The production of refined sunflower oil in Ukraine does not have a clear upward trend due to the high dependence on import demand and the lack of positive dynamics of the domestic consumption. In different seasons, the share of refined oil in the total production of sunflower oil varied from 11% to 13%, depending on the sunflower seed harvest, profitability of production, import demand and other factors. At the same time, because of the reduction of overall sunflower oil production in 2021/22 MY, the share of the refined product increased to 14%.
The peak of production of refined sunflower oil was observed in 2019/20 MY – 918 thsd tonnes. But in 2021/22 MY, for the second season in a row, the output of refined sunflower oil decreased to about 698 thsd tonnes according to preliminary estimation (-5% to 2020/21 MY).
On average, the domestic consumption accounted for about a one-third of the total supply of refined sunflower oil until 2019/20 MY. In 2020/21 MY, due to the war and significant migration processes, the share of domestic consumption decreased to 26% according to APK-Inform.
There were no significant increase in the export of refined sunflower oil during the last few seasons. However, the share of export remains the highest.
The largest export volume was observed in 2019/20 MY – 666 thsd tonnes.
The increase in the export of refined packaged sunflower oil from Ukraine was recorded at the beginning of last season due to growing energy cost and, accordingly, the cost of production of refined and packaged products in the world and, in particular, in Europe, which significantly improved the attractiveness of Ukrainian product. As a result, starting from November 2021, the monthly export of Ukrainian oil began to exceed the figures of the previous year. In January 2022, monthly export increased by 54% y/y. However, starting from February, it significantly decreased due to the blocking of ports.
During the war period, due to logistical difficulties, the demand was mainly for refined and packaged oil that contributed to a rather rapid recovery of the export.
In April, Ukraine exported about 27 thsd tonnes of the oil (up 3 times compared to February). In May, the shipments totaled 47 thsd tonnes (+73% m/m).
According to operational data, in 2021/22 MY despite reduction of sunflower oil export in general by 15%, the volume of refined SFO shipment to the global markets was increased by 4% to 511 thsd tonnes, which became second highest in history.
Around 44% of the total volume was imported by the EU — 233 thsd tonnes which twice higher than average. In other words, having considerably increased purchases due to war in Ukraine, the EU became a key importer of Ukrainian refined sunflower oil.
Also, in 2021/22 MY the US increased imports of Ukrainian refined SFO by 14%, Israel — by 30% and Saudi Arabia — by 62%.
At the same time, the reduction outside a number of key directions was due to complicated logistics from Ukraine after the war began.
After the grain corridor was launched and sunflower oil delivery in bulk was increased from deep sea ports for remote markets, which traditionally imported crude SFO, the share of refined production in the export on 2022/23 MY can decline. However, considering the further rise in prices for energy resources, the demand for refined oil from traditional buyers are expected to be high.
But the crisis in the energy sector of Ukraine does not allow to significantly increase the production of this product at Ukrainian enterprises or at least to keep it at the average statistical level for several seasons. Even if the situation improves in the near future, the limits on the use of electricity at industrial enterprises will remain. Moreover, the threat of repeated missiles attacks on the country’s critical infrastructure also remains.
Being in a quite difficult conditions, the processing sector of Ukraine is rather limited in terms of competition on the raw materials market with exporters of oilseed. Since the beginning of the current season, oilseed exports to the EU countries continue to increase, which in the end will have considerable effect on the total production and export of sunflower oil from Ukraine.
Thus, among the main factors which will influence the market of refined sunflower oil, we should emphasize the profitability of the product, energy sector condition, pace and volumes of sunflower seeds exports and further operation of «grain corridor».
Analytic department of APK-Inform