Sunflower – an honored champion of Ukraine

Records have already became a tradition for the Ukrainian market of sunflower seed and its by-products. Ukraine covers a one quarter of all sunflower seed areas in the world and one third of the global harvest volumes, in such terms the country provides 56% of the global trade with sunflower oil and 65% - sunflower meal. In addition, every year the country continues strengthening its positions in the market segment of high-oleic sunflower oil. The current article focuses on the indicators which Ukraine completed 2016/17 MY, and how market players shared the market, which countries demonstrated the most significant demand, and what should Ukraine expect in the-season 2017/18.

Results of 2016/17 MY

After several additional upward estimations of the official harvest of sunflower seed in Ukraine during the whole last season, the final estimations of APK-Inform Agency in 2016/17 MY broke a record and reached 14.9 mln tonnes. During five recent years, the figure increased by 62%, due to a growth of both yield indices (up 32%) and planted areas (up 21%).

It is worth noting that during several recent years, the market of high-oleic sunflower seed started actively developing, with annual increasing of both planted areas and the share in the general structure of sunflower seed areas. According to APK-Inform estimations, in 2016/17 MY Ukraine planted high-oleic sunflower seed throughout 260 thsd ha, an increase of 90 thsd ha (up 53%) compared with the previous season, and totaled 4.1% of the general planted areas under sunflower, against 3.3% in the previous season. The harvest volumes reached nearly 630 thsd tonnes, and taking into account segregation processes, the figures were estimated at 550 thsd tonnes (up 70%).

Increasing of the total supply of sunflower seed resulted in increasing of its processing volumes by 24% in the previous season, to 14.5 mln tonnes. Therefore, the final results of sunflower oil and sunflower meal/cake production in 2016/17 MY totaled 6.4 mln tonnes (up 29%) and 5.6 mln tonnes (up 22%), respectively.

In particular, processing of high-oleic sunflower seed reached a record level of 520 thsd tonnes (up 2 times), and high-oleic oil production - over 230 thsd tonnes.

Generally, the results of the processing industry reached its absolute peaks and exceeded the starting estimations.

Nevertheless, processing volumes at the level of 14.5 mln tonnes are not the real limit, because the Ukrainian industry could reach the processing capacities of 17.7 mln tonnes last season, and will continue growing. Due to increasing of sunflower seed harvest by 5.7 mln tonnes during 5 recent years, the processing capacities grew by 5.5 mln tonnes in terms of low-scale loading of the enterprises. Thus, in 2016/17 MY the general loading of oilseed processing plants in Ukraine totaled 82%, as opposed to 75% in previous two seasons. Of course, it is an average level, because most large-scale plants worked with 100% loading. Despite the fact that medium- and small-scale enterprises also increased their market activities, it was more difficult for them to compete for raw materials, and reach full loading indices.

In 2016/17 MY, sunflower seed processing capacities increased by 2.2 mln tonnes compared with the previous season, which became a fairly impressive increase taking into account the country's economic crisis. Ukraine mainly managed to reach the increase not due to construction of new plants, but at the expense of modernization of already working facilities, which are mainly located in the southern region of the country. At the same time, many investments scheduled for 2016/17 MY still failed to be realized.

Also, last season there were several purchases of new businesses. Kernel Group increased its assets and purchased one of the newest plants of the processing complex in Kropyvnytskyi from former Creative Group, which received the name Pridneprovsky oil-extraction plant. Its capacities totaled 560 thsd tonnes/year. At another previous plant of Creative, Ellada, Kernel works with tolling. At the same time, in August 2016 the company put on rent its oil-press plant in Mykolaiv - Ecotrans - to Southern Agrarian-Export Company LLC.

The reporting changes resulted in some redistribution of the market of sunflower oil between its players. Among the most significant ones - strengthening of the positions of Kernel Group, Bunge Ukraine, ViOil, and declining of the market shares of Optimus and Mironivsky Hliboproduct.

According to APK-Inform estimations, the domestic consumption of sunflower oil in Ukraine increased by 3% compared with the previous season, and totaled nearly 470 thsd tonnes. The country reached such growth indices by increasing its share in margarine production by 19%, while the share of mayonnaise production remained unchanged, and consumption by the population decreased by 4%.

