Richard Burrell, Dow Seeds: "Future European expansion of high oleic sunflower oil plantings limited to Ukraine"
Interview by Richard Burrell, Omega-9 Oils Market Manager for Europe, Dow Seeds
Question: Dow Seeds, a leading supplier of sunflower and maize seeds in Ukraine, sees great potential in the development of high oleic sunflower oil in Ukraine. Before we start discussing why this market has potential for development and growth in Ukraine, could you tell us what differs high oleic sunflower oil from other types of edible oil?
Answer: The term "high oleic sunflower oil", or HOSO for short, speaks for itself – it's oil that is very high in oleic, i.e. monounsaturated, acid. It can boast excellent stability without hydrogenation. What is more, it has neutral taste.
The major advantage is that it's a trans-free oil solution both for food industry and individual consumption.
An interesting fact is that a patent on high oleic sunflower oil and seeds has expired, which, together with its quality characteristics, also adds to its growing popularity.
Question: Do you want to say that it's better than palm or olive oil?
Answer: Not all oils are created equal. Of course, one cannot say boldly that this oil is better than the other one. Each type has its advantages and disadvantages, depending what it is used for and which features matter. But I can surely state that the ultimate consumer will definitely have more advantages with high oleic sunflower oil in terms of taste, quality and price.
High oleic oil is high in unsaturated fat, low in saturated fat, and has no trans fat!
Palm oil is cheap for food production, but it's not a choice of health dietitians. Olive oil is among the healthiest options but the price is not its strongest side and it's not very shelf-stable, therefore it's not a choice of food producers as it doesn't make food last longer for customers.
High oleic sunflower oil is the happy medium here: its Oxidation Stability Index (OSI) – a measure of how resistant an oil is to oxidation compared to other oils – is close to that of palm oil (20 vs. 23, for comparison that of olive oil is 12). But it's much cheaper than olive oil, while its ratio of oleic and linoleic acid groups of oils is almost similar to that of olive oil and much better than that of palm oil.
Question: How is the situation with HOSO production in Europe?
Answer: I can say that Europe has realized most of its HOSO production potential. Namely, France, one of the world's largest HOSO producers, has reached its potential – due to crop rotation and competition, sunflower is no longer a critical crop.
The share of HOSO vs. conventional types in France in 2014 (data from KLEFFMAN-2014) was 56%, while the share of another big HOSO producer, Spain, was 13.7%.
Ukraine can boast 8.5% against 3.5% in Russia. But if one sees these countries in percentage vs. total HO, the figures were the following: France had 31%, Spain's share was 9% of all HO plantings, and Ukraine got 34%, while Russia's share was 18%.
Therefore we see that Ukraine has a major potential for growth, as our general vision is that growth potential belongs to the east of Europe.
Future European expansion of HOSO plantings on any scale is limited to Ukraine and Russia, having a combined share of HO plantings at 52% of total HO crops in 2014.
Question: Do you have any data for 2015?
Answer: Yes, we do. We estimate that in 2015, for the first time in history, there will be more areas under high-oleic sunflower seeds in Eastern Europe than in Western Europe, and Ukraine's share in total HOSO area cultivated in Europe in 2015 is estimated at 10%.
Question: Why Ukraine?
Answer: First of all, Ukraine is one of the biggest sunflower seed and oil producers and exporters.
The U.S. Department of Agriculture (USDA) in October 2015 raised its forecast sunflower seeds yields in Ukraine in 2015 by 1 million tonnes, to 11 million tonnes, compared to its forecast announced in September. Sunflower oil production in the 2015/2016 marketing year (September 2015 through August 2016) is projected at 4.555 million tonnes. Sunflower oil exports are now projected at 4 million tonnes, which was 8% up on the previous forecast.
Exports for HOSO will play an important role. Ukraine is now discovering new sales markets, for example, India. Now large batches of sunflower oil are being supplied to India. This is a processed product, with added value.
Iran can also be a promising market due to the cancellation of anti-Iranian sanctions.
So, Ukraine is a potential place for growing HO sunflower crops, processing HO seeds (by the way, more crushing plants are being built in Ukraine now), producing and exporting HO sunflower oil.
Question: Which regions in Ukraine are seen as major growers of HO sunflower seeds?
Answer: In Ukraine, leaders are Mykolaiv, Dnipropetrovsk and Kharkiv regions. Kherson, Odesa and Kirovohrad go after them. Also Kyiv region is only trying this type of sunflower seeds.
Question: What are major drives for HOSO market growth in Ukraine?
A: I would describe it in short as a free trade area with the European Union, which is to become effective as of January 1, 2016, if we speak about an economic factor. As for other, non-economic, factors it is related to regulatory demand, i.e. possible limitations on the use of saturated oils and trans fats, and subsequent transition to high-quality healthier eating, which will enable consumers to make healthier choices in food and diet.
Question: Any specifics of growing HO sunflower seeds from ordinary types of sunflower crops? Do production costs differ much? Any risks for farmers?
Answer: There is not much difference in HOSO production costs, but processing & storage require special conditions, therefore the food industry should think about specialized infrastructure.
As for farmers, high oleic sunflower seeds mean value added product for local production, and here it is important to "catch the moment" and be ahead of competitors to "take the cream off."
Also market diversification is important here: orientation should be not only towards foreign markets, but also to satisfaction of domestic demand, which will require education of customers, namely the food industry.
Question: How would you describe HOSO as revolutionary or evolutionary?
Answer: I'd say that it is mainly evolutionary for local consumption, as demand here is driven by processing industry, which needs time and resources to get adapted to the use of high oleic type of oil, which in turn is driven by a healthier style of consumption. The latter requires education of and promotion among farmers and customers (food industry) and popularization of advantages of this oil, as not many are enough aware of differences and advantages.
One should bear in mind that HOSO is designed mainly for the food industry, as it is used in packaged baked goods (packaged cakes, cookies, etc.), as spray coating for cereal, crackers and dried fruit; and in non-dairy creamers as well as many types of frying.
As for demand from the side of exporters, the situation here much depends on regulatory issues – whether Ukraine is able to create favorable conditions for sunflower seed/oil exports, and if the foreign currency rate is conducive to shipments of Ukrainian-produced sunflower seeds/oil abroad.