Ukraine is the Leading Manufacturer of the Sunflower and the Second Largest Producer of the High Oleic Oil in the World
Ukrainian farmers are ready to indulge in any kind of experiments except for those related to sunflower – this crop provides stable profit and constitutes a considerable part of the national agricultural export every year. 2016 was no exception even though the farmers’ expectations were overshadowed by difficult weather conditions and abundance of wild grass.
We are the largest producers of the sunflower
Ukraine occupies 1/3 of the global sunflower production market – we are the largest manufacturers of this crop. In 2016 Ukrainian farmers collected 13,8 million tons of sunflower having significantly outperformed the closest competitors – Russia (10,9 million tons), EU (8,6 million tons), Argentina (3,4 million tons) and China (2,8 million tons).
As the major production volume was consumed internally, the sunflower export constituted only 200 thousand tons last year, which granted us 10,7% share of the global market and the 5th place among world’s largest exporters of this crop. The export revenue amounted to $72 million. Largest consumers were Turkey, France, Portugal, and Spain.
Sunflower oil export brings $4,2 billion in profit
The situation with sunflower oil production and export is far more positive. In 2016 the processing companies produced 4,4 million tons of sunflower oil which allowed Ukraine to become its world’s largest producer. The export volume was even larger – 4,8 million tons which allowed to be ranked 1st among world’s largest exporters of this product. National producers managed to receive $4,2 billion of profit from sunflower oil export. The largest importers were – India ($1,4 billion), China ($445 million), Spain ($338), Netherlands ($290 million), Italy ($234 million). Kernel (19,2 billion UAH), Cargill (7,5 billion UAH), Bunge (6,4 billion UAH) and Myronivsky Hleboproduct became the largest exporters.
The areas planted with sunflower as well as yield rates are increasing
High demand for the sunflower on internal and external markets makes it highly popular among farmers – areas planted with sunflower increased up to 6,1 million hectares regardless of the violation of crops rotation schedules, an increase in the number of pests and unpredictable weather changes. Due to high liquidity of this crop, aforementioned challenges made Ukrainian farmers search for new ways of sunflower cultivation instead of making them abandon it. The yield rate is the most vivid indicator of this trend: during last 10 years, it has increased from 14,3 Cwt/hectare to 22,4 Cwt/hectare.
2016 was overshadowed by weather and wild grass
At first, the sunflower fields suffered from cold spring and after that hot summer sun caused draught which was unbearable even for pests and crop diseases. It allowed sparing some funds on plant protection products. Though, the wild grass was unaffected by the drought. Farmers in southern and eastern parts of Ukraine were particularly concerned with fighting against “sunflower broomrape”. As a result, in order to preserve their harvest farmers of these regions started to collect it 2 weeks in advance.
Nevertheless, all these challenges are worth taking because of the high profitability of the sunflower: the purchase price of this crop is around 10 000 UAH per 1 ton, while the cost of its cultivation is around 5 000 - 6 000 UAH per 1 hectare.
The high oleic sunflower market requires stability
During last two years, areas planted with high oleic sunflower (HOS) were expanding – for 15% in 2015 and for 60% in 2016. Though, in spring 2017 companies decreased the volume of lands planted with HOS: according to «UkrAgroConsulting» - by 15-25% (up to 200 000 – 240 000 hectares). According to Sergiy Timoshenko, head of the department of business solutions in the sphere of agricultural products processing in CIS countries at Syngenta Ukraine, it decreased almost twofold – down to 180 000 – 200 000 hectares.
It’s explained by the fluctuation of the bonus’ size: before it was around $120-200 per 1 ton of oil, now it went down to $50-60. As a result, the bonus for HOS has also decreased down to $10-15 per 1 ton, while farmers expected it to stick around $60-70.
The key reason behind this trend is overproduction in 2015/2016 marketing year - 1,8 million tons were produced while the demand was around 1,6 million tons. Today, on the contrary, we observe the shortage of high oleic sunflower oil proposition: in 2016/2017 marketing year the demand increased up to 1,7-1,75 million tons while the production level decreased down to 1,6 million tons. That’s why already in spring the bonus for HOS increased from $10-15 to $20-25, while in August some companies already proposed $30+ bonus to farmers. This amount is expected to increase up to $40 in autumn. In general, the demand for HOS oil increases for 5-9% every year.
Ukraine is the second largest producer of high oleic sunflower in the world
In 2016/2017 marketing year the volume of high oleic oil production in Ukraine was around 165 000 – 185 000 tons, which made us its 2nd largest global producer – right after France.
The main export destination for the high oleic sunflower oil is the EU market with estimated demand capacity of 1 million tons. Asian countries, notably China and India, as well as the Middle East, are also increasing the consumption of high oleic oil.
The macroeconomic situation during this agricultural season seems to be favorable for HOS. Furthermore, sunflower oil, unlike other products, is the only commodity the market is positive about. Palm, colza and soybean oils most probably will face the price drop. According to the available forecasts, the size of bonus demonstrates the potential for growth as France decreased the scope of lands planted with high oleic sunflower. Thus, all favorable conditions for increasing high oleic sunflower cultivation in Ukraine are in place, while its profitability makes the sector attractive for investments.
