February 9, 2004

 

 

US Soybean Meal Imports To Ukraine Seen Falling

 

A record soybean crop in the Ukraine will reduce the demand for imported soybean meal and the U.S. will continue to lose market share in this shrinking pie due to price competition with soybean meal suppliers from Brazil, Argentina and the European Union, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site.

 

Ukraine produced record sunflowerseed and soybean crops in 2003. This jump in production is reflected in record domestic oilseed crush for MY 2003/2004, expected to reach an estimated 92% of existing oilseed crushing capacity, the press release said. The higher soybean and sunseed production will fully offset the sharp decline in rapeseed output. The existing 17% sunflowerseed export duty and problems with value-added tax (VAT) refunds to food and agricultural product exporters have restricted exports of Ukrainian oilseeds and products.

 

Nonetheless, the record production and crush levels should allow for increased exports of sunflowerseed during the remainder of MY 2003/2004. Sunflower oil and meal exports are expected to hit record highs. Soybean meal imports are projected to decrease in MY 2003/2004 following the 2003 bumper crop. U.S. soybean meal will likely continue to lose market share to lower- priced supplies from Brazil, Argentina and the European Union.

 

Production

 

Oilseeds

 

Sunflower Seed: According to the preliminary final report of the State Statistics Committee of Ukraine (SSCU) released on Dec. 26, 2003, sunflowerseed production in Ukraine reached its highest record level ever as a result of a significant increase in area planted and despite lower yields in 2003 as compared with the previous year.

 

Ukrainian farmers significantly increased the area under sunflowerseed in 2003. More land became available for sunflowerseed planting as areas previously planted to winter wheat suffered from an unprecedented 66% winterkill in 2002-2003. Nearly five million hectares became available for resowing in spring 2003. Post increased the 2003 estimates for sunflowerseed area planted and harvested to reflect Ukraine's preliminary finals.

 

Dry weather during the May-June 2003 sunflowerseed planting and germination caused uneven development of the stand. Precipitation in July- August improved crop conditions; however, kernel development was nearly completed by that time in all major producing areas. The difference between the final weight of the crop after cleaning and drying and the "bunker" weight (usually reported in harvest progress reports) increased from 7% in 2002 to 9% in 2003.

 

This was largely due to the variation in ripeness of the plants at the time of harvest, the press release said. Consequently, Post decreased the previous estimate of sunflowerseed production for 2003.

 

Rapeseed: Rapeseed has lost its position as Ukraine's number two oilseed crop to soybeans for the second year in a row. The Government of Ukraine (GOU) estimates that only 6,000 hectares, or 3% of winter rapeseed area planted in Fall 2002, survived the winter. Post increased the estimate for area planted in 2003 to reflect the 65,000 hectares sown with spring rapeseed in 2003 and to account for the winter damage. Post suggests decreasing the estimate for rapeseed production in 2003 based on expectations of lower harvested area. There is no official information available yet on the 2003 rapeseed harvest.

 

Soybeans: The area planted with soybeans in 2003 exceeded by almost 95% the previous year's record. In 2003, Ukrainian farmers were attracted by high soybean profitability and growing domestic demand that coincided with the need to resow areas affected by winterkill.

 

The new estimate for area planted with soybeans in 2003 is based on SSCU data as there is still no information available on production. The official estimate of the area harvested in 2003 was reduced because some fields remained unharvested by mid December 2003. Soybean yields, however, were reported higher as compared with 2002.

 

According to final GOU statistics, soybean production in 2002 was higher than previous estimates because of higher yields and despite lower harvested area.

 

Meals and Oils

 

The record sunflowerseed and soybean production in 2003 will ensure the highest ever output of meal and oil. Ukrainian crushing facilities will operate at nearly full capacity during MY 2003/2004. The Ukrainian Oilseed Processors Association Ukroliya has estimated that large-scale processing plants can crush approximately 3 million metric tons of sunflowerseed while small and on-farm crushing facilities are capable of crushing 500,000 MT per year.

 

Sunflower oil recovery rate in MY 2003/2004 will be lower as compared with the two previous marketing years. According to Ukroliya data, the average oil content of sunflowerseed processed in September 2003 by large-scale crushers was 40% or 5-6% below the oil content in seeds processed in September 2002. Based on that data, the average sunflower oil recovery rate was increased in MY 2002/2003 and decreased in MY 2003/2004.

 

Large-scale crushers produced an estimated 328,000 MT of oil in September- November 2003 as compared with 324,000 MT produced during the same period in 2002. MY 2003/2004 production estimates for sunflower, soybean and rapeseed meal and oil were updated to reflect the actual quantities of oilseed available to processors allowing for the expected volume of oilseed trade.

