Ukraine: market of flaxseed and mustard seed in 2018/19 MY. Forecasts for 2019/20 MY

Source

APK-Inform

242

Key insights

The 2018/19 MY already finished and brought abysmal records for the market of flaxseed and by-products — in terms of harvest, processing and exports. In Ukraine today this crop is not competitive nor in terms of production profitability neither in terms of the import attractiveness.

Moreover, in the new season there is no hopes for flaxseed production acceleration, as the areas under the oilseed of 2019 crop again declined, and the yield is rather low. And even if there will be a rise in production, it would be able only partially compensate the losses from the significant areas decrease.

Speaking of mustard seed, in 2018/19 MY there were no significant changes in the supply and demand balances. According to APK-Inform Agency figures, in the new season the production can increase by 7%, the domestic consumption — up 17%, and the exports — up 25%.

 

Supply and demand balances of alternate oilseeds in Ukraine, `000 tonnes

 

2018/19

2019/20

Changes

18/19 to 17/18

19/20 to 18/19

Flaxseed

Beginning stocks

3,1

5,2

 -26,5%

 67,8%

Planted areas, `000 ha

31,5

17,7

 -33,1%

 -43,8%

Harvested areas, `000 ha

30,7

17,5

 -33,8%

 -43,0%

Yield, c/ha

7,6

10,3

 -22,4%

 35,5%

Production in clean weight

23,0

17,6

 -48,2%

 -23,7%

Total supply

26,4

23,0

 -45,9%

 -13,0%

Consumption:

9,2

8,0

 -60,0%

 -13,0%

including crop processing

7,0

6,0

 -66,2%

 -14,3%

Exports

12,0

10,0

 -47,3%

 -16,7%

General distribution

21,2

18,0

 -53,7%

 -15,1%

Ending stocks

5,2

5,0

 67,8%

 -4,3%

Mustard seed

Beginning stocks

3,5

6,7

 -8,7%

 89,2%

Planted areas, `000 ha

57,2

50,6

 40,5%

 -11,5%

Harvested areas, `000 ha

52,4

48,0

 32,7%

 -8,4%

Yield, c/ha

6,4

7,4

 -19,0%

 16,1%

Production in clean weight

32,5

34,8

 7,5%

 7,0%

Total supply

38,7

43,5

 8,9%

 12,4%

Consumption:

12,0

14,0

 9,1%

 16,7%

including crop processing

3,1

4,5

 -19,0%

 43,3%

Exports

20,0

25,0

 -4,8%

 25,0%

General distribution

32,0

39,0

 

 21,9%

Ending stocks

6,7

4,5

 89,2%

 -33,0%

 

Global trade. Flaxseed and by-products

In 2018/19 MY, the volumes of flaxseed exports were twice lower compared with the previous season as a consequence of the production decline to the smallest level in 10 years. Herewith, starting from the second half of the season the export deliveries accelerated and were even higher than during the same period last season.

The total exports of flaxseed (September-May) totaled 9.5 thsd tonnes, which is 80% from the forecasted. In the last 3 months of the season the exports can total 2.5 thsd tonnes and by the end of the MY the export of flaxseed is forecasted to reach 12 thsd tonnes (-47% to 2017/8 MY, minimal for 5 seasons).

Speaking of the geography of the Ukrainian flaxseed exports, we should note that Vietnam, that was a leading importer of the oilseed in the previous 6 seasons, had ceased purchasing of Ukrainian flaxseed.

Last season, Poland became the leading importer of the oilseed and purchased 1.7 thsd tonnes (-30% year-on-year). To compare: the exports of flaxseed from Russia to Poland in September-May was 10 timed higher.

Also, we should note the decline of the deliveries to Egypt (down 13 times), Bangladesh (-11%), Germany (-43%), Serbia (-14%), Spain (down 3 times), Romania (-42%) and others.

Nevertheless, the exports increased to Bulgaria (+19%), Taiwan and Algeria (up 4 times each), Turkey (+28%), Greece (+54%), the UAE (up 6 times).

The total export to the EU countries totaled 53% of the total export volumes and declined by 25% to 5 thsd tonnes.

In September-May of 2018/19 MY, the exports of flaxseed cake from Ukraine totaled 2.7 thsd tonnes, which is 3.6 times lower compared the previous season. The actual figure totals 90% of the forecasted export volumes in 2018/19 MY, which were lowered from 5 to 3 thsd tonnes. This will be the minimal volumes of the export for the last 9 seasons.

Since the start of the season, the exports of flaxseed oil totaled 1.3 thsd tonnes, which is 4.5 times lower compared with the previous MY. The total shipments by the end of 2018/19 MY are expected at 1.5 thsd tonnes, which is 4 times lower year-on-year, and is going to be the lowest for the last 8 years.

