VAT rebate risk pushes Ukraine rapeseed exports to record high

Ukraine’s rapeseed exports hit a record high at the start of the 2019/20 marketing year as sellers looked to clear as much volume as possible while uncertainty surrounds the future of its VAT rebate system.

Taxes on rapeseed sales are reimbursed under a scheme set to run to the end of 2021, although Ukraine’s new government has said it wants to end this setup as early as this year, a move that is expected to undermine Ukraine’s most profitable crop.

“It is very likely that the new (Ukrainian) government will initiate some changes on the rebate system and this will also have a serious impact on the profitability of rapeseed and soybean,” Sergey Feofilov, Director General at Ukragroconsult said at the International Black Sea Oil Trade conference in Kyiv on Thursday.

The looming political risk has boosted exports to a record high for the two first two months of the season – which started in July – to 1.2 million mt.

“Traders will try to export as much as they can in the current political uncertainty,” Feofilov added.

Rapeseed is one of Ukraine’s most profitable crops, with “relatively stable prices ,making it attractive for farmers to grow”.

Ukragroconsult forecasts an increase in the rapeseed planted area to 1.4 million ha this winter, up from 1.1 million in 2018/19.

The soybean planted area is expected to remain stable.

Strong export demand for sunoil will keep the 2019/20 export figure close to 6 million mt, lower sunseed production will mean ending stocks for both the seed and the oil will fall.

“We forecast a small decrease of sunseed yield this year, which lowers stocks of the seed and the oil and will put [upwards] pressure on sunoil prices. At the same time, export demand for the oil remains good,” Feofilov added.

Sunoil ending stocks for 2019/20 are expected at just 40,000 mt, down from 172,000 mt at the end of last year, while ending stocks of seed will slip to 71,000 mt, down from 214,000 mt in 2018/19.

Agricensus