Available Online: http://www.ejpau.media.pl/volume18/issue4/art-12.html
THE INTERNATIONAL TRADE IN SUNFLOWER SEED OIL OF POLAND AND UKRAINE
Maria Parlińska1, Oleksii Oliinyk2, Evert Van der Sluis3, Ewa Wasilewska1
1 Department of Economics of Agriculture and International Economic Relations, Faculty of Economic Sciences, Warsaw University of Life Sciences, Poland
2 Technical University of Munich, Germany
3 Department of Economics, South Dakota State University, USA
In this paper we provide an overview of key studies and analyze secondary
data concerning economic aspects of production and distribution of sunflower
seed oil in Poland and Ukraine. In recent years, Ukraine and the EU-28 have taken leading positions in the
global production and export of sunflower seed oil in terms of volume. While
Poland has one of the largest arable land areas in Europe, its sunflower seed
and oil production did not increased as quickly as Ukraine’s. In spite
of improvements in average sunflower seed yields, Poland has increased its volume
of sunflower oil imports since 1992. We document that the average price of exported sunflower oil
was lower in Ukraine than in Poland since 1992 and Ukraine had a positive trade
balance in sunflower oil, while Poland had a sunflower oil trade deficit during
In this paper we provide an overview of key studies and analyze secondary data concerning economic aspects of production and distribution of sunflower seed oil in Poland and Ukraine.
In recent years, Ukraine and the EU-28 have taken leading positions in the global production and export of sunflower seed oil in terms of volume. While Poland has one of the largest arable land areas in Europe, its sunflower seed and oil production did not increased as quickly as Ukraine’s. In spite of improvements in average sunflower seed yields, Poland has increased its volume of sunflower oil imports since 1992.
We document that the average price of exported sunflower oil was lower in Ukraine than in Poland since 1992 and Ukraine had a positive trade balance in sunflower oil, while Poland had a sunflower oil trade deficit during the 1992–2010 period.
Key words: sunflower oil, price, import, export, trade balance, Poland, Ukraine.
As a key sector of the national economy, agriculture produces material of plant and animal origin used as intermediate goods by the food and fiber industry. As such, the agricultural sector directly contributes to the nation’s food security. In Poland and Ukraine, 2.59 and 22.46%, respectively, of total cropland is used for growing oil crops in general, and 0.01 and 15.64%, respectively, of their total cropland area is used for growing sunflower seed in particular [1–3]. For the European Union as a whole, sunflower oil is the third most important oil crop in terms of volume produced, after rapeseed and palm oil <footnote 1>.
A combination of suitable climate and weather conditions, large areas with fertile soils, and sufficient periods of sunshine position Ukraine, Russia and the EU-28 as the world’s leading sunflower oil producers. Together, these nations produced over two-thirds of the total global output, and individually they produced 23.6, 22.5, and 19.8%, respectively, of the total world’s sunflower seed output <footnote 2>. Hence, a thorough analysis of current production possibilities and economic aspects of the trade in sunflower seeds and oil is important for making relevant and practical policy recommendations .
Over the past decade, Ukraine has rapidly expanded its sunflower seed oil production and exports in terms of volume. In turn, the exports have enabled Ukraine to attract significant financial investments. In spite of having similar climate conditions, Poland’s level of production is far below that of Ukraine, and its sunflower seed oil output increased much more slowly than Ukraine’s. This begs the question of why sunflower production patterns diverged so dramatically between these two nations. More specifically, it raises the question of whether the rapid increase in Ukraine’s sunflower seed oil production may have been achieved at the expense of that nation’s future production capacity. After all, sunflowers are among a group of crops that tends to diminish soil productivity in the absence of sufficient managerial counter-measures. Ukraine’s production capacity may suffer in the future if no actions are undertaken to maintain the natural fertility of the highly productive black soils that are prevalent in large parts of Ukraine. Maintaining the soil’s natural productive potential at sustainable levels can be accomplished through crop rotations and by avoiding high levels of inputs such as hazardous chemical fertilizers [7, 9, 11].
The sustainable use of natural resources, including soils, is of deep concern and relevance to humanity. Thus, policy makers dealing with the sunflower seed oil industry must seek to implement efficient policies and market instruments in order to meet demand, while at the same time maintaining profitable conditions for agricultural producers, and while causing minimal damage to soil quality, the natural environment, and the health of people engaged in the production processes. Using economic data on sunflower oil production and trade in Poland and Ukraine, we attempt to paint a realistic picture of market conditions and identify possible future developments in sunflower seed oil markets [4–6].