Increasing of sunflower oil supply, together with relatively stable domestic consumption, led to increasing of its exports from Ukraine in 2016/17 MY to a record level of 5.85 mln tonnes, which exceeded the previous season volumes by 30%. During 5 recent years, the export volumes of sunflower oil increased by 80%.

In 2016/17 MY, Ukraine supplied sunflower oil to 130 countries, against 126 countries in the previous season.

The leading four countries-importers remained unchanged, with slight adjustments in their shares in the general structure - China, India, the Netherlands and Spain.

India imported more than 2 mln tonnes of sunflower oil, which covered 35% of the general supplies, up 44% compared with 2015/16 MY.

Despite optimistic expectations of market players, the shipments to China and its share somewhat declined, and totaled 588 thsd tonnes, against 620 thsd tonnes in 2015/16 MY (down 5%). The volumes decreased due to weakening of demand rates for the reporting vegetable oil in favor of soybean and rapeseed oils.

The supplies of Ukrainian sunflower oil to countries of the European Union increased by 21% to 1.7 mln tonnes, including Spain - up 41%, to 540 thsd tonnes, the Netherlands - up 12%, to 423 thsd tonnes, Italy - up 17%, to 332 thsd tonnes, the UK - up 53%, to 100 thsd tonnes.

Iran significantly increased its position, and imported over 360 thsd tonnes of sunflower oil (up 2.5 times), as well as Egypt - more than 200 thsd tonnes (up 2.1 times). The exports to Turkey totaled 190 thsd tonnes (up 7%), the United Arab Emirates - 88 thsd tonnes (up 30%), Iraq - 82 thsd tonnes (up 6.6 times).

Meanwhile, the exports to Malaysia reduced to 122 thsd tonnes (down 7%), and France - to 115 thsd tonnes (down 24%).

Also, in 2016/17 MY Ukraine demonstrated a record in the exports of high-oleic sunflower oil, which was estimated at 226 thsd tonnes, due to presence of sufficient raw material base and high demand for high-oleic oil. The EU remained the main market (73% of the shipments in 2016/17 MY), but the Asian destination was also very prospective. In 2016/17 MY, the TOP-3 of countries-importers of Ukrainian high-oleic sunflower oil, which purchased 55% of the general shipments of the product, included Spain, Italy and the United Kingdom. Iran took the 4th position in the rating, and became a new market for Ukraine. In addition, Malaysia, India and China increased their purchases.

According to the customs statistics, in 2016/17 MY Ukraine exported 97% of the general supplies of sunflower oil by sea - 5.68 mln tonnes. At the same time, the terminal Everi in the Mykolaiv port processed one quarter of the shipped volumes.

Generally, there are 17 oil bulk terminals with the joint capacity of simultaneous storage at nearly 1 mln tonnes. Mykolaiv (30%), Chornomorsk (30%), Yuzhny (20%) and Dnieper-Bug (10%) ports are the major ones for export shipments.

Also, in 2016/17 MY the exports of sunflower meal, cake and other by-products reached its historic peak - 4.8 mln tonnes (up 26% compared with 2015/16 MY). During 5 recent years, the export volumes of the reporting products increased by 57%. In the reporting period, the export structure significantly changed: if 5-6 years ago, husk, fuel pellets and other technical wastes formed nearly 20% of the supplies, but to date the figures did not exceed 4%, because the plants prefer using wastes in their own boilers. Moreover, the share of sunflower meal in the exports increased, while sunflower cake - reduced.

The EU-28 became the main sales market for Ukrainian meal, cake and other sunflower by-products. The shipments in the reporting direction increased to 2.7 mln tonnes, up 27% compared with 2015/16 MY, while the region's share in the general export volumes remained at 56%.

France (13% of the general volumes), Belarus (11%), Spain (10%), Italy (9%), Poland (9%), Turkey (8%) became the major countries-importers.

Countries of the Middle East reduced its purchases by 3%, to 610 thsd tonnes.

The South Asia region and India doubled the imports of Ukrainian sunflower meal/cake to more than 430 thsd tonnes.

It is worth mentioning the exports of sunflower seed from Ukraine, which in 2016/17 MY reached a peak for five recent seasons, and totaled more than 190 thsd tonnes. The European Union countries demonstrated high demand for the oilseed, and purchased 68% of the supplies.

