Ukraine’s future as a global leader in sunflower oil looks uncertain
YALTA (Reuters) – Ukraine is likely to dominate the world’s sunflower oil market this season as sales from rival Russia and Argentina fall, but the longer-term future looks bleak, the country’s sunoil producers’ association said.
Ukraine will probably export 2.1 million tons of sunoil in the 2009-10 season after refining 6 million tons of sunseed to produce 2.55 million tons of sunoil, the association’s chief, Stepan Kapshuk, told Reuters in an interview on Dec. 4.
“This season Ukraine will be the only country which has a significant volume of sunflower seed for crushing. Together with last year’s stocks we will have about 7.0 million tons for 2009/10 season,” Kapshuk said.
In the last season, refineries processed 5.8 million tons of sunseed and sunoil output totaled 2.503 million. Exports totaled 2.1 million tons again.
Ukrainian sunseed refineries – over 30 large ones and almost 1,000 small – have the capacity to process about 8.5 million tons of sunseed per year.
Kapshuk said Ukraine was likely to cut sunseed exports to 570,000 tons this season due to a rise in local prices on high domestic demand and a global sunseed shortage. Ukraine exported around 767,000 tons of sunseed in the last season.
“Taking into account high local prices, our sunseed exports will be smaller than a season before and the decrease will help producers to raise volumes of local crushing,” he said.
Beginning of collapse
Ukraine’s future as a global leader in sunoil looks uncertain however.
On the one hand, stable demand and profitability of sunoil production has led to refineries being built. Kapshuk said Ukraine could have a 14 million ton crushing capacity by 2015 after $1 billion had been spent on the sector in recent years.
“Most of sunseed exporters now have their own sunoil refineries,” he said.
But the producers may yet find themselves in dire straits if Ukraine scraps export duties on sunseeds, currently at 13 percent, as demanded by the European Union as part of its Free Trade Agreement.
Ukraine has already agreed to cut duties to 10 percent under the conditions of it joining the World Trade Organization. The duties were imposed to keep sunseed in Ukraine and boost the local producing industry.
“We thought our obligation to reduce the duty to 10 percent might resolve the problem, but now EU demands to abolish the duty,” Kapshuk said.
He said European countries had crushing capacities of more than 30 million tons per year, yet the entire EU harvest was lower than Ukraine’s.
“European plants use their capacities by 20-30 percent. Why import Ukrainian sunoil if they can import sunseed?” he said. “For Ukraine it will mean the beginning of collapse.”
