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Russia's invasion of Ukraine has caused an unsolvable global sunflower oil shortage



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The Ukrainian Minister of Agriculture, Roman Leshchenko, said that Ukraine's sunflower oil reserves will last five years.

But Europe is already discussing the imminent shortage of this product. And it seems that this situation will not only affect the European Union.

After all, Ukraine is the world's largest producer and exporter of this type of cooking oil. Due to hostilities and the blockade of Ukrainian seaports by the Russian Navy, the export of already produced stock is impossible. NV Business has examined the situation on the global sunflower oil market.

Sunflower oil is quite a popular product in many countries across the world. It is used to fry food, season salads, it is processed into margarines, cooking oils and sauces, as well as being used in the production of biodiesel. And almost from the first days of Russia's full-scale invasion of Ukraine, panic has been on the rise in numerous countries.

In Turkish supermarkets, increased demand has led to queues, a sharp uptick in prices, and even the introduction of some sort of state regulation. Facebook users post photos from Spanish supermarkets with warnings like "no more than 5 liters per customer."

One of NV Business' sources, who lives in a city in western Germany, said that vegetable oil and flour had practically disappeared in their supermarkets.


Balance of power

According to the United States Department of Agriculture (USDA), sunflower oil accounts for about 12% of the global consumption of edible vegetable oils and 9% of the industrial consumption of this product (for example, biodiesel).

Moreover, Ukraine and Russia jointly control 77% of world exports of sunflower oil, with Ukraine’s share being 48%. The National Scientific Center “Institute of Agrarian Economics” reported that in 2021, Ukrainian oil extraction enterprises exported 5.1 million tons of sunflower oil, which is 26% less than in 2020.

According to the forecasts of the industrial association of sunflower oil produces, Ukroliyaprom, in the 2021/2022 budgetary year, a record was expected in the production and export of sunflower oil. However, things turned out differently. Due to difficulties with exporting goods through Ukraine's Black Sea ports, exports from Ukraine have practically stopped. And the stocks of sunflower seeds in Ukraine in March increased by almost seven times, to 1.9 million tons.

For example, Kernel, Ukraine's largest producer of sunflower oil, announced on March 1 the shutdown of its oil extraction plants.

And the Satellite plant owned by  Chinese state company COFCO is located on the eastern outskirts of Mariupol, a city under continuous heavy attack by Russian forces.

Such a significant reduction in supply has already led to an increase in prices in Argentina – one of the competing global producers of sunflower oil – by almost 50%.

 Who will suffer

The largest buyers of Ukrainian sunflower oil are European Union member states. 32% of sunflower oil deliveries from Ukraine go there. A little more than 30.5% is bought by India. China, Iraq and other countries are next in line.

As early as March 2, 2022, the European associations COCERAL (which represents the trade in cereals, rice, feedstuffs, oilseeds, olive oil, oils and fats and agrosupply), FEDIOL (afederation representing the European Vegetable Oil and Proteinmeal Industry in Europe) and FEFAC (European Feed Manufacturers' Federation) issued a joint press release in which they expressed concern about the reduction in supplies from the Black Sea region.

And two days later, FEDIOL revealed more details about the situation around sunflower oil. According to the association, Ukrainian companies monthly supplied about 200,000 tons of this product. Depending on the year, this covered 35-45% of European oil consumption.

“[With] Ukraine being the major exporter of sunflower oil, these volumes are difficult, and could be impossible, to replace on short notice, as other players on the world market face a similar shortfall in their supply,” FEDIOL said in a statement.


The European association said that the EU stocks will last for 4-6 weeks. Two weeks have already passed.

“After this period, it is likely that the lack of unrefined sunflower oil and limited alternatives will lead to a shortage of refined / bottled sunflower oil on the European market and will be felt at the consumer level,” FEDIOL reported.


Is there an alternative?

To mitigate the impact, FEDIOL member companies even diverted some of the sunflower oil intended for biodiesel production back to the food market.

The EU appreciates that there is no immediate solution to the oil problem. And it is not clear how it will be possible to resume trade. The most obvious way out of the situation is to use other oils: rapeseed, soybean, palm. But these opportunities are limited depending on the markets.

For example, the USDA reports that due to a drought, the crops and harvest of rapeseed in Canada (which controls about 50% of the world's rapeseed oil exports) and soybeans in South America (the lowest crop in 6 years is expected) have been significantly reduced. In addition, Indonesia, which is the largest exporter of palm oil, has imposed export restrictions to stabilize domestic prices.

At the same time, Turkish media outlets claim that the situation with the supply of oil has partially stabilized. The country consumes about 3.3 million tons of sunflower oil per year. 65% is provided by Russia, which recently unblocked supplies from the Azov-Black Sea region.

Will Ukraine be able to resume oil exports through other transport corridors, for example, by rail?

“The demand for the transportation of oil is not yet clear (most of the enterprises of the oil and fat industry have been stopped),” a Ukrainian state railway representative told NV Business.

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