Prices for sunflower oil in Ukraine have grown significantly over the past year. Over the year – from March 2020 to March 2021 – sunflower oil increased in price by 48.5%. And this is a record of the rise in price among all food products.
Experts explain that the sharp rise in oil prices is caused by global trends. But ordinary buyers are not impressed by these arguments. For them, the main question is why in Ukraine, which is the world’s largest producer of sunflower oil, this product is more expensive than in Europe.
As a result, the government did not even try to understand the mechanism of pricing for sunflower oil, but decided to simply restrict exports. Rumors about the introduction of oil export quotas appeared in mid-April. Several draft resolutions of the Cabinet of Ministers “walked” around the market. One of them involved quotas for the export of sunflower seeds and sunflower oil. Moreover, for both groups the quota was zero tons. That is, in fact, a complete halt in supplies to foreign markets of both seeds and finished products – sunflower oil.
At the same time, a real panic began on the oilseed market. The specialized associations unanimously stated that the export blocking would hit hard on the industry and on the country’s economy as a whole. It was expected that the Cabinet of Ministers will put the export on a stop as early as Friday, April 16. On this wave, traders rushed to buy sunflower oil in order to take it out of the country as much as possible. Prices skyrocketed – by $ 50 per tonne during the day.
On Monday, April 19, the Ukroliyaprom association signed a memorandum with the Ministry of Economy to restrict exports, but not as categorical as previously planned.
Until September, exporters can supply about 1.9 million tons more to foreign markets. This is essentially the remainder of the MY 2019-2020 harvest. Thus, all exports for the current marketing year will amount to 5.38 million tons, which is 1.52 million less than last season, but clearly not zero.
The memorandum also refers to the parties’ agreement on export volumes based on the balance of supply and demand, as well as monitoring in the domestic and foreign markets of sunflower oil and, if necessary, initiating measures for state regulation (we are talking about monitoring prices in stores).
Thus, the government hopes for price cuts by producers in an attempt to avoid new sanctions. At the same time, it is obvious that prices on the world market will not go down, and it is possible to achieve a reduction in prices on the domestic market only due to the margin of the producers themselves selling on the domestic market.
Agroliga is an absolutely export-oriented company, 95% of which products, in principle, do not go to the domestic market.
World quotes for oilseeds may grow even more, and we will not sell oil at a loss. Moreover, the very format of the memorandum does not provide for the obligation of its implementation and sanctions for violators of the agreements.
So, at the end, everything may end up with the fact that for a while the prices for oil in retail will slightly drop, the Cabinet of Ministers will report that it has made it cheaper, and then everyone will return to the current formula – the world price plus taxes and margins of manufacturers and retailers. It makes sense to restrict exports if their volumes are so large that it affects the supply in the domestic market, provokes a deficit and increases prices. But this is not our case, since the domestic consumption of oil in Ukraine is insignificant, and the available reserves are more than sufficient.
With kind regards, team of GC “Agroliga”.