The Expansion Paradox of Russia's Oilseed Processing Industry: Capacity Surge vs. Demand Ceiling

Over the past five years, the Russian oilseed processing sector has undergone an unprecedented wave of capacity expansion. From 2021 to 2026, the country's actual oilseed crush volume is projected to rise from 18.2 million tonnes to 28.8 million tonnes, representing a cumulative increase of more than 58%—a figure that vividly illustrates the industry's rapid growth trajectory.

In terms of capacity build-up, annual crushing capacity followed a steadily increasing path: 26.5 million tonnes in 2021, 28.6 million in 2022, 31.3 million in 2023, 32.1 million in 2024, 34.8 million in 2025, and a forecasted 38.0 million tonnes in 2026. Alongside this capacity expansion, capacity utilization peaked historically in 2024, when actual processing reached 28.9 million tonnes against an available capacity of 32.1 million tonnes, yielding a utilization rate of 90%. This outstanding performance was underpinned by a bumper oilseed harvest and favorable global market conditions that year.

However, an industry inflection point emerged in 2025. Despite capacity having increased to 34.8 million tonnes, actual crush volume declined to 27.2 million tonnes—a year-on-year drop of approximately 6%—causing the utilization rate to plummet to 78%. This statistical signal clearly indicates that the pace of capacity expansion has begun to outstrip the carrying capacity of raw material supply. Forecasts for 2026 project that even if crush volume holds at around 28.8 million tonnes, with capacity further expanding to 38.0 million tonnes, the utilization rate will continue its downward trend to 76%, underscoring the growing structural oversupply within the industry.

Regional imbalances further accentuate the supply–demand mismatch. According to Mikhail Maltsev, Chairman of the Russian Oil and Fat Union, the national oilseed output for the current year is expected to reach 36.5 million tonnes, while total processing capacity has already surpassed 38.0 million tonnes, resulting in an estimated feedstock shortfall of 2.5 million tonnes. The most acute disparity is observed in the Central Federal District, where oilseed production stands at 9.3 million tonnes but processing capacity exceeds 14.2 million tonnes. The Northwestern Federal District faces a deficit of 2.4 million tonnes, while the Southern Federal District reports a shortage of 1.8 million tonnes.

This expansionary logic is driven by clear economic incentives: domestic processing of oilseeds and export of value-added products generate substantial foreign exchange earnings and tax revenues, while high export duties on raw materials effectively secure feedstock availability for local processors. Intense competition among crushing plants for limited harvests, in turn, provides farmers with stable offtake channels. However, as capacity growth persistently outpaces feedstock supply, industry profit margins are likely to be squeezed, investment payback periods extended, and the risk of overcapacity is steadily transitioning from a forecast scenario to an operational reality.