Ukraine and Russia: Record-breaking season has begun

UkrAgroConsult experts note that season of 2012/13 ended with a slump in Ukrainian and Russian sunoil outputs to multi-year lows in view of negative crushing margin. However, once the first parcels of cheap new-crop sunseed arrived in the market, crushing resumed and more than offset the decline. A record pace of sunseed crushing was seen in the Black Sea region during the first two months of MY 2013/14. In our opinion, this is not the limit. The market is set to more than once see fresh production and export highs in the new season.

Large and medium-sized crushers of Ukraine produced 395 KMT of sunoil in October. Taking into account small oil mills, overall output exceeded 400 KMT. This is 100 KMT more than in September and 40 KMT more than in October 2012.

Ukraine produced 689 KMT of sunoil in the two months of the season, i.e. 10% more than at the same time last year. This hike in crushing is no surprise: on the one hand, growers got a bumper sunseed crop (at least 10.3 MMT according to UkrAgroConsult estimates); on the other hand, crushing capacities continue expanding from season to season. Additionally, an important driver for crushers was price conditions of the market.

In the previous season, sunseed price varied within USD 550-650/MT and then collapsed by almost 25% in late August and early September. At the same time, price trends in the sunoil export market developed in a somewhat different way: sunoil price began rising faster and stronger than sunseed price and crusher margin consequently increased.

Russian crushers enjoy still more favorable prices now. Sunseed price fell throughout the first two months of the season, even though concerns arose over slow harvest, while FOB sunoil price went up.

In view of the above, sunseed crushers are very active. So, a nearly-record 371 KMT of crude sunoil was produced in Russia in October (373 KMT in December 2011). Production totaled 617 KMT in the first two months of 2013/14, or up 8% year-on-year.

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