Confectionery exports to Europe impossible without tropical raw materials

Delta Wilmar CIS LLC is one of the leading Ukrainian importers sourcing palm oil in Indonesia. The company is also the largest exporter of palm oil from Ukraine to the CIS, EU and Middle East countries.

Mr Zahrebelnyi, over 10 months of MY 2016/17 palm oil imports in Ukraine increased by 22% against the same period of the previous season. What was the cause?

 

As for the increase in the imports of palm oil, bear in mind that about 40% of the ready-to-eat confectionery and dairy products containing tropical oil is exported and doesn’t stay in the domestic market. In other words, it doesn’t mean that the average Ukrainian citizen suddenly consumes more products with palm oil. It means that domestic manufacturers drive up production of the ready-to-eat foods and export them to the neighbouring countries. For confectionery and dairy products, the main export direction is Europe, and now that the EU-Ukraine Agreement of Association entered into force on September 1st, ready-to-eat food production will further increase. For example, dairy exports from Ukraine has nearly doubled. In the first half of the year, Ukraine exported USD 117 million worth of dairy products.

High demand for such foods (yoghurt, cottage cheese, confectionery, butter, spread) prompted the mass production of foods containing plant oils; note that such oils help lower the product’s price. While raw materials grow dear, manufacturers replace animal fats by plant oils to hold the prices and retain consumers.

Furthermore, certain volumes of palm oil are exported to other countries (it increased by 9,000 tonnes year-on-year). Ukraine has the greatest port capacity among all countries of the Black Sea region. 18 merchant seaports and 12 port points, with 6 of them fully equipped and able to provide transhipment and storage of plant oils—all this helps increase the import of palm oil.

 

Has cancellation of the respective export duties in Indonesia and Malaysia had any impact on palm oil imports to Ukraine?

On us, it had none. The amount of palm oil imported by our company mostly depends on domestic demand for margarine. Cancellation of export duties lowered cost of tropical materials, resulting in more competitive prices in comparison to sunflower oil.

This prompted wider usage of tropical oils by the producers in Ukraine as well as across the world. Looking at the world market, you may notice Ukraine imports not that much palm oil—mere 0.4% (0.2 million tonnes). India, the EU and China are among the leading importers with 21% (9.5 million tonnes), 14% and 11% respectively.

 

Does your company have any special requirements for the quality of palm oil?

Delta Wilmar LLC is vertically integrated, so the quality of palm oil is controlled from the palm orchard all the way to shipment of the processed oil. First of all, it must conform to our legislation and regulations of the EU countries, so requirements are very strict and proved by the certificates issued by the certification centre providing international accreditation and SGS international certification: International Standards ISO 22000:2005, ISO 9001:2015, GMP+B1, RSPO SCCS; FSSC 22000:2013 certification scheme; Islamic law (Halal) and Jewish Law (Kosher).

 

 Does the difficult economic situation in Ukraine make the manufacturers increase trans fats content in dairy and margarine products?

As you know, margarine is made not only of palm oil but also of hydrogenated sunflower oil, which sometimes is even cheaper.

But it contains much more trans fatty acid isomers, so its quality and safety are lower.

Consumption of trans fats affects your health, which must be a top priority even during the economic recession.

The increasing use of palm oil is related to the desire to eat healthy as the trans-isomers levels in hydrogenated tropical materials are very low and do not exceed the standards set by the European Union legislation. Ukraine soon will be able to follow the EU’s example and limit trans-isomers content in the end-product up to 2%, and all manufacturers will choose the raw material suppliers more carefully.

 

Are there any restrictions on palm oil imports in Ukraine?

At the moment, there are no restrictions of this kind since the use of plant oils for food is an extremely important aspect of food manufacturing industry, and our company is a principal supplier of palm oil in Ukraine.

Without tropical raw materials, confectionery exports to Europe are impossible since it is difficult to control trans-isomers content in oil. Talking about putting a limit on plant oil use, hardly anybody thinks about the price the end user will have to pay for dairy products. According to the recent figures, livestock numbers in Ukraine decreased by over 11% during the last 3 years, and six-fold over the last 20 years; dairy products will become just unreachable for the end user at a current buying capacity.

 

What do you think about near-term dynamics in the palm oil market?

In Ukraine, production of food in general and confectionery in particular are on the rise in Ukraine, which has caused an uptick in palm oil imports.

The demographic and economic situation in Ukraine over the next few years will boost demand for margarine as the most affordable product of its kind.