At the same time, in 2016/17 MY Ukraine reached a record volume of sunflower seed imports - 23.5 thsd tonnes, which mainly included seeds material.

Forecasts for 2017/18 MY

Sunflower seed supply and demand balances

APK-Inform experts expect that the season-2017/18 will be quite tense for sunflower seed processors.

APK-Inform Agency estimated the harvest volumes of sunflower seed at 13.8 mln tonnes, a decrease of 8% compared with the previous year. The adverse impact of drought conditions affected the expected yield figures in some oblasts. Generally, it will be the second largest production of sunflower seed after the last year record.

The forecast of sunflower seed processing in 2017/18 MY totals 13.5 mln tonnes (down 7% compared with last season). Due to worsening of both the quantity and quality of sunflower seed harvest (decreasing of oil content), the production of sunflower oil will become lower and total 5.7 mln tonnes (down 10%), and sunflower meal/cake - 5.3 mln tonnes (down 7%).

The exports of sunflower seed will reduce compared with the preliminary estimations, to 80 thsd tonnes (down 2.4 times).

Also, the market segment of high-oleic sunflower seed expects for some decline. According to preliminary estimations, in 2017 the harvest of high-oleic sunflower declined by 27% compared with the last season volumes, to 490 thsd tonnes due to reduction in both planted areas (down 23%, to 200 thsd ha) and the yield (down 7%, to 2.42 t/ha). Taking into account segregation processes, in the season-2017/18 the processing volumes of sunflower seed in high-oleic oil will total nearly 400 thsd tonnes, down 23% compared with the results of 2016/17 MY. In 2017/18 MY, the production of high-oleic sunflower oil will total 180 thsd tonnes, against the last season record at 230 thsd tonnes.

Sunflower seed processing capacities

In 2017/18 MY, the activity of construction and modernization of oilseed processing capacities will somewhat decrease. Thus, in the current season growth rates of oilseed processing capacities will not be so significant as in 2016/17 MY (up 2.2 mln tonnes - to 17.7 mln tonnes/year), and will reach only 0.5 mln tonnes, to 18.2 mln tonnes/year. Taking into account the expected reduction of real processing volumes of sunflower seed by 7%, to 13.5 mln tonnes, the loading rates will also decrease from 82% to 74%.

In particular, in the beginning of 2017/18 MY the company Vidrodzhennya (Kirovohrad oblast) launched an extraction processing line on the basis of its oil-pressing plant. The current capacities total 400 tonnes/day, but will increase to 1000 tonnes/day by the beginning of 2018.

Zapad-Agroinvest continued increasing its processing capacities of sunflower seed, and in 2017/18 MY they reached 400 tonnes/day, against 220 tonnes/day last season.

Sumy Plant Foodstuffs PJSC plans to increase its capacities to 500 tonne/day in 2017/18 MY. The current capacities total 120 tonnes/day.

The company Agroliga (Kharkiv oblast) plans to move from oil-pressing technologies to extraction-processing technologies, and increase the capacities of its plant. Until 2018, the company plans to increase its capacities to 70 thsd tonnes/year, against the current level of 55 thsd tonnes, and by 2019 - 100 thsd tonnes of sunflower per year. Nizhynsky fat-and-oil complex (Chernihiv oblast) continues constructing a multi-crop extraction plant with a design capacity at 1 thsd tonnes/day. It is scheduled to lauch in the first half of 2017/18 MY.

Thus, in the new season Ukraine will increase its processing capacities of sunflower seed, and strengthen the leading positions on the market.

Exports of sunflower oil

According to APK-Inform forecasts, in 2017/18 MY Ukraine will export 5.3 mln tonnes of sunflower oil, down 9% compared with last season. In particular, the exports of high-oleic sunflower oil will reduce by 20%, to 180 thsd tonnes.

In the current season, Ukraine will face a high level of competition on the domestic sunflower market, deficit of oilseed raw materials with a good level of oil content, decline in loading of processing plants, reduction in the production and export volumes of sunflower by-products, as well as moderate competition rates from other countries.

Julia Ivanitskaya, oilseed market analyst at APK-Inform Agency