How Did the War in Ukraine Affect the Sunflower Oil Market in the Country?

Tridge and State Statistics Service of Ukraine data show that the production of sunflower oil in Ukraine has been rising gradually over the past 7 years (2015-2021), which was about 90% production increase in the indicated period of time. According to industry projections, Ukraine produced approximately 7.1 million t of sunflower oil in 2021, a 24.1% YoY increase compared with the previous year. Ukrainian sunflower oil producers have made investments in cutting-edge technology to boost the caliber and effectiveness of their manufacturing procedures. This has made it possible for them to create refined sunflower oil of a high quality that satisfies worldwide requirements.

Figure 1: Ukraine Sunflower Oil Production 2015-2021

Source: Tridge and State Statistics Service of Ukraine

Sunflower oil is one of the most widely produced and exported goods in the world, and the Ukrainian economy heavily depends on this sector. According to the State Statistics Service of Ukraine, 6,509,700 hectares, or 23% of all agricultural holdings in Ukraine, were dedicated to sunflower farming in 2021. Tridge’s data (2019) provides visualization of the global sunflower production by country. As can be seen in Figure 2, Ukraine with its 5.84M metric ton of production capacity became the biggest producer in the world accounting for 32.3% of the total production. However, later when the war started Ukraine lost a significant amount (estimated at -40%) of sunflower oil production capacity.

Figure 2: Global Sunflower Production by Country and Their Share

Source: Tridge

According to data from the State Statistics Service of Ukraine, here are the ratios between sunflower oil production and domestic consumption in Ukraine. As can be seen in Figure 3, Ukraine’s local consumption of sunflower oil is less than 10% over the past years, which means that more than 90% of all produced sunflower oil is export-oriented, as the country is one of the world's largest exporters of sunflower oil.

Regarding the export of sunflower oil, Ukraine exports nearly half of the global sunflower oil exports. Tridge’s export data shows that sunflower oil export of Ukraine in 2021 was estimated at 5.6 Billion USD. Major importers of Ukrainian sunflower oil are India, EU countries and China.

Figure 4: Top 10 Importers of Sunflower Oil from Ukraine with Import Value in USD

Source: Tridge

In the Global Trade of Sunflower Oil, Ukraine dominates the market with wider geographical coverage in Europe, Asia and Africa accounting for 53.20% of the global market share in export.

Figure 5: Top Export Flows of Sunflower Oil in the World

Source: Tridge

Ukraine's sunflower oil industry has been significantly impacted by the war which started on February 24, 2022. One of the hardest hit areas of the conflict was the eastern Ukrainian province of Donbas, which served as a significant agricultural powerhouse. The war hindered agricultural activity, which led to a decrease in sunflower oil production in this region, which was responsible for a sizable amount of Ukraine's sunflower oil production. According to the data of the U.S. Department of Agriculture (USDA), in the marketing year 2022/23 Ukraine is projected to become the world’s third-largest sunflower seed producer after Russia and the European Union, as production is expected to be down sharply reflecting the challenges from the war. USDA data shows that total sunflower oil production in Ukraine was recorded around 4.1M metric tons. Estimates of Ukrainian sunflower production for 2022 are still hazy because of the ongoing conflict, but they're likely to be 43% lower than in 2021.

The War in Europe's Eastern gate made sunflower seed growers in Europe produce more harvest which caused decreased demand for Ukrainian sunflower oil because of their own domestic production. As a result, starting from late July 2022 wholesale price for Ukraine's refined sunflower oil fell to 1.44 USD/kg. Recent price data of Tridge shows that the sunflower oil prices remain lower amid demand pessimism in the global market, even though weekly updates of Tridge on March 30, 2023 stated that sunflower prices in Ukraine are recovering after falling to the lowest level of the season.

Figure 6: Ukraine Refined Sunflower Oil Wholesale Price Trends

Source: Tridge

Ukraine's exports of sunflower oil also were impacted by the war. Transporting sunflower oil from production hubs to export terminals was challenging due to the disruption of transportation networks and infrastructure caused major ports blockade by Russia. Delays and higher shipping costs resulted from this, which in turn reduced Ukrainian sunflower oil's ability to compete on the international market. The battle also had a detrimental effect on the nation's economic stability and investor trust, which prevented investment in the sector and reduced production capacity. According to the data of USDA, in the marketing year 2022/23, Ukraine’s share of global exports is projected to decline to 40 percent. Many industry experts also confirm the possible visible decline in export of sunflower oil from Ukraine in upcoming years.