For the last 2 years the increase of the oilseeds processing volumes is the main trend of the fat and oils market of Belarus which leads to the new production record of vegetable oils – 291 thsd tonnes.
Herewith, the change of the balance sheet resulted in the redistribution of the main flows of the products, in particular of rapeseed and soybean oils.
Exports show the positive tendency
In 2018, there were several factors on the market of vegetable oils in Belarus that have determined the main trends of the segment and the trade flows.
First – it is the growth of the production volumes of the main oils by 71% in 2017. As a result of significant increase of oilseeds imports (rapeseed and soybeans) the production of oils in Belarus in 2018 reached 291 thsd tonnes. This is a record high for Belarus. The previous record production was observed in 2014 (277 thsd tonnes).
Second – it is a decline of the share of imported products on the domestic market to 98 thsd tonnes, which is nearly 25% of the total supply compared to 41% last year. The import decreased on behalf of sunflower oil (from 97% in 2017 to 93% in 2018) which was caused by the first factor.
Herewith, if we look at this by seasons, the same dynamics can be observed only in terms of sunflower oil: for the 4 months of 2018/19 MY Belarus imported 27% less of this oil compared to previous year. Thus, the share of the product in the total volume declined to 90% from 96% in 2017/18 MY.
And third – the substantial increase of export of vegetable oils. In particular, the significant rise of the import of oilseeds leads to the vegoils export acceleration, especially of soybean oil, the shipment of which was almost null until recently.
According to the National Statistics Committee of Belarus, in 2018 the export of main vegetable oils totaled 270 thsd tonnes, which is more than 4 times higher compared to 2017. The biggest growth of the shipments was observed in terms of soybean oil – more the 12 times, as a consequence the share of the total export increased from 4% to 13%. Rapeseed oil continues to be the main exporting product – the export increased more than 4 times and its share totaled 86% (93%).
The evaluations of the domestic consumption of rapeseed oil in Belarus are mostly unchanged season by season and total 120-140 thsd tonnes. The Belarusians still do not used to rapeseed oil because of the formed traditions of other oils consumption.
Herewith, till 2017 its production and shipment to the global market totally depended on the domestic production and more than 97% of the oil was exported to Norway and the EU countries. Since the launch of the plant “Belagroterminal” in 2018 the main volumes of oil started to be shipped to Russian ports, and by the end of 2018 the share of oil shipment to Russia totaled 41% of the total export volumes of rapeseed oil.
If we look at the monthly dynamic of rapeseed export, we would note that the export of rapeseed oil significantly increased from April 2017/18 MY until nowadays. During August-December of the current season the export of rapeseed oil totaled 135 thsd tonnes which is 2.5 times higher year-on-year. Herewith, each month within this period demonstrated record high volumes of shipments.
Speaking of price dynamics, we should note that since the beginning of 2018/19 MY there was an upward trend on the rapeseed oil market of Belarus as against previous season. The main factor influencing the market was the price tendencies on the European market of rapeseed oil. The correlation is going to preserve because nearly 55% of the product is exported to the European markets.
The additional support for prices on the domestic market since the start of 2018/19 MY was provided by the rapeseed market – prices for oilseed increased based on the growing competition.
Thus, as of beginning of March the bid prices for rapeseed oil were declared mostly by 70 Br/t EXW higher year-on-year.
The total supply of sunflower oil on the market of Belarus is nearly by 90% consist of imported products. Herewith, on the Belarusian plans the oil is produced mostly from the Russian raw materials. In these conditions, the market participants do not expect the growth of the product production as the producers in Belarus can hardly compete on the global market.
If we analyze the import dynamics of sunflower oil in Belarus for the last years we could see that the volumes usually total within 90-100 thsd tonnes. Herewith, if the import of sunflower seeds increased the import of oil declined slightly. If we look at the import of sunflower oil to Belarus, we can see that its deliveries increased significantly – 2.6 tines in 2016/17 MY and by 30% in 2017/18 MY compared to 2015/16 MY.
At the same time, the geography of sunflower oil purchases does not change: for the last 2 seasons in Belarus the share of Russian oil supply totals in average 78%, Ukrainian oil – 22%. The main reason for such a distribution of the product is the price. We should also add that despite the lower prices for sunflower oil during the current season compared to previous (the price difference in terms of DAP varied within 30-100 USD/t), the volumes of its purchases decline.
The decrease of the import pace can be traced from season to season – in 2017/18 MY this figure was 6%.
In September-December of 2018/19 MY the import totaled 31 thsd tonnes which is 27% lower year-on-year. It is estimated that in January the import of sunflower oil from the main exporting countries totaled nearly 10 thsd tonnes (+28% compared to November in 2018/19 MY and twice increase compared to January in 2017/18 MY). However, the total import volumes for the 5 months of 2018/19 MY are still 13% lower year-on-year.
This tendency is quite successfully compensated by the growth of sunflower seeds imports since the start of the season by 70%, owing to the planning requirements of the processing plants for contracts’ fulfillment obligations.
For the last several seasons the Belarusian market of soybean oil demonstrates the strong growth of export, taking into account the fact that up until 2016/17 MY it was almost totally absent. This trend appeared because of the growing volumes of the processing in Belarus which allowed to solve several problems of the fat and oil industry, such as increasing of the loading of the processing plants, significant decline of the prices for the product. It also provided the decrease of the import of soybean oil that till 2016 totaled 6-14 thsd tonnes.
The upward tendency on the export market of soybean oil will preserve in 2018/19 MY. Within September-December of the current season the export reached 6.3 thsd tonnes which is 5 times higher year-on-year. Each of the months, except November, demonstrated the high monthly export growth.
The main buyer of the Belarusian soybean oil in September-December of 2018/19 MY was Russia with the share at 98%. In the previous season the main and only market of distribution was Latvia. The trade flows changed because since the end of 2017/18 MY the Belarusian producers shipped the main volumes of the product to the Russian seaports.
In terms of the constantly low domestic consumption (nearly 15-20 thsd tonnes) and the drastic growth of the product supply on the domestic market the prices this season were forming mostly in downward trend. Also, the prices were largely influenced by the price dynamics on the Russian market of soybean oil.
The difference of bid prices compared to previous season has increased significantly in the second half of January-February 2019, owing to soybean prices decline (by approx. 10 USD/t) mostly imported from Ukraine.
Trends not to change
By analyzing the current conditions of the Belarusian market of vegetable oils and the factors influencing the market, we would emphasize several tendencies that will preserve till the end the season:
- The market participants believe that the domestic production of the vegetable oils will continue to grow, taking into account the increasing import of soybean and rapeseed;
- The domestic consumption of vegetable oils will not change significantly and at the same time will stipulate the increase of exports;
- The import of vegetable oils, sunflower oil in particular, will continue to demonstrate rather inactive downward tendency in terms of the growth of sunflower seeds imports. Herewith, this market segment still will depend on imports.
Svetlana Kirichok, APK-Inform Agency