Ukrainian government mulls retail sunoil price regulation
Ukraine’s government has proposed a package of measures to retailers and sunseed crushers in a bid to stabilise domestic retail prices for bottled sunflower oil until the arrival of new crop production in July, with the details set out in a draft memorandum seen by Agricensus.
The Ukrainian Ministry of Economic Development sent out the draft at the end of last week asking feedback from the industry as the government looks to limit the impact of food price inflation.
Trade sources were invited to submit comments on the proposals through until Monday morning with an industry meeting scheduled to start at 1700 Kyiv time.
“Participants agree for the period of validity of this Memorandum to not allow the sale price of sunflower oil to increase above the price level that has developed in retail chains as of March 1, 2021,” the draft document reads.
Adding that the industry will commit to providing “stable and uninterrupted” supply to the domestic market of the product that the government deems to have a “significant social value”.
In return, the Ukrainian government said it would keep the current import and export regulations unchanged, offer crushers “favourable credit resources” as well as legal advice to develop the market, and promote the development of a sunflower market information system.
The proposed intervention follows similar plans in Russia set out in December last year where a price agreement between retailers and crushers has fixed prices of the vegoil at retail level.
The latest governmental interventions came as sunoil prices in Ukraine – the world’s largest producer and exporter – hit a record high of $1,700/mt last week, after doubling on the year following a disappointing harvest last autumn.
However, Ukraine’s sunflower sector has indicated that the proposal to introduce food price checks would be economically unviable for industry coming after seed prices have soared by over a third since the start of 2021.
“This decision will cause harm to Ukrainian oil producers, since it is not wise to regulate the end product price without considering the cost of the raw material,” a crusher told Agricensus.
Sunseed prices in Ukraine surged following the prolonged drought, with Ukrainian farmers harvesting only 14 million mt of seeds, down 15% on the year, USDA data showed.
Sunseed crushers have hiked their bids for seeds up to UAH27,000/mt ($977/mt) by the end of last week to secure volumes, up from the UAH20,000 mt ($724/mt) which they paid two months ago.
“High levels of export prices for sunoil gave us, crushers, a chance to pay a higher price for sunseeds, but the memorandum will force us to sell the oil at the levels that do not correspond with the material prices, which will damage the business,” a second crusher said.
No official decision has been made yet with the memorandum set to come into force from the date of signing until July 1, 2021.
The domestic market in Ukraine consumes around 565,000 mt of sunoil annually out of its 6 million mt production, USDA data showed.
The rest is exported, mainly to India, which buys around 2 million mt a year.