MARKET DEVELOPMENT
Russia Prefers Cheap Vegetable Oils. Quality is Not Top-Priority
Russia Prefers Cheap Vegetable Oils. Quality is Not Top-Priority
23/09/2015 (UkrAgroConsult) - Due to the fact that Russia is one of the world leading producers of sunflower oil, and is actively expanding its own production of soybean and rapeseed, exports of oilseed complex goods from Ukraine to Russia have been always low.
Vegetable oils have been supplied in small volume, mostly palm oil derived products, including special fats. Russian confectionery enterprises actively bought milk fat replacers, cocoa butter substitutes and other raw materials from Ukraine, but at the end of 2014 (September-December) the purchases of these products by Russian companies declined sharply. There are several reasons. Firstly, Russian Federation increased processing of vegetable oils in their own plants, and secondly, market operators prefer to minimize the risk under conditions of political instability (when and what goods will be next banned?).
Consequently, in the first half of 2015 Russia imported 77.5% less vegetable and animal fats from Ukraine than in January-June 2014.
Oil crops were not actively imported to Russia: no supplies of rapeseed, while sunseed exports did not exceed 5 KMT per season. Only soybean exports were quite substantial – growth of the livestock number became a driver for construction of soybean processing plants, and the own crop of Russian Federation was not enough for capacity utilization. In the 2013/14 season, when flood in the Far East have provoked 25% losses of soybean crop in Russia, the purchases of this oil crop increased to 140 KMT. However, after the imposed ban on imports of oilseeds and vegetable meals from Ukraine, the purchases of soybean by Russia came to nothing. After that, Russian importers raised the imports of cheaper South American soybean, and the largest processer of soybean in Russia – Group of companies "Sodrugestvo" acquired assets in Paraguay. Relatively low prices for South American soybeans in this case became the most essential factor in terms of devaluation of Russian ruble.
Vegetable oils have been supplied in small volume, mostly palm oil derived products, including special fats. Russian confectionery enterprises actively bought milk fat replacers, cocoa butter substitutes and other raw materials from Ukraine, but at the end of 2014 (September-December) the purchases of these products by Russian companies declined sharply. There are several reasons. Firstly, Russian Federation increased processing of vegetable oils in their own plants, and secondly, market operators prefer to minimize the risk under conditions of political instability (when and what goods will be next banned?).
Consequently, in the first half of 2015 Russia imported 77.5% less vegetable and animal fats from Ukraine than in January-June 2014.
Oil crops were not actively imported to Russia: no supplies of rapeseed, while sunseed exports did not exceed 5 KMT per season. Only soybean exports were quite substantial – growth of the livestock number became a driver for construction of soybean processing plants, and the own crop of Russian Federation was not enough for capacity utilization. In the 2013/14 season, when flood in the Far East have provoked 25% losses of soybean crop in Russia, the purchases of this oil crop increased to 140 KMT. However, after the imposed ban on imports of oilseeds and vegetable meals from Ukraine, the purchases of soybean by Russia came to nothing. After that, Russian importers raised the imports of cheaper South American soybean, and the largest processer of soybean in Russia – Group of companies "Sodrugestvo" acquired assets in Paraguay. Relatively low prices for South American soybeans in this case became the most essential factor in terms of devaluation of Russian ruble.