Oilseeds harvest in Ukraine could grow by 1.5 million tonnes this year compared with 2017, to 21.7 million, according to the UkrAgroConsult consulting agency.
“According to the results of this year, we forecast growth of the harvest to 21.7 million tonnes for three main oil crops – sunflower, rapeseeds and soybeans,” Director General of the UkrAgroConsult consulting agency Serhiy Feofilov said at a press conference at Interfax-Ukraine.
According to him, Ukrainian farmers continue expanding crop areas, increasing yield and general production of sunflower and other oilseeds, as these crops are currently the most profitable.
“Now the prices for wheat and barley are very close to each other, it is about $230 per tonne FOB, but even six months ago wheat was at around $180-190 per tonne FOB. The prices for corn are about $185 per tonne FOB, which is due to expectations of a high harvest, but even these prices are $30 higher than a year ago,” the UkrAgroConsult director general said.
At the same time, he said that even now grain crops will not be able to compete significantly with oilseeds, although the prices for grain have grown by 15-20%.
“Presumably, the main reason for the increase in grain prices will be the current unfavorable weather conditions in the three major grain-producing regions of the planet, but probably in 12-18 months the prices for grain will return to the previous level,” Feofilov said.
In his opinion, despite the increase in oilseed crushing capacities, the demand for raw materials and the supply of oil, the growth of exports is not accompanied by an increase in foreign exchange earnings, which is the fundamental reason for the trend towards a decrease in the profitability of the oilseed complex of Ukraine.
“Currently, the prices of vegetable oils, including sunflower, are at the lowest level over the past decade – about $700 per tonne FOB. It should be emphasized that the export of oilseed products – oil, meal, soy and rape is about 40% of all agrarian and food exports of Ukraine,” Feofilov said.
According to the forecasts of UkrAgroConsult, in Ukraine the production and stocks of both sunflower and sunflower oil will be significant by the end of the next season, and this will put pressure on prices both domestic and export.
“It is likely that sunflower areas (6.5 million hectares in 2018) will be stable in the structure of crops in Ukraine in the future, which is due to the considerable demand and crushing capacities, which in Ukraine are 20 million tonnes,” Feofilov said.
The director general of the consulting agency said that the creation and promotion of a national brand of sunflower oil is an effective and proven tool for overcoming the tendency of falling profitability.
“Manufacturers now do not think about creating a national brand, most likely because they are getting enough margin, but the situation may change, moreover, it is already changing. Export in physical terms, in tonnes, is a trend towards growth, and exports in revenue at cost, in dollars – a downward trend. Branding is expensive, we are talking about hundreds of millions of U.S. dollars, but the results will be extremely positive,” he said.