The ongoing military tension between Russia and Ukraine – the world’s two largest producers of sunflower seed oil – could start rattling global cooking oil markets despite their growing production.
Based on data from the Food and Agriculture Organization of the United Nations (FAO), Russia’s sunflower oil production had increased from 827,000 tonnes to more than 4M tonnes between 1992 and 2014, while in Ukraine production rose from 857,000 tonnes to 4.4M tonnes in the same period, wrote Olive Oil Times on 10 August.
In comparison, the world’s third largest producer Argentina’s output is only 932,000 tonnes and together, Russia and Ukraine are responsible for more than half of the total global sunflower oil production.
However, the ongoing military conflict following Russia’s annexation of Crimea from Ukraine in 2014 is threatening not only the sunflower market but also vegetable oil markets in general, including olive oil, according to Olive Oil Times.
The US imposed fresh sanctions on Russia in early August, not only because of its role in the Ukrainian conflict, but also for its alleged interference in the US 2016 presidential election.
While the sanctions did not currently target Russian sunflower oil exports, the country might impose tariffs on its own exports.
The Russian Sunflower Oil and Fats Union sent in June a letter to the country’s Economy and Agriculture Ministries requesting the export tariff on sunflower oil to be raised from 6% to 16.5% in hopes that the internal tariff would bring down domestic sunflower seed prices.
The cost of sunflower seeds had risen by 9% in Russia since mid-May due to international demand, wrote Olive Oil Times, which combined with inflation was threatening to make sunflower and other oils too expensive for Russians to afford.
Ukraine was poised to gain from the dwindling Russian cooking oil supply as Europe was the primary importer of the country’s sunflower seed oil with demand growing in recent years.
However, the value of the Ukrainian hryvnia had fallen to a third of what it was in 2014, which made the price of its oil exports more attractive to international markets.