(Bloomberg) -- Ukraine's sunflower-oil sector -- the world's largest -- is suffering major cutbacks to plantings and exports because of the Russian invasion, the biggest producer said.
Farmers are kicking off the spring sowing season, and plantings could fall 20%, with yields also decreasing, Ievgen Osypov, chief executive officer of Kernel Holding SA, said Tuesday in an interview on Bloomberg Television. Together, that means the combined output of grains and oilseed could fall to a maximum of 60 million tons, compared with more than 100 million tons last season, Osypov said.
Plus, supplies from the prior season are having difficulties leaving the country because ports are blocked by the war. Ukraine is working to improve logistics to ship crops across its western border, but capacities are limited to about 10% of normal seaborne trade, he said.
Losses for the vital vegetable oil risk accelerating global food inflation that's already running at a rampant pace. Buyers across Asia and Europe that are awaiting sun-oil deliveries are switching to alternatives soybean, rapeseed and palm. Yet those supplies have been limited as well by weather woes and labor shortfalls, sending prices to dizzying heights.
Read more: Russia's war is redrawing the $120 billion global grain trade.
“We'll have huge stock inside Ukraine, and no stock and no goods for the market outside Ukraine,” Osypov said. “It's big damage for the food security of the global world, and a big problem with liquidity for the company and the farmers inside Ukraine.”
Kernel's shares have plunged 43% so far this year in Warsaw trading.
Kernel's infrastructure so far largely remains in good condition, he said. It's very difficult to source sunflower oil from other places since Ukraine is such a dominant supplier, Osypov said.
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