Forecasts of sunflower seed and soybean harvest in Ukraine — APK-Inform

For many recent years, in Ukraine experts formed the forecasts of production figures of such crops as sunflower seed, regardless of the official planted areas and yield figures, which are useful only for monitoring of the market trends. Various experts have different approaches. Therefore, the discrepancies in expectations for the harvest often reaches hundreds of thousands of tonnes. Often, it is possible to make the final estimations of sunflower seed harvest only at the end of the marketing year. To date, in terms of the growth of the share of domestic processing in the supply and demand balances of soybeans, and the issue of the final appraisal of official figures also became rather relevant.

The season-2018/19, which ended in August 2019 for the oilseed segment of Ukraine, demonstrated the record export volumes of sunflower seed and soybean by-products. Taking into account the current stable capacities of the domestic market, the export figures of oilseed by-products are the main benchmark in estimation of the real volumes of raw materials. According to APK-Inform estimations, in 2018 sunflower seed production in Ukraine totaled 15.2 mln tonnes, an increase of 12% compared with the previous year. Also, agrarians harvested almost 4.8 mln tonnes of soybeans (up 14%), taking into account the final appraisal results. Both crops demonstrated the maximum harvest figures, due to the growth of yield indicators, as well as sunflower seed planted areas also increased.

Increasing of the supply of oilseeds contributed to reduction of the purchasing prices in 2018/19 MY. As for soybeans, the price decline was more significant, due to the negative impact of the global market situation: overproduction of soybeans in the world, high carry-over stocks, the current trade war between the USA and China, which resulted in significant reduction of the imports and consumption of soybeans.

So, in 2018 agricultural producers received the average profitability rates of sunflower seed and soybeans, at the level of 5-year minimum: 32.5% and 21% respectively, according to the official figures.

Under the current conditions, the planted areas for the harvest-2019 somewhat reduced, which became quite logical consequences. At the same time, despite the reduction of the areas under sunflower seed by 3%, the forecast of yield totaled 2.5 t/ha, which will allow updating the record of the oilseed harvest volumes, and reach the level of 15.4 mln tonnes (APK-Inform estimations).

According to the statistics figures of the Ministry of Agrarian Policy, as of October 11 Ukrainian agrarians harvested sunflower seed throughout the areas of 5.2 mln ha (88% of the forecast), which matched with to the last year rates. The production volumes reached 12.4 mln tonnes, against 11.6 mln tonnes on the same date last year. The average yield of sunflower seed exceeded the last year level by 9%, and totaled 2.4 t/ha (1.51-3.46 t/ha depending on the region).

Market participants noted the good qualitative figures of new crop sunflower seed, including the high oil content at the level of 44-51%.

Apart from Ukraine, other countries will also receive the good harvest of sunflower seed in 2019. So, Russia, Romania and Moldova can harvest the record volumes of the oilseed. Also, Argentina, Bulgaria, Hungary, Turkey, Kazakhstan and Serbia have quite high production forecasts.

In terms of another good harvest year, in the beginning of 2019/20 MY the bid prices of sunflower seed in Ukraine decreased to the multi-year lows: 7`700-8`100 UAH/t EXW, 8`000-8`500 UAH/t CPT-enterprise, and nearly 8`800 UAH/t on the same terms in southern oblasts. The prices decreased by over 20% compared with October 2018.

Some weakening of prices is the common phenomenon during the harvesting campaign, but such sharp drop in the beginning of the current season developed, due to a large number of the oilseed supplies from farmers. Due to the fact that agricultural producers were not satisfied with the current prices, in October 2019 the market operators reported that agrarians started slowing down sales to support the prices.

At the same time, as of October 11 Ukraine already harvested soybeans throughout 1.24 mln ha, or 78% of the forecasted areas, which slightly exceeded the last year level (up 6%). The production reached 2.9 mln tonnes of the oilseed (down 2% y-oy). The average yield of soybeans totaled 2.34 t/ha (the range by oblasts totaled 11.2-34.1 C/ha), which was lower by 7% compared with the last year figures (2.52 t/ha).

Buyers of soybeans noted some worsening of the oilseed qualitative indices compared with last year, including the lower content of protein.

According to APK-Inform forecasts, due to reduction of the planted areas in 2019 by 8% and the yield by 11% (to 2.45 t/ha), Ukraine will decrease the production of soybeans by 18% compared with last year — to 3.9 mln tonnes. It will become the lowest harvest results since 2015.

In September 2019, in the period of active harvesting works the market provided the sufficient number of offers of soybeans from sellers, which contributed to some lowering of the prices. In addition, the global market still showed the downward trend. The bid prices mainly varied within the range of 7`800-8`300 UAH/t EXW, down 17% compared with the last year level. At the same time, the reduction of the number of raw materials offers from agrarians on the Ukrainian market, slowing down of the harvesting campaign in some southern oblasts of the country, due to the adverse weather conditions, as well as several external factors, may somewhat support the prices in the near future.

Generally, it should be noted that the following factors will impact on the market segments of sunflower seed and soybeans:

— the high harvest of sunflower seed in the world and the large-scale supply of sunflower oil will put pressure on the prices in the market segment;

— slowing down of the oilseed sales on the domestic market will limit the price drop or even support the prices;

— the growth of soybean price quotations on CBOT, due to lowering of the production forecasts and carry-over stocks of the oilseed in a number of countries, will become the upward factor for the global prices and the Ukrainian soybean export market;

— activating of the conclusion of soybean trade contracts between the USA and China may contribute to restoring of the soybean sector, as well as prices on the neighboring markets;

— reduction of the planted areas under winter rapeseed for the harvest-2020 in several oblasts of Ukraine, due to the unfavourable weather conditions, as well as rather poor germination rates, will lead to increasing of the areas under spring crops.

Julia Ivanitskaya, oilseed market analyst at APK-Inform Agency