On October 23, the XXI international conference "Fat&Oil Industry-2023" took place in Lviv — one of the main events of the oilseed market of Ukraine. The organizer of the event was APK-Inform Agency (with the support of "Ukroliyaprom" Association).
At the conference experts and participants discussed trends, development vectors and prospects of the fat and oil industry. The event brought together more than 200 representatives of leading companies from 14 countries — processors, exporters, agricultural holdings, industry organizations, equipment manufacturers, etc. Anyone who continues to work in the event industry during the war in Ukraine understands how difficult it is to gather so many delegates offline.
The importance of the conference for the industry is eloquently testified by the fact that the combined share of Fat&Oil Industry-2023 participants in the Ukrainian oilseed processing and export market exceeds 50%.
The fat and oil industry in Ukraine, despite all the problems and challenges, is actively developing. As the general director of the Ukroliyaprom Association Stepan Kapshuk reported, starting from 1998 and up to today, Ukraine has increased the total oilseed processing capacity by 9.2 times — from 2.6 mln tonnes to 24 mln tonnes and significantly increased the production of raw materials. The current capacity for sunflower seed processing in Ukraine is about 18 mln tonnes, rapeseed and soybeans — 2 mln tonnes.
At the same time, the production of sunflower seed increased from 2.26 mln tonnes in 1998 to 14 mln tonnes in 2023 (forecast), rapeseed — from 0.13 mln tonnes in 2000 to 4.1 mln tonnes in 2023, soybeans — from 0.06 mln tonnes in 2000 to 4.7 mln tonnes in 2023.
S.Kapshuk also reported that over the past 25 years, 70 new processing enterprises, including 40 large ones, as well as 16 oil transshipment terminals were built in Ukraine. Investments in the amount of more than $4 bln have been attracted to the industry.
According to "Ukroliyaprom" Association forecasts, in the new season, Ukrainian enterprises will be able to process 15.6 mln tonnes of oilseeds, including 13.5 mln tonnes of sunflower seed, 1.5 mln tonnes of soybeans, and 600 thsd tonnes of rapeseed. At the same time, the production of sunflower oil is expected at the level of 6 mln tonnes, soybean oil — 0.3 mln tonnes, rapeseed oil — 0.25 mln tonnes.
However, military actions in Ukraine led to changes in logistics chains, production and processing of agriproducts. In particular, one of the major players of the Ukrainian oilseed market specializing in sunflower seed processing — OptimusagroTrade — started processing rapeseed.
Products are exported to Europe and Asia (50/50). The main buyers are biodiesel producers. Roman Suzak, deputy general director for commodity flows of OptimusagroTrade, announced this during his speech at "Fat&Oil Industry-2023".
"After the occupation of our elevators in the Kherson and Zaporizhzhia regions, the geography of purchases was changed... The main idea of starting rapeseed processing was its seasonality. Rapeseed harvest begins in July, while sunflower seed — in September. The difference is 2 months. At a time when the enterprise is standing still due to the lack of raw materials (sunflower seed) in the region, there is an opportunity to purchase/process rapeseed and continue to work in military conditions," R. Suzak explained.
Among other reasons, he cited low competition among rapeseed processors in the region; marginal processing of this oilseed; favorable price conditions and high demand on the market for rapeseed processing products.
Another promising oilseed is soybean. As Svitlana Kyrychok, an analyst of the oilseed markets of APK-Inform Agency, clarified, Ukraine is actively increasing the planting area under this crop.
So, in the current year, soybeans account for 20% of the planting area under oilseed (against 19% and 15% in the previous two years). This was facilitated, first of all, by the price situation on the oilseed market.
"We raised our soybean harvest estimate to 4.9 mln tonnes (+14% compared to 2022), which could be a record for the industry, driven primarily by the expansion of soybean acreage to a six-year high (+13% compared to 2022). In addition, amid high demand for this crop and fairly good profitability, it is expected that next year the planting area under this crop will increase again," the analyst noted.
Among the issues raised by the conference participants was the regulation of the genetically modified soy market. As a matter of fact, about 50% of soybeans in the country are GM, said Volodymyr Pugachev, executive director in Eastern Europe of the "Danube Soya" Association.
He is convicted that Ukrainian market of genetically modified soybeans should develop in a legally regulated area.
"Let's hope that normal regulation of the market will begin, because it cannot happen that we do not have GM soybeans according to the law, but in fact its share is about 50%," V. Pugachev believes.