Our analysis covers the period between 1992 and 2012, determined by the availability of data from the FAO, USDA and EUROSTAT. The main objectives of the research are to:
- Analyze the dynamics of production and consumption of sunflower seed oil in the World, EU-28 countries and Ukraine;
- Analyze the dynamics of sunflower seed oil trade of Poland and Ukraine and define their major importers and exporters; and
- Develop practical recommendations for policy makers in the sunflower seed oil industry domain .
We use descriptive and comparative methods in our research, aided by statistical methods to facilitate our economic analysis. In the process of conducting our research, we apply the following methods:
- Abstraction – distinguish between the main properties of, and make connections between fat and oil market regulations, and extract key elements for further discussion;
- Analytical-statistical – gather relevant primary and secondary data, evaluate the data’s accuracy and appropriateness, and conduct basic statistical analyses to reach conclusions on the basis of the data’s economic interpretation;
- Induction and deduction – analyze fat and oil industry data pertaining to Poland and Ukraine, and identify general tendencies; and
- Comparative-descriptive – compare market indicators, production facilities and other relevant country-specific indicators to determine the two nations’ comparative advantages and disadvantages [7, 8, 10].
Analyzing the sunflower seed oil sectors in Poland and Ukraine from an economic and environmental sustainability perspective is important, especially within a European context. The EU’s sustainability efforts directly relate to the agricultural sector in general and sunflower seed oil production in particular. If Ukraine would attempt to seek EU membership, it would have to follow the EU’s main objectives and policies, including those pertaining to environmental sustainability. In this paper, we compare the priorities of Poland and Ukraine in the area of sunflower seed oil production and in the context of current European economic policy standards.
STATISTICAL ANALYSIS AND RESULTS
Literature review & theoretical background
Global production data indicate that Ukraine has rapidly increased its production volume of sunflower seed and has become one of the world’s leading producers of sunflower oil over the past one to two decades. Anna Platonova, the Head of the oilseed department of Ukraine’s APK-Inform Agency (the acronym denotes the Agro-Industrial Complex), stated that due to rapidly increasing volumes of sunflower seed production, Ukraine’s sunflower seed export capacity quintupled since 2000 and continues to increase at the current time. At the same time, Ukraine’s imports of planting seed decreased and new processing plants are being built <footnote 3>. It is worth to notice that about 30% of the increase in Ukraine’s production is due yield increases. This increase in production can be due genetics, fertilizer use, herbicides, or other technological innovations.
Between the 2009/2010 marketing year (MY) and 2011/2012 MY, the total production of sunflower seed oil in the EU-28 increased by 12% from 2500 to 2600 thousand metric tons (MT), its imports decreased by 20%, and its exports doubled from 100 to 200 thousand MT <footnote 4>. According to an official report by Ukraine’s APK, the total area planted to sunflower seeds continuously increased in recent years, reaching 5200 thousand hectares in 2012 <footnote 5>.
Research by Ukrainian scientist Trotsenko suggests that maintaining soil fertility and avoiding contamination of cropland by disease and vermin requires following appropriate crop rotation practices and planting sunflowers on the same land at a maximum frequency of once per 8 to 10 years . However, in early 2012, Ukraine’s State Agency of Land Resources reported that the total agricultural land area in Ukraine was 41 557.6 thousand hectares (68.9% of the country’s total land area) and its tilled land comprised 32 498.5 thousand hectares (53.8% of its land area) <footnote 6>. Therefore, if farmers would use the tilled land once every 8 years on average, Ukraine would be able to plant no more than 4062.3 thousand hectares (32 498.5 thousand hectares / 8) to sunflowers per year. In actuality, the 2012 area planted to sunflowers was 5100 thousand hectares, which exceeds sustainable levels by 1113.7 thousand hectares, or 27.4%.
According to the United States Department of Agriculture (USDA) <footnote 7>, the total global production volume of sunflower seed oil was 12 290 thousand MT in MY 2011/2012. During the same period, the EU-28’s contribution was 2800 thousand MT and that of Ukraine was 3650 thousand MT (Fig. 1). Ukraine is one of the world’s largest sunflower seed oil producers. In MY 2011/2012, Ukraine and the EU-28 jointly produced 52.5% of world’s total production (Fig. 2).
