March 31, 2009

Ukraine's oilseed production is expected to decrease by approximately 20 percent in the 2009-2010 marketing year partly due to an expected decrease in sunflower seed area and lower yield, according to a US Department of Agriculture attache report posted Monday (March 30) on the Foreign Agricultural Services Web site.

All major oilseeds are expected to show lower yields due to reduced inputs and lower seed quality. Sunflower oil and meal production is likely to decrease because of lower sunflower seed supply. Spring rapeseed area may increase, but is likely not to offset a drop in winter rapeseed sown area, resulting in a lower rapeseed production and exports in the 2009-2010 marketing year. In contrast to other oilseeds, soybean production is expected to increase based on strong domestic and export demand.

Sunflower seed production increased by 56 percent in the 2008-2009 marketing year due to large harvested area and high yields. Sunflower harvested area increased by 33 percent, while favourable weather conditions, as well as an increase in input application resulted in a 25 percent increase in average sunflower yield. Increased supply, as well as slow export demand for sunflower oil resulted in a significant drop in sunflower seed prices in the 2008-2009 marketing year. Global financial turmoil hit Ukrainian economy hard, and the Ukrainian currency (UAH) rapidly devalued by 35 percent, which additionally pressured local prices when denominated in US dollars. Sunflower seed prices on the domestic market plummeted deeper than prices of other major grains and oilseeds.

In MY 2008-2009, rapeseed and soy production increased by 174 percent and 12 percent, respectively. Strong import demand from EU (mostly from its bio-fuel industry) helped rapeseed prices remain firm compared to other grains and oilseeds.

Domestic soy prices have plunged deeply in the beginning of the 2008-2009 marketing year, but partially recovered after that due to increased demand for soy on both domestic and export markets. Weakened local currency is expected to have a positive impact on the competitive position of Ukrainian oilseeds (rapeseed, soy) for both 2008-2009 and 2009-2010 marketing years. Because of this, farmers view major oilseeds in the current year as crops with good prospects for profit.