A quota on duty-free supply of 50 thsd tonnes of sunflower seed to Turkey that will be set as part of the free trade agreement between Ukraine and Turkey will not have any significant impact on the processing industry of Ukraine, in particular, in the current season, noted Svetlana Kirichok, oilseeds market analyst with APK-Inform.
According to APK-Inform, in Ukraine in 2021, the harvest of sunflower seeds amounted to a record 16.5 mln tonnes (+20% y/y). In addition to record production, in the first half of the current season, farmers preferred to hold back sales of sunflower seed, expecting better prices, which resulted in the maximum oilseed stocks on the market during the winter period. As a result, in the second half of 2021/22 MY, we may see either a surplus in sunflower seed supply or huge carry-over stocks, which is also quite justified in the context of unclear prospects of the next crop.
“Therefore, the volume of sunflower seed, which is provided for duty-free exports by the quota, may go unnoticed on the scale of the country’s fat-and-oil industry and it will not bring any significant increase in competition on the commodity market in the rest of 2021/22 MY”, – the analyst said.
At the same time, it is important to note, that since November 2021, bid prices in ports began to exceed the prices of domestic buyers. However, the sunflower seed shipments remain relatively small, which shows that the domestic market remains more attractive for farmers.
It is possible that the export direction will be more price attractive during the formation of consignments for shipments to foreign markets within the quota, and may lead to price increases. However, given the small volume for duty-free exports, the price increase will most likely be local and will not have a significant impact on the overall price environment.
“However, there are risks that should be taken into account. At the moment, it is not yet clear whether there is a possibility of revising the quota either up or down. If such a possibility is envisaged, then in case of further adjustment of the volume for duty-free exports to Turkey together with the already existing export "indulgences" for the EU countries (reduced export duty rate), competition on the commodity market may really intensify, which will be reflected in the price of sunflower seed and oil”, – the expert summed up.