Fig. 1. Dynamics of the production volume of sunflower oil, mln. MT (Source: own calculations based on FAO, USDA and EUROSTAT data
Fig. 2. The share of Ukraine and the EU-28 to the world’s sunflower oil production (Source: own calculations, based on FAO and EUROSTAT data)
According to time series data of Food and Agricultural Organization <footnote 8> and Eurostat <footnote 9>, the volume of sunflower seed production in Ukraine increased from 3460 to 8670 thousand MT between 2000 and 2012, whereas that of Poland increased from 1.32 in 2003 to 5.7 thousand MT in 2012, with a spike of 7.5 thousand MT in 2005 (Fig. 3). A comparison of sunflower oil production volumes shows that Poland and Ukraine produced 15.47 and 3940 thousand MT, respectively, in 2012 (Fig. 4) (Food and Agriculture Organization). Average annual sunflower seed yields in Ukraine increased from 0.94 to 1.84 MT/ha between 2001 and 2011, while Poland’s yields remained without significant fluctuations at average level of about 1.66 MT/ha over the same period (Fig. 5).
Fig. 3. Sunflower oil production volume dynamics, in thsd. MT (Source: own calculations, based on FAO, USDA and EUROSTAT data)
Fig. 4. Dynamics of sunflower oil production by country, in thsd. MT (Source: own calculations, based on FAO data)
Fig. 5. Average yield dynamics of sunflower seeds by country, in MT/ha (Source: own calculations, based on FAO data)
In the following section we will consider the production and trade dynamics, based on data obtained from the Food and Agriculture Organization. Since 1992, Ukraine’s sunflower oil production volume has exceeded that of Poland. Although dwarfed by Ukraine’s output, Poland’s average production volume of sunflower oil experienced continued growth since 1992 (Fig. 6). Poland’s import volumes of sunflower oil fluctuated considerably since 1992, with average imports of 47 402 thousand MT per year. In contrast, Ukraine’s sunflower oil import volumes dropped to very low levels since 2000, as a direct result of the rapid increase in its domestic production (Fig. 7). The reverse situation took place in the case of sunflower oil export volumes of the two countries. Poland’s sunflower oil export volumes were significantly lower than Ukraine’s, averaging 3.24 thousand MT per year since 1992. In contrast, Ukraine’s export volume of sunflower oil increased since 1992, due to favorable economic and market conditions, with a peak of 3200 thousand MT in 2012 (Fig. 8).
Fig. 6. Production volume dynamics of sunflower oil by country (Source: own calculations, based on FAO data)
Fig. 7. Import volume dynamics of sunflower oil by country (Source: own calculations, based on FAO data)
Fig. 8. Export volume dynamics of sunflower oil by country (Source: own calculations, based on FAO data)
Much of the dynamics of international markets are driven by prices. An analysis of price fluctuations of imported sunflower oil shows a rapid price escalation observed for both countries, starting in the second half of the 2000s. These price movements are largely consistent with price fluctuations of other food and feed commodities over the same time period. Since 1992, the average export price of sunflower oil was 633.64 USD/MT in Ukraine, considerably below Poland’s average export price of 998.14 USD/MT (Fig. 9).
Fig. 9. Price dynamics of imported sunflower oil by country (Source: own calculations, based on FAO data)
Neverthelless, due to their lower production costs, it was still profitable for Ukrainian producers to supply foreign markets with sunflower oil at the relatively lower price. While Poland’s relatively higher export price was more profitable, its export volumes were considerably below those of Ukraine (Fig. 10).
Fig. 10. Price dynamics of exported sunflower oil by country (Source: own calculations, based on FAO data)
In contrast to Poland, Ukraine had a positive and continuously increasing sunflower oil trade balance during the entire period between 1992 and 2012. On average, Ukraine’s sunflower oil trade surplus was 565.46 million USD, and its highest trade surplus was achieved in 2010, with a value of 1 738.7 million USD. In contrast, Poland had a sunflower oil trade deficit, which averaged 28.93 million USD over the 1992–2010 period (Fig. 11).
