WASHINGTON, D.C., U.S. —The oilseed planted area in Ukraine in marketing year 2016-17 is forecast to increase due to the expansion of soybean plantings, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service said in a March 22 report. Soybean planting is up 8%, reaching 2.3 million hectares compared to 2.1 million hectares in market year 2015-16. The expected increase of soybean area is based on the stable profitability of this crop for farmers.

According to official data, soybeans and sunflower seed were the two major oilseed crops in Ukraine in 2014, which maintained relatively strong profitability. This trend is expected to continue into 2015. It should be noted that the increased profitability for all major crops in 2014 is largely attributed to significant devaluation of the national currency.

It is anticipated that agricultural crop production in 2016 will be impacted by the following factors:

• the national economy is still experiencing aftershocks of economic instability stemming back to the end of 2013; 

• local currency (Hryvna - UAH) continues its devaluation: almost 70% value was lost since beginning of 2015 and over 300% since beginning 2013;

• continued political instability in the country;

• further increase of UAH-denominated costs of agricultural inputs, including fuel, seed, fertilizer and pesticide chemicals – a significant share of which are traditionally imported;

• intermediary financing for agricultural production is only available for the short term (one to three months at exorbitantly high interest rates) and long-term credit resources are prohibitive in terms of costs to producers.

Producers are trying to adapt to this new business environment. Fertilizer and chemical applications to the 2016 crop can be expected on the level of 2015.

According to industry insiders, total oilseed crush capacity in Ukraine at the beginning of 2016 reached 16.5 million tonnes. That could be expanded up to 17 million tonnes by the end of the year due to construction of new facilities, as well as modernization of existing ones that could allow a larger threshold and variety of oilseeds to be crushed at higher speeds, improved output quality, etc. In addition, a few new transshipment facilities are planned to enter into operation in Ukraine in the near term, which would create even stronger stimulus for farmers to opt for production of oilseeds, as competition between importers and/or crushers would translate into more competitive domestic prices.

Oilseed meal consumption has been gradually increasing in Ukraine in the last five years due to strong demand from expanding industrial poultry and animal production in the country. However, further growth of feed consumption in the country is slowing. This will likely stimulate larger volumes of oilseed meal exports out of the country.

Strong consumer demand in the E.U. for Ukraine’s oilseeds meal is expected to continue, while the Middle East is gaining importance as a significant export destination. Soybean oil exports from Ukraine are split between the E.U. and East and Southeast Asian countries.