 

Consumption

 

Meals

 

Sunflower and soybean meal consumption in MY 2003/2004 is expected to increase over the revised MY 2002/2003 levels due to increased demand for protein meals. While it is unlikely that Ukraine's domestic livestock industry will reverse the current downward trend in 2004, domestic poultry producers do indeed intend to increase production, the press release said. This will create additional demand for soybean meal and, to a lesser extent, sunflower meal. Rapeseed meal utilization will decline further as a result of lower production and crush in 2003.

 

MY 2001/2002 and MY 2002/2003 sunflower meal utilization estimates were revised downward to reflect higher exports in both marketing years. Soybean meal consumption in MY 2002/2003 was also lower than had been anticipated earlier due to lower crush and imports.

 

Oils

 

Consumption of sunflower oil in MY 2003/2004 will likely be significantly lower than the current official USDA estimate despite expected record production. The main reason is higher than anticipated exports. This will decrease the quantity available for domestic human consumption. Post also decreased significantly the estimate for sunflower oil consumption in MY 2002/2003 due to exceedingly high exports as reported in the official GOU statistics.

 

The new estimate was derived from available data on sunflower oil production and final export statistics for MY 2002/2003. A sharp drop in sunflower oil consumption in MY 2002/2003 could be explained by higher domestic prices. According to available data, the average price of sunflower oil (EXW producer) rose from $590/MT in March 2003 to $756/MT in July 2003 - a jump of 28%.

 

Trade

 

Trade estimates for all oilseeds and products for calendar years 2001-2002 and MY 2001/2002-MY 2002/2003, including shipment to and from the United States and the European Union, were adjusted to reflect GOU statistics.

 

Oilseeds

 

Sunflowerseed exports this marketing year will continue due to strong export demand. This is despite the existing 17% export duty and problems with VAT refunds to exporters.

 

Considering the high cost of credit, insufficient on-farm storage, high storage losses for sunflowerseed and Ukraine's nearly utilized crushing capacity in MY 2003/2004, the country should see increased sunflowerseed exports this year as compared with MY 2002/2003.

 

Post slightly lowered the current year's sunseed export estimate due to lower production in 2003. Ukraine's exports of sunflower oil in September- December 2003 totaled 398,000 MT compared with 40,000 MT exported during the same period in 2002. France, Turkey, Pakistan and Spain have been the major export destinations this marketing year.

 

Rapeseed exports are anticipated to increase this year over the revised MY 2002/2003 level in spite of the disastrous 2003 harvest. Shipments already reached 22,000 MT in July-October 2003 with Hungary being the major destination.

 

The soybean export estimate for MY 2003/2004 has also been increased, reflecting shipments already contracted for Italy and FSU countries. Soybean imports into Ukraine in MY 2003/2004 will continue to be limited to seeds for sowing due to the high risks involved in importing soybeans as opposed to importing soybean meal. The major problems related to soybean imports include the high cost of financing bulk imports and the lack of official regulations regarding the utilization of products of biotechnology.

 

Meal

 

Ukraine exported 124,000 MT of sunflower meal in September-October 2003, or 8% more than during the same period in 2002. As a result, Post increased the MY 2003/2004 export estimate. Latvia, Poland, Belarus, Italy and Spain have been the major buyers this marketing year.

 

Soybean meal imports in MY 2003/2004 will likely decline for the second year in a row due to increased domestic production and crush. U.S. soybean meal has been losing the Ukrainian market as a result of price competition with shipments from Brazil, Argentina and the European Union. The average CIF price of U.S. soybean meal imported into Ukraine in September 2002-August 2003 was $274 per ton as compared with $243 from Brazil, $257 from The Netherlands and $248 from Argentina.

 

Oil

 

Sunflower oil exports will also increase due to significant export demand. Exports of sunflower oil in September-December 2003 totaled 398,000 MT compared with 288,000 MT exported during the same period last year. Russia, Italy, The Netherlands, Algeria and Turkey have been the major buyers of Ukrainian sunflower oil this marketing year.

 

Policy

 

The GOU will likely maintain the 17% export duty on sunflowerseed in MY 2003/2004. The Ukrainian Oilseed Processors Association has already announced that it will lobby to have the duty increased to 20% in order to more effectively limit exports. The Law of Ukraine "On the State Budget for CY 2004" became effective on Jan. 1, 2004.

 

This new law, which rescinded VAT refunds to exporters of food and agricultural products, would have the effect of severely limiting exports of oilseeds and products. Following recent heated debate, the Cabinet of Ministers of Ukraine has announced that the GOU will soon remove this provision and resume VAT refunds to food and agricultural exporters. Once VAT refunds are officially reinstated, exports of oilseeds and products can be expected to continue uninterrupted for the remainder of MY 2003/2004.