The FH of 2018/19 MY for the Ukrainian market of sunflower seed was characterized by the increase of many figures: starting the widening of the planted areas and the growth of the domestic processing volumes. The relatively high demand of the buyers stimulated the Ukrainian plants to continue modernization of the existing production lines thus the nameplate capacity of sunflower seed processing by March of 2019 reached the record 18.7 man tonnes per year. This opens new perspectives for Ukraine’s consolidation in the global market of sunflower product of processing.
Sunflower seed: rebuilding of the production volumes
The sunflower seed production on the Ukrainian market starting 2018/19 MY rebounded and reached 14.9 man tonnes (here and further APK-Inform Agency data), which is almost 11% higher the last year’s results. The increase of the oilseed harvest was due to the widening of the planted areas and the relatively high yield (nearly 2.5 t/ha), provided favorable weather conditions during the vegetation period.
Despite the increase of sunflower seed production, the competition on the domestic market continued to be rather high. There were several reasons - the increase of the processing capacities and the modernization of the existing plants. Thus, in the current season was reported about the new plants being launched: PJSC «Inter Agroline» (Donetsk oblast), LLC «Riston Oil» and LLC «Potoky» (Dnipropetrovsk oblast). Taking into account the named companies, according to APK-Inform figures, as of beginning of March the basic production capacities of sunflower seen processing in Ukraine total 18.7 mln tonnes per year (+2% compared to the previous season).
Also we should note that the average loading of the plants in September-January of 2018/19 MY increased slightly - to 87%, as a result for the 5 months of the current season the processing of the oilseed redhead the record volumes - nearly 6.8 mln tonnes (6.3 mln tonnes y-o-y).
Production capacity of the new plants
PJSC «Inter Agroline»: the processing of sunflower seed into oil and of shells in to pellets for the soil fuel boilers. The total production capacity of the plant is nearly 240 t/day.
LLC «Riston Oil» - a producers of sunflower oil, granulated meal, expanded cake and fuel pellets rom production residuals. The planned processing capacity of sunflower seed is 640 t/day.
LLC «Potpky» - multi crop plant, the producers of sunflower oil and of unique high-protein meal (with the protein content more that 48%). The maximal processing capacity of sunflower seed is 1400 t/day.
Also we should note that the average loading of the plants in September-January of 2018/19 MY increased slightly - to 87%. As a result, for the 5 months of the current season the processing volumes reached the record 6.8 mln tonnes compared to 6.3 mln tonnes year-on-year.
International trader: the exports of oilseeds is accelerating
The increase of the sunflower seed production in the current season stimulated not only the volumes of domestic processing, but also the export of oilseed. In particular, in 2018/19 MY (September-January) Ukraine exported more than 39 thsd tonnes of the crop (nearly 18.7 thsd tonnes in 2017/18 MY). We should note that the share of oilseeds export is still rather low and totals nearly 1% of the total of sunflower seed supply. Herewith, according to the data by APK-Inform, the volumes of export by the end of the year will reach 60 thsd tonnes.
Despite the little volumes of exports, for the last 5 months of 2018/19 MY Ukraine shipped sunflower seed to 35 countries. The leader among the importers in the reporting period was Turkey with the share of shipments totaling 59%. Herewith, last year Turkey was not even one of the TOP-5 importers. The relatively constant importers were Finland and Romania. At the same time, if the shipments to Romania are almost coincide with the last year volumes (1.5 mln tonnes vs 1.4 thsd tonnes), the export to Finland increased 2.9 times – from 1.4 thsd tonnes to 4 thsd tonnes, thus the country became the second largest importer of Ukrainian sunflower seed. The third largest importer of Ukrainian oilseeds was Azerbaijan – the shipments increased 81 times compared to previous season (September-January) and reached 3.4 thsd tonnes.
In general, the export trading of sunflower seed is still of low priority for the market of this oilseed and does not influence the price conjuncture which forms normally on behalf of the competition of processors and the tendencies on the export market of products of processing.
Market of crude sunflower oil: competition intensifies
As against previous season in 2018/19 MY the majority of the plants increased the volumes of sunflower oil production. This “bounce” was due to the modernization of production lines and as a consequence the increase of the total capacities of the enterprises. Moreover, it was also possible because large processing companies formed the stock of raw materials in advance (2 months ahead) and signed forward contracts for the delivery of the product. The main produces of sunflower oil in the FH of 2018/19 MY were such companies as Bunge Ukraine, Zaporizhya refinery plant, Vinnytsa refinery plant (Vinoil), “Oilseeds Black Sea” and Kernel, and others.
In general, in September-January the Ukrainian plants processes the record volumes of sunflower seed and produced nearly 3 mln tonnes of sunflower oil, which is up 9% y-o-y and totals 46% of the forecasted production volumes for the current MY.
The main part of the produced oil in the reporting period was shipped for export – 2.4 mln tonnes. The size of the domestic market is rather low and totals 0.2 mln tonnes.
The trading activity on the domestic market of crude sunflower oil during the reporting period was low owing to the high number of different oils (including soybean and rapeseed oils) offers entering the market. The prices for the product were under pressure of the export market price conjuncture of the product of oilseeds processing.
Market of sunflower meal/cake: production re-orientation
For the 5 months of 2018/19 MY Ukraine produced 2.7 mln tonnes of sunflower meal and cake which is up 8% year-on-year. In general, the combined production of these products is forecasted to reach 5.7 mln tonnes this season, whereas the export can total 4.7 mln tonnes.
Starting 2018/19 MY the prices on the market of products of productions were forming in mixed trends, herewith, the downward trend prevailed. The main factors that pressured the prices were the price easing on the export market and the surplus of the product supplies.
We should emphasize, that many refinery plants were modernized and re-oriented to the solvent-extraction production, as a result, the share of sunflower meal production increased. The reason was the high demand of the buyers on both the domestic and foreign markets.
Also, we would note that spread between the offer prices for sunflower meal and cake, that in the beginning of the season totaled 1`000 UAH/t, was gradually reducing and in December 2018 – February 2019 reached “zero” point. Such a tendency was due to the high demand on sunflower cake in terms of the limited offers of the product and the price rise, and also because of the low trading activity on the “falling” market of sunflower meal.
Speaking of the prospects for the second half of the current season we can note that the number of offers of sunflower seed is expected to increase during the spring period, which is each and every year is explained by the necessity of the agriproducers to refill current assets of the farm before the sowing campaign. At the same time this factor together with the foreign exchange fluctuations can put a significant pressure on prices for both oilseed and by-products.
The key factors that specify the further activity of shipments of sunflower oil and meal/cake will be the cost of the raw materials and the export market conjuncture.
In case the high processing volumes of sunflower seed to preserve there is a possibility for the new records, in particular, the volumes of sunflower oil production can reach up to 6.4 man tonnes, sunflower meal/cake - up to 5.7 man tonnes.
Tatiana Khromenko, APK-Inform Agency