Sergey Feofilov: Ukrainian soybean market in Q&A

The market in November-December 2024 raised several questions to UkrAgroConsult, requesting forecasts on the trends of the Ukrainian soybean (SB) market. Sergey Feofilov, Director General of UkrAgroConsult, answers the most important questions.

Q: Despite the war in some regions, Ukrainian farmers set records in the 2024/25 season, including the harvest of 6 M mt of SB. What were the conditions for this record and how was it achieved as weather fluctuations in 2024 had a negative impact on the yields of all crops, especially late varieties?

A: Ukraine harvested even more than 6 M mt of SB. UkrAgroConsult estimates the 2024 harvest at 6.23 M mt (5.26 M mt in 2023). The general trend of rising oilseed prices and higher margins in the previous 2023/24 season ensured that oilseeds were attractive to farmers. SB showed impressive results - profitability turned from negative to positive in the 2023/24 season, encouraging a significant expansion of SB area by 700 K ha, or 35%, to a record 2.7 M ha in 2024.

However, it is the spring crops that suffered the most from the 2024 drought. UkrAgroConsult expects the final SB yield to be 2.35 mt/ha - the lowest in the last four seasons. Despite this, the sharp increase in area compensated for the lower yield, allowing for the record harvest.

It should also be noted that the largest SB areas are traditionally located in the center, north, and west of Ukraine, which reduces military risks. SB areas increased in nearly all regions.

Q: What is your forecast for Ukrainian soybean S&D in 2024/25 and how does it relate to global trends?

A: Earlier UkrAgroConsult considered the probability of high SB carryover stocks for the next season 2025/26, but considering the high exports of SB, SB oil and meal from September to December 2024, this scenario is currently not considered.

Global 2024/25 SB production is also a record high due to increased areas and favorable weather in the leading producing countries (Brazil, the United States, and Argentina). The world market is oversupplied, setting the stage for significant price volatility and uncertainty.

Demand remains high, but its growth is lagging behind the increase in supply. This leads to the increasing global stocks. Ukraine, although a relatively small player in the global SB market, is critically sensitive to the recent global downward price trends, which reduce SB margins for Ukrainian farmers.

Q: Soybeans, like most agricultural crops in Ukraine, are export-oriented. What are the prospects for SB exports this season?

A: The SB export potential for the 2024/25 season is estimated at a record level of 3.7 M mt.

In fact, most of the SB crop will be exported, the export share is expected to decline to 59% (61% last season and 74% in 2022/23). Due to stable logistics, about 60% of SB is exported through seaports, with 25% by rail, 12% by road and 4% by ferry.

The EU remains the leading importer, but Pakistan joined the pool of the largest SB buyers - EU, Turkey and Egypt.

Q: Can the reintroduction of tariffs on SB exports, imposed a few years ago and then lifted, encourage domestic processing?

A: Government regulation as a mechanism to influence markets is quite effective. However, UkrAgroConsult believes that regulation should be reserved for critical situations that require drastic measures and that the end effect of the regulation must be anticipated. However, the previous "soybean adjustments" led to a sharp reduction of SB areas.

Q: What factors could help the export of Ukrainian SB and processed products in 2024/25 and the following seasons?

A: Positive factors

• Ukraine's significant export potential
• predominance of non-GMO soybeans, restrictions on GMO SB imports by the biggest SB buyer
• stable demand for non-GMO SB with price premiums
• advantageous geographical location with lower logistics costs

Negative factors would include fierce competition, logistical challenges as many ports in Ukraine have to operate from time to time or remain blocked due to military actions. Alternative export routes through Danube ports or land corridors to EU countries may be more expensive and less efficient. Strict EU quality and certification requirements are also a challenge.

Q: How much SB will be processed this season? Is the crushing capacity large enough to increase SB processing? And can domestic consumers cope with the growing supply of SB oil and meal?

A: Over the past four seasons, domestic processing has increased by nearly 1 M mt, rising from 1.22 M mt in 2020/21 to 2.15 M mt in 2024/25. This will also be a record, similar to the harvest. Soymeal and oil will remain the main products demanded by the livestock and food industries. As domestic consumption is not significant, soybean oil will be offered for export, potentially setting a new record. Currently, the export of SB oil is estimated at 400 K mt  (+17% compared to 2023/24), SB meal at 1,1 M mt (+61% compared to 2023/24).

The large processing capacities allow Ukraine to process the 2024 record soybean harvest and export high value-added products, increasing its share in the global market.

Q: Given the realities of the soybean market this season, will farmers feel like setting new soybean records in 2025?

A: Farmers may be disappointed with SB margin in 2024/25. However, UkrAgroConsult still believes in the great potential of SB in Ukraine. Although SB areas and production are expected to decrease in 2025, this will be temporary, as SB are the cheapest oilseed crop in terms of production costs.

Farmers may maintain their interest in SB, believing that new records are still ahead, especially given the demand for products and export potential. Either way, SB will remain a major crop along with sunflowers and corn.

Q: Which crops in your opinion could overshadow SB next season?

A: Sunflower and corn are expected to increase their areas in the new 2025/26 season, and SB will be one of the crops that will take that area away. Such expectations are based on the price behavior of all mentioned crops in 2024/25.