Following a disappointing crop in 2020, Black Sea sunflower oil prices rose. What impact could this year’s forecast record crop have on prices for the 2021/22 season?
- Black Sea countries including Ukraine and Russia have been allocated the largest areas to grow sunflower seeds in 2021.
- Both Ukraine and Russia may increase sunflower oil supplies for the next 2021/22 season (September-August).
- The new crop sunflower oil prices have already edged down, after they were squeezed by the prospects of plentiful supplies.
For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.
Black Sea sunflower oil prices for the new 2021/22 season could be weakened by the forecast of a rebound in Ukraine sunflower production to record levels.
Russia also expects an abundant sunflower seed crop in 2021, which could weigh on prices despite export duties for sunflower seeds and sunflower oil having been set for the forthcoming season.
Ukraine’s record-breaking 2021 sunflower seed crop
Sunflower seed production in Ukraine could break records in 2021, with the crop planted on the largest area ever. The weather also looks encouraging.
The sunflower seed crop was sowed in Ukraine on areas of 6.372 million hectares, which is close to last year’s estimate. Ukraine sunflower seed production for the 2021/22 season (September-August) is predicted by market operators to be 16.6-17.0 million tonnes, which could be 30 percent higher than in the current season (13.1 million tonnes, according to Ukraine State Statistic Services).
In 2020, the Ukrainian market also anticipated the biggest sunflower seed production, but unfavourable weather affected the harvest. Hot temperatures combined with extremely low soil moisture turned the initial prospects of an abundant sunflower seeds crop in 2021 into a three-year low.
This year, the situation looks completely different, traders have said. The soil moisture is sufficient and optimal in most areas, and the the condition of sunflower seed plants is mostly good.
Extremely firm prices for both sunflower oil and sunflower seeds in the 2020/21 season were due to lower supplies. In response, Ukrainian farmers expanded areas for the 2021 sunflower seed crop.
Traders said that the Ukraine sunflower seed prices peaked at UAH25,000-26,000 per tonne CPT plant in April 2021 compared with UAH10,000-11,000 per tonne when the season started.
The larger sunflower seed harvest could lead to higher sunflower oil production and exports for the new season. Ukraine is likely to produce around seven million tonnes of sunflower oil in 2021/22 season (September-August), which would be 17 percent higher than in the current 2020/21 season (six million tonnes), USDA forecasted.
Therefore, Ukraine could supply the global market with a record-breaking volume of sunflower oil next season – 6.4 million tonnes (5.4 million tonnes in 2020/21).
Ukraine’s new crop of sunflower oil prices have already eased on expectations of a possibly enormous sunflower seed crop in 2021. Offerings for October-December 2021 delivery fell to $1,000-1,100 per tonne FOB compared with $1,150-1,200 per tonne earlier.
Record crop in Russia could also weigh on prices
Ukraine and Russia are the two leading sunflower oil producers and exporters providing 70 percent of global trade.
Record large sunflower seed sowings in Russia, the second largest player in the global sunflower oil market, are also weighing on prices, despite the fact that export duties on sunflower seeds and sunflower oil have already been set for the new 2021/22 season.
In 2021, Russian farmers have sown sunflower seeds on 9.1 million hectares, which exceeded the initial estimates by 7 percent. According to official data.it is the largest area ever (2020 – 8.3 million hectares). In 2021, Russia is also expected to harvest a record-setting sunflower seed crop of 14.5-15.5 million tonnes (13.3 million tonnes in 2020).
From 1 July 2021 until 1 September 2022, the Russian government set a 50 percent duty to export sunflower seeds, but not less than $320 per tonne in order to try to curb rising domestic food prices.
The Russian market considers the size of the duty to be a restraining move. So, with a record sunflower seed crop, Russia could expand sunflower oil production and increase its supplies for exports. Next season Russia will likely produce 7 percent more sunflower oil compared with the previous season – around 5.5 million tonnes, USDA believes.
Russia also set a formula-based export duty for sunflower oil from 1 September 2021 until 31 August 2022. It is set at 70 percent of the difference between indicative price and the base price ($1,000) reduced by a $50 per tonne coefficient.
But if sunflower oil export prices move to a $1,000 per tonne FOB mark, which is currently seen, sunflower oil from Russia could be shipped duty free.
For the next season of 2021/22 (September-August) good supplies of Russian sunflower oil could stiffen competition in the Black Sea region and weigh on prices.