rapeseed oil started from 730-750 USD/t CPT. But the current prices start from 800 USD/t and above. Strengthening of EUR/USD exchange rates made the Polish and EU markets rather attractive for rapeseed oil sellers. The prices for rapeseed oil on the domestic market varied within 740-750 EUR/t. The countries showed the same demand rates: The EU is interested in rapeseed for biofuel, China - for food industry."
In late July - early August 2017, the leading Ukrainian enterprises started processing rapeseed of the harvest-2017. In particular, the following companies reported about launching of crop processing works: Gradoliya (Kirovohrad oblast), Vioil (Vinnytsia oblast), Oliyar (Lviv oblast), Nizhynsky fat-and-oil complex (Chernihiv oblast), Zapad-AgroInvest (Ternopil oblast), and Yasensvit (Cherkasy oblast). Also, in the nearest future Bessarabia-V (Odessa oblast) and Krasnohirsky oil plant (Cherkasy oblast) will start processing the oilseed.
Due to the growth in rapeseed processing, the production of rapeseed oil and rapeseed meal/cake will also increase. According to optimistic forecasts of APK-Inform Agency, in 2017/18 MY the production of rapeseed oil in Ukraine can significantly increase - up 90%, and reach 131.4 thsd tonnes, including 130 thsd tonnes for exports (against 69.5 thsd tonnes in 2016/17 MY).
In the season-2016/17, Ukraine suppled the major volumes of the product to Poland (25 thsd tonnes), Lithuania took the second position (15.02 thsd tonnes), followed by the Netherlands (9.9 thsd tonnes), France (6 thsd tonnes), and Italy (5.3 thsd tonnes), which in 2015/16 MY was the main country-importer of Ukrainian rapeseed oil.
It is worth noting that in late December 2016 the company Oliyar launched the production of refined rapeseed oil at their plant in Stavchany (Lviv oblast).
In mid-May 2017, companies started announcing their export bid prices for crude rapeseed oil from the new crop raw materials within 745-750 USD/t CPT. However, since mid-July 2017 the preliminary offer prices somewhat increased due to the growth of prices for oilseed raw materials. In the reporting period , the offer prices increased by nearly 10 USD/t, and varied within 770-780 USD/t FCA. The bid prices were announced not higher than 760-765 USD/t DAP.
In the first ten-day period of August, offer prices for rapeseed oil rose to 800-820 USD/t FCA, due to the increase of bid prices on the global market. At the same time, the bid prices did not exceed 800 USD/t on the same terms.
According to APK-Inform analysts, in 2017/18 MY the production of rapeseed meal/cake in Ukraine can grow to 167.7 thsd tonnes (up 90%). Therefore, the export volumes can increase to 162 thsd tonnes (up 103%).
Last season, Lithuania, Poland, Spain, Israel and Belarus were the main countries-importers of the rapeseed by-product.
In the beginning of the season-2017/18, companies reported about steady selling rates of rapeseed meal/cake on the export market. But the available moderate demand rates developed due to a sufficient supply of protein product on the global market.
In August of 2017/18 MY, bid prices for Ukrainian rapeseed meal/cake varied within the range of 185-195 USD/t DAP.
As for the prospects of the Ukrainian market of rapeseed and its by-products, we should note that the current season for market participants will be characterized with a high demand on the global market, which can somewhat support the domestic prices. But taking into account rather low margin, rapeseed processing enterprises will reduce the processing volumes and fail to compete with traders in the price sphere. Traditionally, the second half of the season will be less active than the first one, because Ukraine will manage to export and process the major volumes of produced rapeseed.
Viktoria Zelenaya, APK-Inform Agency