Ukraine's Sunflower Supply Shock Deepens as USDA Cuts 2025/26 Harvest Forecast to 10.5M Tons

The latest forecast from Ukraine's top agricultural consultancy, APK-Inform, marks a clear shift. While the firm recently projected a 2026 harvest of 13.69 million metric tons, a significant downward revision has already occurred at the global level. The USDA, in its December outlook, slashed its forecast for Ukraine's 2025/26 sunflower seed harvest to around 10.5 million tons. That is a major cut from the earlier estimate of 12.7 million tons.

This revision is not a minor adjustment but a stark signal of persistent challenges. The immediate reasons are clear: ongoing yield declines and the direct impact of war. As battles remain concentrated in the country's main cultivation regions, they continue to limit both sowing and harvest operations. This pattern has been a feature for years, with APK-Inform noting in 2022 that battles are concentrated where sunflower cultivation normally occurs, leading to a drastic drop in sowing areas.

The magnitude of the cut must be weighed against a severely diminished production base. The 10.5 million ton forecast is already far below the 13.69 million ton projection for 2026, and it represents a continued decline from the previous year's level. This downward trend, driven by conflict, points to a new, lower normal for Ukraine's sunflower output.

Context of the Cut: A Market in Structural Strain

The cut to Ukraine's sunflower forecast matters because the market was already operating under severe strain. Even before the latest revision, the supply-demand balance was tight, with exports at historic lows and domestic processing struggling. Through the first four months of the 2025/26 season, sunflower seed exports were stuck at multi-decade lows of just about 12,000 tons. This near-total blockade of exports has forced nearly the entire crop to be processed domestically, a shift that has put immense pressure on the domestic crush sector.

Processing volumes tell the story of that pressure. In September, sunflower processing in Ukraine hit its lowest level since July 2022, totaling only around 560,000 tons. The limited supply during the off-season forced many plants to switch to rapeseed or soybeans, a sign of how thin the sunflower supply was. While prices recovered somewhat in October, the underlying weakness was clear in recent weeks. Last week, processing bids for sunflower seed fell to 29,000-30,000 UAH/ton CPT, with some plants offering as low as 28,500-28,800 UAH/ton CPT. This price drop was driven by weak demand, particularly in the meal sector, showing a market where buyers hold the upper hand.

The bottom line is a system already stretched thin. With exports negligible and domestic processing volumes depressed, there was little buffer. Any further reduction in the harvest, as now forecast, would amplify existing pressures. It would tighten the already-scarce supply of raw material for processors, potentially triggering a sharper price spike when the next crush cycle begins. The market's recent weakness is a warning sign that it has little room for error.

Counterpoints and Risks: Other Forecasts and Revisions

The market's view of Ukraine's sunflower crop is not monolithic. While the USDA's cut to around 10.5 million tons sets a key benchmark, other forecasts reveal a wide range of expectations. According to UkrAgroConsult, the outlook is sharply divided, with pessimists putting 2025 output below 10.5 M mt, optimists – near 11 M mt. This divergence highlights the significant uncertainty surrounding the harvest, driven by the volatile conditions on the ground.

A major source of this uncertainty is the baseline itself. Some agencies, including the USDA, continue to include the harvest from four Ukrainian regions under Russian occupation in Ukraine's official balance. As Barva Invest's Pavlo Khaustov notes, unaccounted areas are at least 600,000 ha, maximum 1.2 million ha. This means a portion of the crop grown in these contested zones is credited to Ukraine, inflating the official supply figure. When that area is excluded, the true available supply for the Ukrainian market-and its export potential-shrinks further. This discrepancy in accounting directly affects the starting point for any forecast and adds a layer of complexity to the supply picture.

Beyond the immediate harvest, a potential policy shift in a key importing region could alter demand dynamics. Indonesia, the world's largest palm oil producer, may revive its plan for a mandatory B50 grade of palm oil-based biodiesel. Although no final decision has been made, the government is monitoring the situation, with the plan potentially implemented in the second half of the year. If enacted, this would increase domestic demand for palm oil, a direct competitor to sunflower oil. The resulting pressure on palm oil supplies could, in turn, make alternative oils like sunflower more attractive to buyers, providing a potential demand cushion for Ukrainian processors.

The bottom line is that the supply shock is compounded by both internal and external risks. The forecast range itself is wide, reflecting deep uncertainty. The baseline is complicated by contested land, and a potential policy change in Indonesia could either ease or intensify competition for global oil markets. For now, the market must navigate these competing signals while the physical harvest remains under siege.

Catalysts and What to Watch

The coming weeks will test whether the forecasted supply shock is a near-term reality or a manageable event. The primary catalyst is the final harvest itself. The market must reconcile the optimistic initial projection of 13.69 million metric tons for 2026 with the revised USDA forecast of around 10.5 million tons. Any further yield surprises, particularly if they confirm the pessimistic view from UkrAgroConsult that output could be below 10.5 M mt, would validate the worst-case scenario and likely trigger a sharp repricing of sunflower oil and meal.

Beyond the harvest, the key to unlocking the market's potential lies in logistics. With exports at multi-decade lows of just about 12,000 tons through the first four months of the season, the bottleneck is physical, not just political. Any easing of infrastructure risks or transit constraints could suddenly release pent-up demand for oil and meal. The market is watching for signs that shipping delays and war-related risks are abating, as continued pressure could have a lasting impact on investment and yields for the next crop cycle.

Finally, watch the policy front in Indonesia. The government's potential revival of a mandatory B50 grade of palm oil-based biodiesel is a major demand-side variable. If implemented, it would increase domestic demand for palm oil, a direct competitor to sunflower oil. This could tighten global vegetable oil supplies and make alternative oils more attractive, providing a potential cushion for Ukrainian processors. The decision, expected in the second half of the year, will be a critical factor in the global vegetable oil balance.

The bottom line is that the supply shock's impact hinges on three moving parts: the final yield, the state of the logistics pipeline, and the trajectory of Indonesian biodiesel policy. Any shift in these areas will determine whether the market faces a severe shortage or a more contained disruption.