Ukraine Limits Sunflower Oil Exports to Combat Food Inflation

Ukraine announced a limit on sunflower oil exports for the current 2020/21 marketing year, as rising prices on sunflower oil, and competing vegetable oils, spurred the government to restrict exports in an effort to control domestic prices. 

Ukraine is the world's largest producer of sunflower seed and sunflower oil. But its 2020/21 sunflower crop declined 15% from the previous season as dry conditions in the Kirovohrad, Kharkiv, and Dnipropetrovsk regions, as seen in the Gro Drought Index, affected vegetation and lowered yields. Black Sea June sunflower oil futures have increased 30% so far this year. 

The Ukraine government and the sunflower oil industry agreed on a total target of 5.38 million tonnes for sunflower oil exports for the year. That is 140,000 tonnes lower than the USDA’s estimate for the year and 1.3 million tonnes lower than Ukraine’s previous year’s record exports.  

Russia, another major producer, just imposed a floating export duty on sunflower oil shipments from the start of the new crop year on Sept. 1. This is in addition to Russia’s export duty on sunflower seeds of 50%, up from 30% currently, with a minimum of $320/tonne. The tax will run from July 1, 2021, to August 2022. 

Vegetable oils have been a key driver of food inflation this year. Overall tightness in vegetable oil supplies combined with a rebound in demand has pushed prices sharply higher from year-ago levels. Edible oils are often interchangeable, so a shortage of one type places added pressure on others. With Russia and Ukraine both restricting exports, the global vegetable oil situation will bear careful watching. 

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