06/10/2011 (Agrimoney.com) - A knock-on impact of export duty plans, besides bumper crops, are behind the former Soviet Union's depressing effect on world vegetable oil prices, SovEcon said, as Ukraine prepared to discuss extending the levies.

Oil World's warning on Tuesday that record Russian and Ukrainian sunflower seed harvests would weigh on oilseeds markets, and send Rotterdam palm oil lower to $920 a tonne, represents only part of the story, SovEcon said.

Markets have long been pricing in bumper former Soviet Union production of sunflowers, and therefore of sunflower oil - although the Russian Grains Union earlier this week lifted the bar on estimates for the Russian harvest of the oilseed to 9m tonnes.

A recent drop in values from $1,200 a tonne to $1,050-1,080 a tonne was caused primarily by a selling frenzy by merchants eager to beat proposals to extend, from January, to oilseeds the grain export levies already blamed for slashing wheat shipments.

"Ukrainian companies are selling sunflower seed oil quite aggressively to ship as much as possible before 2012," Andrey Sizov, managing director of SovEcon, the Moscow-based consultancy, told Agrimoney.com.

Farmers protest
The comments came as Ukrainian ministers prepared to discuss the levy extension, which could see sunflower oil shipments taxed at 10% of their value, down to a minimum of $84 a tonne.

However, there are some expectations that that the levy may be imposed at a lower level, given the opposition to the move from Ukraine's agriculture ministry and from farmers, who on Tuesday held a protest rally outside parliament buildings in Kiev.

Mykola Azarov, the Ukraine prime minister, has said that the government was "was ready to seek compromise", but within the context of supporting grain stocks, the need for which has been boosted by a poor sowing season for winter grains.

"The dry autumn makes us consider creating higher reserves than we had planned before," Mr Azarov said.

Industry association Ukroliyaprom, while warning that export taxes at 10% would lead to the loss of 30,000 jobs, has also opened the door to compromise.

Hit to grain exports
Separately, Mykola Prysyazhnyuk, the Ukrainian farm minister, on Wednesday warned that the grain export levies could cost the country half its grain shipments in 2011-12.

"We need to export 25m tonnes but if export duties remain in place, we will export about 13m tonnes, maybe a little bit more," he told Reuters.