Fig. 11. Sunflower oil trade balance dynamics by country (Source: own calculations, based on FAO data)
In general, our research shows that suitable legislation and appropriate climate conditions have enabled Ukraine to significantly increase the volumes of its sunflower seed oil production and exports in recent years. In contrast to Poland, strong demand from domestic and foreign sources has stimulated Ukrainian farmers to increase their areas planted to sunflowers and quickly develop their infrastructure for storage, transportation and processing seed and oil. It should be noted that Ukraine has different organization structure in agriculture in comparison with Poland. Polish agriculture is based on small farms while agriculture of Ukraine is based on the large-scale agricultural entities. Many of them are so-called “agriholdings” with average size of about 80 thousand hectares. Such “agriholdings” use about 26% of total farm agricultural land. About 79% of farm’s agricultural land is under cultivation of the farms with average size more than 1000 hectares. Such organizational structure of Ukrainian agriculture influences production structure, and particular in sunflower seed oil production and it is a very important factor of the cultivation of sunflower and the sunflower seed oil production trade.
Between 2001 and 2011, Ukraine’s production of sunflower seeds and oil increased dramatically due to the simultaneous increase in the crop area planted to sunflowers and average annual sunflower yields. A combination of factors including favorable natural and climate conditions, a high quality of planting seeds, effective agro-technology, and favorable market conditions led to suitable conditions for achieving high levels of sunflower oil production, which were not only destined for domestic markets, but also for export purposes. Among the two main countries analyzed, only Ukraine had a positive and continuously increasing trade balance during the entire period, with an average value 565.46 million USD and a maximum value of 1738.7 million USD in 2010. In contrast, Poland experienced an average trade deficit in sunflower seed oil of 28.93 million USD between 1992 and 2012.
In recent years, average sunflower seed yields were comparatively high in both Poland and Ukraine, reaching a level of about 2 MT/ha. Even though Ukraine’s climatic and agronomic conditions are fairly similar to those in Poland, the latter’s sunflower production volumes are much smaller, in part because Polish agricultural policy aims to take into account the long-term soil fertility, which incorporates soil-friendly agricultural crops such as wheat, legumes, and corn, but it may also result in reduced short-term profits.
Based on our research, we recommend that Ukrainian policy makers consider developing policies with alternative regulations or incentives to reduce that nation’s sunflower seed and oil exports, because in recent years Ukraine’s production volume appears to far exceed the limits of maintaining a sustainable level of production. If the legislative basis concerning export duties and volume of production limits remain in place and market conditions with relatively high prices continue, then the area planted to sunflower seed may further exceed 4062.13 thousand hectares, which may result in additional unsustainable practices among of farmers and cause a deterioration in the quality of productive agricultural lands. Further research is needed to analyze and explore the economic aspects of production and trade of sunflower in Poland and Ukraine and to investigate whether sunflower plantings may compromise the sustainability of agriculture in the two nations.
<footnote 1> http://ec.europa.eu/agriculture/cereals/presentations/cereals-oilseeds/market-situation-oilseeds_en.pdf (28.09.2014)
<footnote 2> http://www.sunflowernsa.com/stats/world-supply/ (22.08.2014)
<footnote 3> http://www.apk-inform.com/en/exclusive/topic/1014389#.Ub2m_PpH3fI (22.08.2014)
<footnote 4> http://ec.europa.eu/agriculture/cereals/presentations/cereals-oilseeds/market-situation-oilseeds_en.pdf (29.09.2014)
<footnote 5> http://www.apk-inform.com/en/harvest2012/1016228#.Ub2r5PpH3fI (22.08.2014)
<footnote 6> http://www.dazru.gov.ua/terra/control/uk/publish/article?art_id=134612&cat_id=97786 (22.08.2014)
<footnote 7> USDA, Foreign Agricultural Service, Oilseeds: World Markets and Trade
<footnote 8> http://faostat.fao.org/site/535/default.aspx#ancor (28.09.2014)
<footnote 9> http://epp.eurostat.ec.europa.eu/portal/page/portal/agriculture/data/main_tables (30.09.2014)
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Accepted for print: 16.12.2015
Department of Economics of Agriculture and International Economic Relations, Faculty of Economic Sciences, Warsaw University of Life Sciences, Poland
166 Nowoursynowska Street
Technical University of Munich, Germany
Evert Van der Sluis
Department of Economics, South Dakota State University, USA
102 Scobey Hall, Box 504
Brookings, SD 57007
Department of Economics of Agriculture and International Economic Relations, Faculty of Economic Sciences, Warsaw University of Life Sciences, Poland
166 Nowoursynowska Street
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