Deep processing: how agribusiness creates added value for the Ukrainian economy
17 June 19:08
“Not just to grow, but to create a high value-added product in Ukraine.” This is how the Ministry of Agrarian Policy formulates the tasks for itself and the Ukrainian agricultural sector. The fact that 95% of sunflower is already processed domestically is mentioned as an achievement, while the fact that soybeans and rapeseed are still exported as raw materials is mentioned as a disadvantage.
Komersant interviewed Volodymyr Rossokha, Chief Researcher of the Department of Agricultural Production Economics at the National Research Center “Institute of Agrarian Economics”, Doctor of Economics, about Ukrainian agricultural production and its real and potential added value.
Leaders, drivers and record holders
– To begin with, let’s summarize the current balance. How much high value-added agricultural products are currently produced in Ukraine?
In 2024, the share of highly processed products in Ukraine amounted to 20% of exported agri-food products.
The average cost of a ton of Ukrainian exported agricultural products was USD 315/ton. USD/ton. At the same time, in Poland, this figure was 1560 USD/ton. USD/ton, and in Italy – 2670 USD/ton. USD/ton.
– Which sectors primarily create this added value and which Ukrainian companies provide leadership?
In the domestic agricultural sector, the leaders in processing are the oil and fat and sugar industries.
Ukraine is one of the world leaders in sunflower oil production. At the same time, our processing plants operate at up to 65% capacity utilization.
In the marketing year 2023/24, i.e. from July 2023 to June 2024, Ukraine produced 6.6 mln tons of sunflower oil, of which 6.2 mln tons were exported.
According to the Ministry of Economy of Ukraine, sunflower oil has become the leader in domestic exports of the processing industry. Its main importers are:
- Romania (951 mln USD),
- Turkey (932 million USD),
- China (532 million USD),
- India (337 million US dollars),
- Spain (312 mln USD).
The largest sunflower oil producer in Ukraine with a market share of 27-28% is Kernel Holding, which produces up to 1.6 million tons of oil per year. The company also exports about 8% of the world’s sunflower oil. The top 3 Ukrainian sunflower processors with a market share of almost 10% are Creative Group, which has 9 plants and exports almost 70% of its products, as well as Astarta/Globyno and Krasnohirsk Plant.
– Another export record holder last year was the sugar industry. In 2024, Ukraine exported 746.3 thousand tons worth $419 million, the highest figure in the history of observations since 1997.
Thus, in the 2023/24 marketing year, Ukraine produced about 1.8 million tons of sugar. 77% of sugar exports went to the European Union. So, looking back at last year’s successes, we can say that due to the abolition of quotas, Ukrainian beet sugar has completely captured the EU market.
The top 3 sugar producers at the end of the season are:
- Radekhivskyi Sugar, which accounted for 31% of the national production.
- Astarta Agricultural Holding – 21% of the market. In 2024, the company produced about 380 thousand tons of sugar.
- UkrprominvestAgro – 14% of production.
Potential growth points
– When talking about processing potential, Ukrainian officials primarily mention rapeseed and soybeans. How is it with added value?
Rapeseed, which used to be primarily export-oriented as a raw material, is increasingly being processed domestically, which increases the added value of the industry.
In the 2023/24 marketing year, Ukraine produced 430 thousand tons of rapeseed oil, which was a historical record. At the same time, exports of this type of agricultural product reached almost 424 thsd tonnes, which is four times higher than in the previous marketing year.
Ukrainian rapeseed oil is already widely distributed in the markets of the EU member states, China, Malaysia, Singapore and other countries. In 2023, Ukraine exported rapeseed oil worth USD 355 mln. USD.
The top 3 leading companies producing more than 90% of all rapeseed oil in Ukraine include:
- Allseeds Black Sea with a market share of about 33-40%. The company has an oil and fat plant in Yuzhne (Odesa region) with a capacity of about 1,800 tons of rapeseed per day.
- Oliyar PE (TM Mayola, Sonyashna, Rodynna), located in Lviv region, with a market share of 25-27%. Production capacity is about 1,000 tons per day.
- Vinnytsia Oil and Fat Processing Plant (ViOil) – 16-20% share. The company’s rapeseed oil production capacity is about 600 tons per day.
