2018/19 MY became the game-changing year for the Ukrainian soybean market. Due to the growth of the supply level of the oilseed, the competition rates for raw materials between export-oriented companies and processors slightly decreased. Oil-producing enterprises received the good opportunity to increase the capacities of their production lines, as well as increase the oilseed processing volumes to the record level of 0.62 mln tonnes for just 5 months of the current season. The situation became the fiducial point for stimulation of the supplies of soybean by-products on the global market.
Soybean market: restoring the production volumes
Despite some reduction of the planted areas under soybeans to the minimum level for 5 recent seasons, due to adoption of "soy amendments", in 2018/19 MY Ukrainian agrarians managed to harvest rather high volumes of the oilseed — nearly 4.3 mln tonnes (hereinafter — estimations of APK-Inform Agency), up 3% compared with the previous season, and almost met the level of 2016/17 MY. The record yield figures (2.5 t/ha), in terms of applying of mineral fertilizers and crop protection products of the new generation, as well as the favourable weather conditions during the planting campaign and vegetation of seeds, contributed to achievement of such high results.
The high harvest volumes allowed to Ukraine to keep its 8th position in the global rating of the largest countries-producers of soybeans. As of the leaders, in the current season the TOP-5 of soybean producers included the USA, Brazil, Argentina, China and India.
Foreign trade: reduction of the share of soybean exports
In 2018/19 MY, Ukraine continued developing the trend of reduction of soybean exports, which will surely remain stable in the future seasons. Thus, in September-January the shipped volumes of the oilseeds on foreign market became the minimum one for 5 previous seasons. The situation developed, due to the following factors:
— low competitive ability of domestic raw materials on the global market, due to coming of the sufficient number of soybean offers with the adequate quality characteristics and the lower cost, in particular the US, Brazilian and Argentinian origin;
— decreasing of the interest of agricultural producers in the oilseed cultivation in terms of the entry into force of the law on cancellation of the VAT refund for the exports of soybeans since September 1, 2018, which led to reduction of the planted areas under the oilseed;
— increasing of the basic capacities of soybean processing plants from 3 mln tonnes to 3.5 mln tonnes per year, due to modernization of the installed production lines, as well as commissioning of new plants;
— low, but stable demand for the oilseed by-products on the foreign market, which opens up new prospects for Ukraine to increase the export volumes of soybean oil/meal to the major countries-importers, as well as expanding of the geography of supplies.
Despite the reporting growth of the share of processing, soybeans still remained the export-oriented crop (Ukraine still exports nearly 60% of the oilseed volumes). Generally, for 5 months of 2018/19 MY Ukraine already shipped more than 1 mln tonnes of soybeans on foreign markets, or 44% of the forecast. As a reminder, in the same period last season Ukraine exported nearly 1.7 mln tonnes of the oilseed.
In the reporting period of the current MY, Turkey became the leader among countries-importers, and purchased more than 54% of all export volumes of the oilseed raw materials. Belarus reached the second position in the list of importers, and increased the purchases of Ukrainian soybeans in 1.5 times compared with the same period of last season. In the first half of 2018/19 MY, Algeria took the third position in the rating, and showed the interest in purchasing of the Ukrainian oilseed for the first time.
In the current MY, the competition struggle between exporters and processors of the oil-producing sector for raw materials was relatively low, and mainly started developing only in the pre-New Year period (late November & first half of December 2018), due to the desire of traders to fulfill their obligations under the concluded foreign economic contracts before the end of the calendar year. In the reporting months, supplying of the oilseed was more active, as a result processors with the previously formed stocks of raw materials started reducing the purchasing prices. Thus, the spread between the average bid prices on the basis of CPT/EXW reached 1200 UAH/t.
In the current season, the foreign currency bid prices for soybeans reached the minimum level for 7 recent years, and as of the end of March 2019 the prices mainly varied within the range of 308-325 USD/t CPT-port.
Trend of production increase
The growth of soybean production in terms of weakening of the competition rates between oilseed processors and exporters led to the significant changes on the market. The long-term trend of increasing of the domestic processing of soybeans still continues developing in the current season. For 5 months of 2018/19 MY, Ukrainian plants processed 0.62 mln tonnes of the raw materials, which became the maximum figures in the whole contemporary history. In terms of keeping of the high processing rates until the end of the season, the figures will reach a new record of 1.67 mln tonnes, as opposed to 1.25 mln tonnes in 2017/18 MY.
According to APK-Inform analysts, for 5 months of 2018/19 MY Ukraine produced nearly 105.5 thsd tonnes of soybean oil, up almost 20% compared with the same period last season.
For 5 months of the season, Ukraine supplied the product to 32 countries, as opposed to 22 countries in same period of 2017/18 MY. Generally, Ukraine exported more than 89 thsd tonnes of soybean oil. In September-January of 2018/19 MY, Ukraine shipped the major volumes of the product to the EU (47%), South and East Asia (35%). The TOP-3 of countries-importers included Poland, India and China.
Also, in September-January of 2018/19 MY Ukraine produced nearly 463 thsd tonnes of soybean meal/cake, up 19% compared with the same figures last year.
In September-January, Ukraine exported 232 thsd tonnes of the product. For 5 months of the current MY, Poland became the leader in purchasing of Ukrainian soybean meal/cake, which increased the import volumes in five times. Thus, the key importers of the previous year — Belarus and Hungary — shifted to the second and third positions, respectively.
Despite the sufficient number of soybean meal offers, the demand on both domestic and export markets remained at quite high level.
According to APK-Inform analysts, as of February 2019 the carry-over stocks of soybeans in Ukraine totaled 2.7 mln tonnes, up 28% compared with the previous season. According to market participants, the fact will continue putting pressure on prices for the raw materials, and contribute to the further growth of the oilseed processing volumes.
In terms of keeping of the strong demand for soybean by-products on the foreign market, and attractive pricing environment, by the end of the season the general production volumes of soybean cake and meal can reach 1.2 mln tonnes (up 33% compared with the previous year), while the exports — 560 thsd tonnes (up 61%), respectively.
Tatyana Khromenko, APK-Inform Agency