However, if the soybean and rapeseed market segments are on the rise, not everything is rosy in the traditional sunflower seed market. According to the updated assessment of APK-Inform Agency, the production and export of Ukrainian sunflower oil in 2023/24 MY may decrease to 5.5 mln tonnes (-8% y-o-y) and 5.1 mln tonnes (-10% y-o-y), respectively. But there is potential to maintain these indicators at the level of the previous season.
"Yes, taking into account the rather good prospects of the sunflower seed crop in 2023, as well as the difficulty of estimating the production of this oilseed in the frontline regions, at the end we can get a crop slightly larger than the current forecasts, as it was last year. But it is worth noting that to a greater extent the indicators of oilseed production and export will still depend on the operation of alternative export routes, and especially on the functioning of the ports", S. Kirichok noted.
She also clarified that the export of sunflower oil by sea in the 2022/23 MY accounted for the lion's share of the total volume of shipments to foreign markets (about 76%), and this is a high risk of missile attacks and loss of products.
In addition, the rate of sunflower seed export is gradually gaining momentum. APK-Inform analysts believe that from December there is a high probability of oilseed shipments growth to EU countries. On the other hand, this may limit the potential for sunflower seed processing.
Another interesting topic was the issue of growing high-oleic sunflower seed in Ukraine. It accounts for 7-10% of the total planting area in Ukraine. Today, Ukraine ranks second in the world in terms of sunflower oil production after France. In our country, this segment is still considered a niche, but it has great prospects, said Serhiy Tymoshenko, CEO of MAS Seeds-Ukraine.
"According to our estimates, seeds were sold for 420.000 hectares. How much HO sunflower seed will be harvested from this area is a big question. It can be 70%, or it can be 50% of the total amount, because some hybrids were taken simply as high-yielding ones. There is a certain downward trend compared to previous years, but it is not so bad because we understand that it affects the overall price of high oleic oil," the speaker said.
Global demand for HO oil exceeds production by 150.000 tonnes. The shortage of HO oil will begin to be felt from November to December, which will lead to price growth. The increase of the premium to its maximum values is expected by the end of 2024.
According to the expert, farmers are hesitating whether or not to plant HO sunflower seed because of the instability of this segment. But it is better to plant, because in the worst case you can sell HO sunflower seed as an ordinary one, and in the best case — get a premium. At the same time, the costs per hectare are the same, the speaker emphasized.
Russia is at war with Ukraine not only on the battlefield, but also in the economic sphere. Thus, the competition between Ukrainian and Russian sunflower oil on the global market will remain very high in 2023/24 MY. This was reported by Victoria Blazhko, head of the department of agricultural markets in the Black Sea region and editor of Argus AgriMarkets.
She noted that Ukraine remains the world's largest exporter of sunflower oil, despite disruptions in logistics chains. However, Ukraine's share in world exports is decreasing due to the growth of sunflower oil exports from Russia.
"The pressure from Russia is increasing more and more... Russian products put pressure due to the improvement of quality, price and growth of sunflower seed production," the expert explained.
The main "battlefield" in this confrontation is India and China, other countries of Asia and Africa.
Ukrainian exporters of agriproducts face many difficulties due to the state of war, changes in the usual logistics chains, constant shelling of ports and sometimes — claims from foreign buyers. Therefore, one of the blocks of the "Fat&Oil Industry-2023" conference was a special legal session "Execution of contracts through new logistics routes", where participants, together with experienced specialists of AGA Partners, searched for answers to the question of how to overcome these difficulties. Speakers were Iryna Moroz, partner of AGA Partners, and Anastasia Shevchuk, lawyer of AGA Partners.
The rich session program ended with a discussion, where the participants discussed global changes in the geography of sunflower oil exports, the impact and consequences for the industry of the record export of this product, the search for alternative ways of supplying foreign markets, current issues of export competition, etc.
Some participants of the conference emphasized that, unfortunately, many countries perceive Ukraine as a supplier of cheap raw materials (even oil is a raw material in this context), further processing Ukrainian products into products with a higher added value — biodiesel, glycerin, etc. Therefore, for sustainable economic development, we must move from simple to deep processing of oil raw materials.
We would like to conclude the "Fat&Oil Industry-2023" review with an optimistic thesis from Viktoria Blazhko — Ukraine remains a powerful player in the global fat and oil market, both in terms of processing and export, and when logistics will improve (which we all sincerely hope), the market will return to roughly the state it was in before the full-scale invasion.
We thank all participants, partners and sponsors of the conference: MYANDE GROUP (Exclusive Sponsor), Payoneer (Financial Sponsor), Tekoil (Technological Sponsor), Kotloenergoproekt (Energy Sponsor), MAS Seeds, AGA Partners — Legal Partner.
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By Tetanya Lyagusha