Soybean oil is a dynamic and promising segment of processing in Ukraine, with production of about 320 thousand tons. In the first half of the 2024/25 season, soybean oil exports amounted to 245.4 thsd tonnes, up 52% year-on-year.
It is also worth mentioning that deeply processed corn products are in high demand on the domestic and foreign markets. These include starch, glucose-fructose syrups, glucose, maltodextrins, dry syrups, and dextrose.
Current starch production volumes are 90-110 thousand tons per year.
The largest producer is Interstarch Ukraine, which controls about 80% of the corn starch and glucose-fructose syrup market in Ukraine.
In terms of starch exports, Ukraine is gaining a solid position in Europe and consistently supplies high quality products. It has an expanded list of importers in Europe and Asia.
Ukrainian ketchups, pastes and canned food are also in high demand in Europe and the Middle East.
The sauces and condiments segment generates over USD 25 million in annual sales. The sauces and condiments segment generates over USD 25 million in sales and ketchup – USD 6 million. USD. Canned vegetables, including pastes, generate export volumes of tens of thousands of tons and provide significant foreign exchange earnings.
The top 3 producers of canned vegetables in Ukraine include:
- Nizhin/Greenville cannery, founded in 1927, through the Nizhin/Greenville brand. It is part of the Fozzy Group holding and has a market share of about 40%.
- Torchin (Nestlé) – ketchup, mayonnaise, marinades, mustard – 25% of mayonnaise, 70% of ketchup in Ukraine.
- Chumak JSC – ketchup, pasta, sauces, mayonnaise, canned food – almost 20% of exports to the EU and other regions.
– Soybeans and rapeseed, unlike sunflower, for example, are still quite often exported as raw materials. Could you please explain why it is possible to process sunflower successfully and in large volumes, while it is more difficult to process soybeans and rapeseed?
Sunflower crushing has been developing since the 1990s: more than 100 plants have been built, many of them large modern mills. It is highly profitable. The oil yield, which is almost 40% of the weight of the kernels, allows for a quick return on investment.
Other advantages include strong domestic demand, stable exports, low risks, and supportive legislation, including a ban on sunflower seed exports and the creation of conditions for the export of packaged oil.
The complexity of soybean and rapeseed processing is due to the technological peculiarity of soybeans and the instability of rapeseed quality and storage.
Soybean processing, for example, requires special pressing or extraction equipment, enzyme control (toxicity of raw soybeans), urease deactivation, and soybean meal is used only with high-level technologies. Most soybean processors are small or outdated enterprises. Therefore, it is often easier to export raw materials than to process them.
Rapeseed has a high acidity and moisture content, which makes it difficult to store. Rapeseed oil has high requirements for purification – we are talking about bitterness, odor, and glucosinolates. Exporting the seeds is sometimes more cost-effective than investing in cleaning and packaging.
Also, unlike sunflower, soybeans and rapeseed are not under economic pressure to process. Soybean and rapeseed had no restrictions on seed exports. They have a shallower domestic market. While sunflower oil is a daily commodity for Ukrainian consumers, soybean and rapeseed oils are mainly exported, so less investment is made in on-site processing, branding, bottling, and packaging.
Thus, sunflower is exceptionally profitable for processing, as it is a mass crop that is technically easy to process and has a stable demand. Soybeans and rapeseed are technically more complex, riskier crops with lower local added value without investments in deep processing.
Price matters, but it is not the only thing
– It is profitable to produce deeply processed and high value-added products, but to understand this, let’s compare the price parameters of raw and processed products.
Obviously, it is much more profitable to sell processed products than raw materials.
Sugar industry: raw materials (beet pulp, molasses) – USD 50-150 per ton. USD/ton; sugar (final products) – 600-800 USD/ton, value added. The added value is 4-6 times higher than on raw materials.
Oil and fat industry: sunflower, FOB price of raw materials (seeds) – 350-400 USD/t;oil(for final products) – 350-400 USD/t. USD/t; oil (bulk) – 900-1000 USD/t. USD/t, i.e. 2.5 times more profitable; packaged oil – 1100-1300 USD/t, which adds 20 percent. USD/t, which adds 20-30% of added value.
