Sunseed crush in Ukraine could fall more than 25% due to energy crisis

How the Russian invasion is reducing Ukraine's sunflower crushing capacity

Up to a third of Ukraine’s sunflower crushing capacity could be reduced in 2022-23 due to the energy crisis the country is facing following targeted Russian strikes with missiles and kamikaze drones on energy infrastructure, market sources told Fastmakets Agriculture last Thursday.

Alongside the interruptions to power and water supplies, traders also pointed out that constant uncertainty around the operation of the grain corridor was another factor that would likely bring challenges for the crushing sector.

Ukraine-based sources suggest that the reduction in processing could be anything from 28% to as high as 44% affecting demand for between 8-11.5 million tonnes of sunseeds per season, according to various estimates.

The figure could depend on the degree of damage, any energy savings undertaken by crush enterprises and the ability of enterprises to autonomously provide electricity to power production.

According to APK-Inform, the average sunflower seed processing volume for the three seasons preceding the 2021-22 season was 14.7 million tonnes.

However, market sources said it is virtually impossible to estimate how much processing could be lost since new attacks could damage even more power plants and lead to further blackouts and problems with water supply.

“In the event of large-scale power outages, the water supply also disappears. The plant cannot operate without water,” a crusher in the Odesa region told Fastmarkets.

At the same time, crushers, in addition to the planned reduction in electricity consumption, are trying to deal with energy problems in alternative ways.

Crushers being affected

In general, the country’s crushers divide into three groups in terms of energy difficulties and ways to solve them.

The first group consists of a number of plants that have experienced power outages and rolling blackouts after electricity providers were forced to reduce electricity consumption by 25-30% after massive missile and drone attacks on energy infrastructure through the second half of October.

The second group covers the largest sunflower crushers, many of which have their own generating turbines or crushers that have their own power stations.

Such plants are usually independent of the supply of electricity, which allows such plants to be autonomous from the general energy supply.

The final groups are plants that have reduced their electricity consumption by an average of 25-30% and are planning to install powerful generators in case of future power problems or reduce electricity consumption by stopping processing at night and doing most of the work during the day.

In most cases, the net impact will be to limit production.

“As a result, there will not be enough oil for the contracts in the first place,” the Ukraine-based trader said.

According to APK-Inform analysts, a reduction in sunflower processing in the 2022-23 season is expected to reach 10.3 million tonnes, which will lead to a decrease in the production and export of sunflower oil to an average of 4.5 million and 4.1 million tonnes, respectively.

Click here to access our data analysis and gain better insights into soybean crushing trends and margins.

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