Ukraine’s VAT oilseed change spells price pressure for farmers: UGA

The decision of Ukraine’s parliament to remove exporters’ ability to reclaim VAT on sunflower seeds, soybeans and rapeseed could pile pressure on farmers as the value of Ukraine oilseeds will likely fall, the Ukrainian Grain Association said Tuesday.

The move is set to be introduced from March 1, 2018 and is intended to provide further support to the country’s manufacturing sector, and particularly the crushing industry, as exporters will still be able to reclaim VAT on any oil exports.

“In general, unfortunately a move like this will impact the farmers,” one market source said, adding; “there isn’t the crush capacity available so the seed will be exported, the trader will not get his VAT so he will expect someone else to pay for it.”

That is likely to fall on the farmer, although “the reality is that sunseed in southern Ukraine is by far and away the most profitable crop farmers can plant,” the source said, with the Ukrainian Grain Association estimating losses could amount to UAH 9-10 billion (up to $366.8 million) at current export prices and .

Removing the export duty encourages greater processing of the raw crop into finished products, providing support to crush margins in the country and making it more profitable to export oil over seed.

According to the Ukrainian Grain Association, 90% of rapeseed is exported from the country and, with sunflower by far the major crop, it could be rapeseed that loses out in terms of future acreage.

From January 1 through to November 30, Ukraine has exported 5.3 million mt of sunflower oil exports, according to government data.