Dairyindustry: raw milk – 309 USD/ton. USD/ton; cheese, milk powder, condensed milk – 900-1300 USD/ton. USD/ton, i.e. 3-4 times more profitable than simply exporting raw milk.
Grain industry: corn – 180-220 USD/ton. USD/ton; corn starch – 600-700 USD/ton. USD/ton, glucose, dextrose – 850-950 USD/ton. USD/ton, i.e. more than 4 times more.
Poultry: chickens, live weight – 1.2 USD/kg. USD/kg; chilled fillets – 3.5 USD/kg, ready-made semi-finished products – 3.5 USD/kg. USD/kg, ready-made semi-finished products (schnitzels, cutlets) – 4-6 USD/kg. USD/kg. For example, MHP generates more than 40% of its revenue from ready-to-eat meals (including pizza and snacks).
Deep processing also allows not only to earn more per ton, but also to stabilize income, as prices for finished products fluctuate less than for raw materials.
And one more fact to better understand the benefits: Ukraine exports 80% of its oil, but retains only about 5% of the margin in the country because it does not engage in packaging, branding, and export packaging. But this is where the added value lies!
– What would you advise Ukrainian entrepreneurs to do? What special products can they bet on?
In Ukraine, it makes sense to produce corn starch, as it is a basic product that can be used to make more than 3,000 derivatives. It is most widely used in the food industry in the process of food production, in the paper and pulp industry, as well as in pharmaceuticals, cosmetics and textiles.
Another product that can find a foreign buyer is polylactic acid, which is made from starchy milk. This production chain can also produce gluten feed and corn oil, which is used in the chemical industry in Europe, the United Arab Emirates, and Indonesia.
Let me explain. Polylactic acid (PLA) is the basis for biodegradable plastics designed to replace traditional packaging plastic. Ukrainian producers have the opportunity to compete with foreign producers because their products are more expensive. So, if you offer a lower price, you can potentially find markets.
In the coming years, yeast extract will grow in popularity on the global market. While bakery and brewer’s yeast is well-known and stable in its consumption, yeast extract is an independent product that contains many components, including proteins, carbohydrates, vitamins B1, B2, B3, amino acids, and nitrogen.
Risks, barriers, and hopes
– Let’s try to find the answer to the question: what prevents the creation of a high value-added product in Ukraine? Of course, the first deterrent is Russia’s armed aggression against Ukraine.
Yes, of course, the fighting on Ukrainian territory and the constant threat of enemy attacks have a constant negative impact. And it’s not just about damage to infrastructure, logistics routes, and agricultural enterprises. It also creates risks for long-term project planning and implementation.
In fact, the war largely determines other constraints.
First, the development of the processing industry is hampered by infrastructure constraints. They are related to logistics issues, including the instability of the railroad, destruction and overloading of ports (especially due to the war); lack of modern warehouses, refrigerators, and terminals for storing products with a short shelf life; power outages; and high energy prices.
Secondly, there are financial barriers related to expensive loans and limited access to finance, especially for small and medium-sized producers. To this can be added the unwillingness of investors to work in a country where the war is ongoing, as well as the low level of insurance for agricultural production.
Thirdly, unequal access to markets due to trade barriers, including quotas, duties, EU restrictions, non-compliance of certification with international market requirements, and low level of marketing support for systematic brand promotion abroad, hinders further development of processing.
Fourth, the development of agricultural processing is hampered by personnel and technological constraints caused by a lack of qualified personnel in food engineering, logistics, and agro-processing; obsolete equipment at most plants; and the absence of a state program to modernize equipment and technologies in agricultural processing.
But with political will, government support and investment, a gradual transition to a high value-added economy is possible.
I would call the prospects for the production and trade of processed agricultural products in Ukraine moderately optimistic.
And the existing global demand for finished products should make producers more optimistic.
Countries in the EU, the Middle East, and Africa are increasingly in need of ready-to-eat food, feed, and food ingredients, not raw materials. Packaged oil, canned food, meals, sauces, sugar, meat, glucose, maltodextrin are in constant demand. And despite the hostilities in Ukraine, exports are growing.
As a reminder, in 2024, processed products accounted for 20% of Ukraine’s agricultural exports. In 2025, the government plans to increase its volume to 25-30%. The benchmark is set. We need to move forward. Step by step.
Author – Sergey Vasilevich
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