Ukraine’s Kernel Holding sees bumper 2017 marred by oilseeds pain

Ukraine’s Kernel Holding has posted record sunflower oil and grain exports and is anticipating a sizeable increase in the acreage it farms in 2018, according to the company’s 2017 annual report released Monday.

Overall pre-tax earnings have slumped however, as weakness in the crushing sector has undermined corporate performance.

Crop productions surged to its highest level in the last five years, topping 2.1 m mt for grains and oilseeds, with the bulk – 1.7 m mt – concentrated in grains. Oilseed production rose to 409,000 mt up from 333,000 mt in 2016.

Acreage slipped to 385,000 hectares (ha) in 2017, but is set to surge in 2018 with plantings undertaken on 593,000 ha. Corn will form the bulk, grown on 204,000 ha, with wheat (146,000 ha), sunflower (134,000 ha) and soybean (65,000 ha) comprising the rest.

Across the board, and despite unseasonably hot, dry summers across central Ukraine, crop yields have continued to climb and are well above the average for Ukraine. Corn saw the biggest jump, rising 7.2 mt per ha to 8.9 mt per ha while wheat rose to 5.8 mt per ha and sunflower to 3 mt per ha, up from 5.1 mt per ha and 2.8 me per ha respectively.

However, the hot spells seen in central Ukraine could yet pose problems for yields in the future, prompting chairman and founder Andriy Verevskyy to warn of a toxic combination of five consecutive years of falling soft commodity prices globally, the impact of devaluation in Ukraine’s currency and unusually hot weather causing yields to decline could see a hit to future earnings in the farming division.

In its outlook for 2018, Kernel anticipates Ukraine’s farmers producing close to 13m mt sunflower seed in 2018 – a fall of one million mt on 2017 figures.

However, Kernel is committing to operating its oilseed crushing capacity at close to maximum utilisation, having attained a near 90% usage rate in 2017, and anticipates crushing 3.2m mt of sunflower seeds in 2018.

That will likely see a further improvement on record exports, with bulk sunflower oil and bottled sunflower oil exports in 2017 increasing to 1,084,000 mt and 131 m liters respectively and 3 m mt of sunflower seeds crushed. Weak domestic demand in Ukraine, amidst ongoing regional uncertainty, fired record exports

Despite revenue rising 9.1% year-on-year to $2.1 b, pre-tax earnings fell 7.8% to $319.2 m.