High raw material prices are threatening sunflower oil production in Ukraine
27 May 19:34
ANALYSIS
Ukraine is seeing high demand for sunflower seeds, yet an increasing number of plants are halting processing. Rising seed prices have reduced profitability, prompting producers to suspend operations en masse as they await the start of the rapeseed season, writes
“At this price for sunflower seeds, there is no processing margin,” says Sergey Repetsky, a partner at Sunstone Brokers.
According to his estimates, processing a ton of these seeds could result in a loss of $25.
It is cheaper for plants to shut down than to operate with such raw materials, as personnel wages and production maintenance costs result in “only” a $10 loss per unprocessed ton of seeds.
Because of this, processing companies are looking at other crops that can give factories what Ukraine’s main oilseed crop cannot: the ability to operate profitably.
Leonid Kozachenko, president of the Ukrainian Agrarian Confederation, stated in a comment
“The only ones who can survive right now are a few companies that have their own raw materials,” Kozachenko noted.
As the expert emphasized, some companies source more than 30% of their sunflower seeds themselves, while others source 15–20%, and this is precisely what allows them to remain in the market. In contrast, companies that are forced to purchase raw materials at market prices are effectively operating at a loss.
According to Kozachenko, a ton of sunflower seeds currently costs between 31,000 and 35,000 hryvnias, depending on the region. At the same time, the price of sunflower oil at ports is about $1,350 per ton.
He emphasized that if you add it all up, it turns out to be unprofitable for our companies.
Kozachenko noted that the industry has not faced a crisis like this in at least the last ten years. Due to high raw material prices and unfavorable export conditions, Ukrainian processors are on the brink of survival, which could affect both the domestic market and the country’s export potential.
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