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NUMBER:  ¹1   ¹2   ¹4   ¹5   ¹6   ¹7   



¹ 2(2015)

CONTENT


DRINKS
Review of Russian Wine Market
Research of the Company “I-Marketing”

Review of Russian Beer Market
Research of Information Agency “CredInform”


TEA & COFFEE
Review of Moscow Tea Market
Research of the Marketing Agency “FDFgroup”


CONFECTIONERY
Review of Russian Confectionery Market
Research of the Company “ID-Marketing”

Review of Russian Chocolate Market
Research of the Company “Market Analitika”


MEAT
Review of Russian Market of Sausage and Processed Meat Products
Research of the Company “GfK Rus”


FISH & SEAFOOD
Review of Russian Market of Canned and Preserved Fish/Seafood
Research of the Company “Step by Step”


OILS & FATS
Review of Russian Market of Vegetable Oil
Research of the Company “RBC.research”


DAIRY PRODUCTS
Review of Russian Dairy Market
Research of the Company “ID-Marketing”


FAST FOOD
Trends on Russian Snack Market
Research of Agency “Depot WPF”


HERBS, SPICES & SAUCES
Review of Russian Mayonnaise Market
Research of Information Analytical Agency “INFOLine”


TRADE SHOWS
“Prodexpo 2015”


“Upakovka/Upak Italia 2015”

Review of Russian Market of Vegetable Oil
Research of the Company “RBC.research”

