Fewer sunflowers grown in 2024 led to Ukraine’s largest sunflower oil producer and exporter, Kernel, halting production at one of its sunflower oil sites in January 2025, the company reported.
Last year’s excessive drought meant only 10.2 million tons of sunflowers were harvested in Ukraine as of the end of December despite capacity being 50% higher – the worst result since 2014. In 2023, the harvest yielded 12.8 million tons, LIGA Business wrote.
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According to its latest quarterly report (October-December 2024 – see Note 1), Kernel focused three plants on processing soybeans (93,000 tons) and rapeseed (14,000 tons). However, one plant suspended operations in January, LIGA Business wrote.
In total, Kernel increased oilseed processing by 20% compared with the same period the previous year, reaching 973,000 tons. Additional capacity stems from a new processing plant in western Ukraine, which began operations in February 2024, LIGA Business reported. The processing volumes also represent a 42% growth on the previous quarter.
According to Pavlo Martyshev, research associate at the Center for Food And Land Use Policy Research at the Kyiv School Of Economics: “We have an excess of processing capacity… now, we can process about 20 million tons of oilseeds per year. Of these, we can process 18 million tons of sunflowers and two million tons of soybeans and rapeseed.”
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In 2024, the drought was so severe that it provoked a shortage of raw foods in general and created a spike in inflation, leading to the central bank raising the key interest rate.
About two thirds of Ukraine’s territory suffered due to the drought, which also affected rapeseed and soybeans, Martyshev said.
On paper, Ukraine has harvested a record volume of 6 million tons of soybeans, but, as Martyshev noted, planting areas were expanded. The actual yield per hectare was lower.
Wider pressures facing producers
The shortage of raw materials due to the drought became one of the key reasons for Kernel suspending production at one sunflower oil plant. But global market forces are also pressing down on producers in Ukraine.
Other factors include reduced demand for agriculture products from China and lower oil prices following US President Donald Trump’s statement of intent to bring them down.
“Vegetable oils are used to produce biofuels, and biofuels depend on oil prices,” Martyshev explained.
A global oversupply of soybeans has also been spurred by huge harvests in South America, the expert said, putting pressure on global markets.
As a result, Ukrainian sunflower oil producers like Kernel, and many smaller ones, are squeezed between low global prices and high domestic prices caused by Ukraine’s drought.
Why Ukraine produces so many sunflowers
The sunflower has become one of Ukraine’s most recognizable symbols and the country’s trademark, appearing on many photos in Google and across social media. This happened as a result of massive seedings of sunflowers and the proliferation of sunflower oil extraction plants since 1998.
At some point in history, sunflower production surpassed the growth pace of grains, Martyshev told Kyiv Post.
Agricom sunflower fields in Zhytomyr region. Source: Agricom
Farming sunflowers has always been profitable, but making a processed product – sunflower oil – is a business with a low margin due to strong competition, Martyshev explained.
Another challenge is that sunflowers are problematic for sustainable farming, the KSE researcher told Kyiv Post.
“[They] can lead to soil degradation, especially wind erosion. Sunflowers have deep roots, and they extract moisture from the lower soil layers, leaving dry soil afterwards... downy mildew may start spreading on crops,” Martyshev explained.
“I don’t see increased volumes of sunflower production in the near future. It will be sustainable within current volumes, but there will unlikely be more,” Martyshev said.
Sunflower oil producers largely appear to understand that, and a part of the industry has already adapted to a lack of raw materials by halting processing for a certain period of time.
“They’ve adapted their business model to [temporary] halts. Instead of buying sunflower seeds evenly and processing them at any price, they prefer to shut down for a short period, wait for sunflower prices to drop and oil prices to rise, see a margin, and then resume operations – buying again and starting production,” Martyshev explained.
Note 1: The financial year in the agriculture industry corresponds with the harvesting season, so Q2 2025 as noted in Kernel’s report corresponds with Kernel’s harvesting season during October, November and December 2024.
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