Prospects for the Russian market of sunflower and its by-products in 2016/17 MY

Source

APK-Inform

25359

Season-2015/16 was rather unfavorable for many operators of Russian fat&oil market. Significant growth of prices on domestic market and decline of prices on global market led to slower pace of exports. However, despite these factors, exports of sunflower and sunflower oil from Russia increased by 56% and 4% correspondingly in 2015/16 MY. APK-Inform forecasts Russia to harvest record sunflower crop in 2016/17 MY (+8.2%) that will encourage sunflower oil and meal exports.

 

Sunflower

Russian farmers keep on increasing planted area under sunflower. In 2016, the oilseed area reached 7.5 mln ha, up 7.05% in comparison to year ago. Weather was generally favorable that can positively influence on yield forecasted at 14.7 c/ha (+1.38%). Sunflower crop can reach record 10.26 mln tonnes that will promote the oilseed exports and reduce imports. APK-Inform forecasts sunflower exports from Russia at 100 thsd tonnes (+59.87%) in 2016/17 MY. Lowering of export tax from 9.88% to 6.5% (but not less than 9.75 EUR/t) since September 1, 2016 will also stimulate sunflower shipments. The oilseed imports can decline to 80.94 thsd tonnes (-30.29%) due to high inner consumption and import-replacement program.

 

In early September, many processors in European part started to slightly decrease bid prices waiting for high supply of new crop. However, during harvesting campaign sunflower supply was rather moderate. As result, by the end of the month prices returned to 22000 RUR/t CPT. High competition between processors forced some companies to voice higher price – 23000 RUR/t and sometimes even 24000 RUR/t CPT.

 

Sunflower oil

APK-Inform forecasts Russia to produce 4.16 mln tonnes of sunflower oil in 2016/17 MY (+7.41%) due to higher sunflower crop. Export of the product could increase by 15.08% to 1.5 mln tonnes. Turkey (38.78%), Egypt (12.84%) and China (10.21%) were the main importers of Russian oil last season.

 

During the first month of 2016/17 MY majority of crude sunflower oil producers did not have enough supply due to limited sunflower stocks at processing plants. Oil producers started to crush the oilseed since the second half of September. Signing of forward contracts was slow. By the end of September, offer prices for sunflower oil totaled 51000-52000 RUR/t EXW. Buyers’ interest was low at such prices and they were expecting for better offers due to growing supply.

Trade activity on export market was low. Mainly market operators prefer to avoid long-term contracts, as they were afraid of decline of demand prices (USD/t, FOB) on external market and increase of offer prices (RUR/t, EXW) on domestic market. In late September, demand prices for Russian sunflower oil mainly did not exceed 760 USD/t FOB while minimal offer prices totaled 765 USD/t FOB.

 

TOP-9 exporters of sunflower oil in Russia in 2015/16 MY*

No

Company

Volume, `000 tonnes

Share, %

1

Aston LLC

257.65

19.77

2

EFKO Group

126.03

9.67

3

Yug Rusi LLC

98.44

7.55

4

NMGK Group

86.51

6.64

5

SolPro LLC

77.6

5.96

6

Nefis-Boiproduct JSC

61.48

4.72

7

Artis-Agro Export LLC

60.1

4.61

8

SamaraAgroPromPererabotka CJSC

51.05

3.92

9

DonMasloProduct CJSC

39.63

3.04

 

Other

444.6

34.12

 

Total

1303.09

100

* According to the Federal Customs Service

 

Sunflower cake/meal

APK-Inform forecasts increase of sunflower meal/cake output by 6.91% to 4.06 mln tonnes.

Export of the product can reach 1.33 mln tonnes in 2016/17 MY, up almost 180 thsd tonnes per year. Turkey (32.16%), Latvia (25.54%) and Italy (14.6%) were the main destinations for Russian meal/cake in 2015/16 MY. Moreover, many sellers expect to supply significant volumes to Belarus. Previously, the country mainly imported meal/cake from Ukraine, however after a ban to import the product from certain Ukrainian oblasts with ASP some companies from Belarus plan to buy Russian meal/cake. Russia did not supply meal/cake to Belarus over the last 10 years.

 

 

During the first month of 2016/17 MY supply of sunflower meal/cake was seasonally low. Thus, trade activity both on domestic and external markets was slow.

Trade activated in late September. Inner offer prices totaled 13300-14500 RUR/t EXW depending on quality. Offer prices in ports made up 190-205 USD/t FOB while maximal demand prices did not exceed 195 USD/t FOB.

 

Prospects

Mainly market participants suppose that season-2016/17 was as difficult as previous one was despite record sunflower crop and higher exports. “Processing capacities exceeds crop volume almost 1.5 times, thus processors margin will be low this season. Domestic prices for oil and meal depends on export prices that can decline in short-term”, - one market operator comments.

At the same time, high competition between processors can stimulate sunflower price increase. However, unattractive prices in ports will limit long-term contracts. Profitability of oil and cake/meal production for many producers will be under question.

“Prices for sunflower to be rather stable during the 1st quarter. Average demand prices will stay at 21000-23000 RUR/t CPT.

Demand prices for sunflower oil on export market can increase by 5-10 USD/t in November-December due to close festival period and higher trade activity. In February-March, Argentinian soybean and oil will enter the market that can likely to drive prices down by 20 USD/t.

Sunflower meal trade activity on external market will be limited. Demand prices in ports can decline to 170 USD/t in short-term”, - said S.Otzupko, analysts of Russian oilseed market

To conclude we can say that the season should be successful for production, but not for prices. Market operators pay attention to supply of sunflower at processing plants as it will influence on prices of sunflower oil and meal.

 

Anna Skotar, APK-Inform Agency

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