 

Mustard seed

According to APK-Inform Agency estimations, for the last 10 months of 2018/19 MY Ukraine exported 16.8 thsd tonnes of mustard seed, which is 17% lower compared the same period last season. The estimation of the export was lowered from 25 to 20 thsd tonnes as the expectations concerning the shipments acceleration have not materialized.

In August-May, the exports of Ukrainian mustard seed to the EU countries totaled 16 thsd tonnes, which is 96% of the total volumes exported. The export volumes to the EU declined by 19% compared with the previous season.

In particular, the exports declined to Germany (-37%), Poland (-15%), Romania (-21%) and others.

At the same time, the exports increased to Netherlands (+6%), Hungary (up 2.3 times), the Czech Republic (+21%), Finland (+14%), as well as Bangladesh returned to the TOP-10 importers of the Ukrainian oilseed.

In the reporting period, the TOP-7 countries-importers stayed unchanged with slight shifts in the list.

 

Price situation. Market of flaxseed

During March the bid prices of flaxseed broke a record 11`800 UAH/t CPT. In general, for this period of a season the price rise is common. In a short time, the prices returned to the previous figures and stayed rather stable until mid-June. The number of the offers of flaxseed was low thus the trading activity was slow. The traders were ready to purchase the oilseed at the prices totaling 11`500 UAH/t CPT, herewith, they could offer the extra prices of the volume of more than 20 tonnes, and also for the consignments with the high treatment degree (98.5%).

In June, many companies informed about the ceasing of the purchasing activity until the new season because of the absence of the sufficient number of the offers to form the export consignments.

The forwarding contracting activity for the purchase of flaxseed of 2019 crop was low. By the end of July, the prices were declining due to the limited number of the offers. However, taking into account rather small planted areas under flaxseed this year, the prices are expected expected to increase in 2019/20 MY. At the same time, it can stimulate the widening of the areas under the oilseed during the planting campaign in the spring 2020.

 

Market of white and yellow mustard

In March-June, the trading activity on the market of mustard seed was low because of the small stocks of the oilseed, as the main volumes of the crop had been already sold in the first half of the season. The offers to sell the product were rather rare. Some market participants declined the declarative bid prices of white and yellow mustard to 14`500/20`500 UAH/t CPT due to the unattractive price conjuncture on the global market and the slowing of the trading activity.

By the end of July, the prices declined because of the start of the harvesting campaign. The bid prices of the oilseed of 2019 crop totaled 13`000 UAH/t CPT (yellow mustard) and 15`500 UAH/t CPT (white mustard). According to the market participants, the quality parameters of the oilseeds met the standard.

 

Forecasts for 2019/20 MY. Flaxseed

According to the State Statistics Service of Ukraine, the planted areas under flaxseed for 2019 crop declined to the 15 years minimum — 17.7 thsd ha, which is 30% lower year-on-year. Most of the agriproducers were not satisfied by the profitability of the crop, which was the main reason of refusal to produce it and areas decline.

The decrease in the areas was observed in every oblasts, apart from Lugansk where there areas actually increased by 14% y-o-y. The most significant decline (down 2.5 times) was observed in Mykolaiv oblast, which was the largest in terms of areas last year. In general, South-East Ukraine is the main production region of flaxseed.

According to the forecasts of APK-Inform Agency analysts, proving the flaxseed yield to be average for the last 3 seasons (1.03 t/ha) Ukrainian agrarians can harvest nearly 18 thsd tonnes of the oilseed (-24% year-on-year). In this case, the crop will be the lowest for the last 12 years. The dough in June decrease the possibility to receive higher yields. We should note that the next official estimates of the flaxseed and mustard seed production will be published in January 2020.

In terms of severe decline of the supplies the domestic consumption of flaxseed in 2019/20 MY is expected to total 8 thsd tonnes (-13% year-on-year) and the export potential can total 10 thsd tonnes (-17% year-on-year).

 

Mustard seed

The planted areas under mustard seed for the 2019 crop complied with the average figures. According to the State Statistic Service, this year the mustard seed planted areas totaled 50 thsd ha, which is 12% lower compared with last year. In particular, the areas in the largest producing oblasts – Kherson oblast – declined by 19% y-o-y. Moreover, the areas declined in Zaporizhya oblast (-11%), Lugansk (-48%), and Donetsk oblasts (-27%), in other words in South-East region. At the same time, the areas increased in the central region and closer to western region — Zhytomyr oblast (+4%), Khmelnytskyi (+80%) and Vinnytsa oblasts (+77%).

Taking into account that the yield of mustard seed in central and western oblasts is usually higher, and their share in the regional structure also increased, we expect for increasing of the average yield in 2019. So, despite some lowering of the planted areas, the production of the oilseed can increase by 7% — to 35-36 thsd tonnes.

There are no preconditions for the increase of the domestic consumption of mustard seed, so we expect this figure at 14 thsd tonnes in 2019/20 MY. The export potential is 25 thsd tonnes, which is 25% higher year-on-year.

 

 

 

Julia Ivanitskaya, APK-Inform analyst

 

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