During recent 15 years global market sees robust growth of production of vegetable oil. Annual growth ranges 2% to 9% while the average growth rate of production volume constituted 4.9% since 2000. By 2014 global production volume of vegetable oil reached 176 million tons while in 2000 this index constituted 90 million tons. This dynamics was first of all related to population growth and increasing share of industrial consumption of vegetable oils. In particular, vegetable oil is increasingly used as bio fuel. However, in 2015 and further on growth of vegetable oil production can slow down. The reason is declined demand for bio fuel in the context of reduced prices for traditional kinds of fuel.
Most popular kinds of vegetable oil in the world are palm oil and soybean oil – they provide respectively 35.7 and 26.8% of global production in volume. Rapeseed oil, not too popular in Russia, is the third popular oil variety in the world (15.4%). Meanwhile sunflower seed oil – most popular in Russia and Ukraine – is only forth popular in the world with 8.7% of global production in volume.
In 2014 the largest supplier of vegetable oil in the world was Indonesia with 19.2% of global production in volume. Indonesia is the clear leader among manufacturers of vegetable oil in the world. It is followed by China (12.3%), Malaysia (12%) and EU (8.9%). Russia provides 2.6% of global production of vegetable oil in volume; during recent years share of Russia in world production demonstrates robust growth.
Just like global market, Russian market of vegetable oil performs quite healthy. In particular, during recent 10 years production volume of vegetable oil in Russia increased by more than 2 times. Analysis of production dynamics of vegetable oil in Russia since 2002 reveals several periods. In 2002–2006 the market demonstrated robust growth by 15-30% annually. In 2007 growth of production volume slowed down a little but 2008 was a bad year for the review industry – production volume declined by more than 9% due to bad crop of sunflower seeds in 2007. After the new harvest and in the context of global recession in 2009 Russia demonstrated confident growth of vegetable oil production in volume – by 28.6%. Indeed, global recession which started in the end of 2008 stimulated increase of vegetable oil production in Russia. On the one hand devaluation of ruble made Russian vegetable oil more competitive on global market. On the other hand recession changed consumer behavior of Russians – they started to eat more at home than in foodservice, and thus were cooking more at home. In this context consumption of mayonnaise and other sauces – products based on vegetable oil – increased significantly.
In 2010-2011 production of vegetable oil in Russia was on plateau. Record crop of sunflower seeds in 2011 was followed by 35% year-to-year increase of production volume in 2012.
During recent two years production of vegetable oil in Russia also saw significant increase in volume. Year 2014 is worth special attention: production volume almost reached 4.8 million tons, plus 21.8% over 2013. This dynamics was mainly driven by record crop of sunflower seeds in 2013.
As for the structure of vegetable oil production in Russia, in 2003–2006 more than 95% of domestic production was provided by sunflower seed oil. However, Russia is one of the countries in the world with the highest per capita consumption of sunflower seed oil. This index cannot grow all the time, so it is quite logical that by 2006-2007 Russian market of sunflower seed oil got close to saturation.
In this context the period of 2007-2008 was the time when production structure of vegetable oil in Russia started to change. First, in 2009 share of sunflower seed oil in domestic production went down to 86.9% while shares of such varieties as rapeseed oil and soybean oil increased significantly. Share of rapeseed oil tripled in 2009 over 2003, from 1.4% to 4.5%. Share of soybean oil grew from 2.6% to 6.5%, also almost by 3 times.
In 2011–2014 the structure of Russian vegetable oil market undergone serious changes. Share of sunflower seed oil in domestic production was dancing around 81-85%. However, the country saw significant increase of sunflower seed oil production in volume. Shares of rapeseed oil and soybean oil remained practically unchanged – this means that production volume of these kinds of vegetable oil in Russia also grew in 2011–2014. However, increased offer had no demand inside the country, so manufacturers had to start export of vegetable oil.
In 2015-2016 production volume of vegetable oil in Russia is forecasted to grow. This trend will be supported by weak national currency which will facilitate export. Increase of production volume is to be driven by three basic kinds of oil: sunflower seed oil, rapeseed oil and soybean oil.
Analysis of vegetable oil import to Russia during recent years shows slight declining trend. Import of vegetable oil to Russia hit its historical maximum in 2008 when it constituted a little more than 1 million tons. But already in 2009 import of vegetable oil to Russia reduced significantly because of global recession and increase of import prices. On the other hand, domestic manufacturers used this opportunity to increase both production and export in volume.
Still, already in 2010 import of vegetable oil started to recover pretty fast and constituted 962.5 thousand tons, plus almost 50% over 2009. But during the next 3 years import of vegetable oil to Russia was on plateau with volume smaller than in 2008 and 2010.
In 2014 import of vegetable oil to Russia reduced significantly – almost by 2 times against 2013. This decline was driven by strong growth of domestic production of sunflower seed oil, rapeseed oil and soybean oil. Besides, it should be mentioned that import saw most impressive decline in H2 2014 (especially in Autumn and in December). This trend was related to serious fall of ruble exchange rate to main currencies of the world.
On the other hand, export of vegetable oil was growing during practically all recent years. During 6 years (in 2006–2011) dynamics of export of vegetable oil from Russia looked like following. In 2006–2008 export volume constituted approximately 750-800 thousand tons annually. But in 2009 global recession changed dynamics of Russian export.
First, crisis lead to weakening of ruble against main currencies of the world. Thus, prices for Russian products on global market reduced and this stimulated export from Russia. Second, consumption of ready sauces significantly increased in many countries including EU because many families had to stop eating out. Let us remind you that vegetable oil is widely used in production of sauces. This trend also stimulated export from Russia. Besides, Russian manufacturers cut their prices even more to underpin export.
Considering the above factors and good crop of sunflower seeds in 2008 Russia significantly increased production volume of vegetable oil in 2009, respectively the country increased export and reduced import of the category. In 2009 export of vegetable oil increased by 58.2%, in value terms export declined due to extra cut of prices (from 1,567 $/ton to 766 $/ton).
In 2010-2011 export volume returned to pre-crisis level as most acute stage of recession was passed. Prices also started to increase gradually. However, in 2012 starts a new stage of Russian export of vegetable oil. During recent 3 years export of vegetable oil in volume was close to 2.6 million tons; in 2014 export volume exceeded 3 million tons.
This impressive dynamics was driven by rocketed domestic production of vegetable oil in Russia – mainly of sunflower seed oil, rapeseed oil and soybean oil. Sunflower seed oil is traditional for Russia, so it is in demand both on B2B and B2C markets. Situation with rapeseed oil and soybean oil is different: significant increase of domestic production had no response of domestic demand, thus major part of these categories is exported from Russia.
Interestingly, extra growth of vegetable oil export from Russia was stimulated by declining manufacturer prices. For instance, in 2014 the average export price for vegetable oil reduced by 16.5%. However, with consideration of ruble exchange rate manufacturers got extra profit in rubles. Thus, in 2015-2016 competitiveness of Russian vegetable oil is to get stronger on global market. Respectively, export will continue to grow provided current volume of domestic production is sustained.
In the summary of the above analysis we’d like to estimate the volume of vegetable oil consumption in Russia. According to “RBC.research’es” estimations based on indices of production, export and import volumes in 2014 consumption of vegetable oil in Russia constituted about 2.1 million tons, minus 16.9% against 2013. This decline was driven by several factors:
1. import of vegetable oil saw impressive decline due to weakening of ruble against dollar and euro (especially in the end of the year);
2. same decline of ruble exchange rate made export more attractive and thus developed the threat of undersupply of vegetable oil on domestic market.
Thus, situation on Russian market of vegetable oil is quite unusual now. On the one hand domestic production is immense but export is more profitable than domestic sales; besides, domestic demand also declined. Combination of these factors stimulated the start of significant growth of prices for vegetable oil in Russia in the end of 2014 – beginning of 2015. This trend first of all affected most popular variety – sunflower seed oil, and also olive oil and palm oil.
Thus, in 2015-2016 the country faces favorable conditions for further increase of export of vegetable oil and for significant increase of prices on domestic market due to possible undersupply of sunflower seed oil. Weak ruble will stimulate manufacturers regard export as prior distribution strategy. In this context domestic consumption is forecasted to decline on the background of growing prices. According to “RBC.research”, consumption volume of vegetable oil in Russia is forecasted to constitute 1.88 million tons in 2015 and 1.9 million tons in 2016.
Consumption of vegetable oil in Russia is dominated by sunflower seed oil and palm oil – together they provide over 90% of consumption volume. At the same time Russia has well-organized production of rapeseed oil and soybean oil. These varieties of vegetable oil still have no sustained demand on domestic market, so they are almost completely exported.

Sergei Khitrov
Senior Analyst
“RBC.research”

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