Volga Baikal AGRO NEWS Update on the Russian Oilseeds Market Development !!!
Oilseeds show margin records. Results of the first half of 2020/21 agricultural year in the sunflower, soybean and rapeseed markets.
Despite the strengthening of state regulation, the oilseed market in the current season looks positive for both farmers and processors. Against the backdrop of a large margin of margin, supported by good domestic demand, agricultural producers are planning to increase crops. At the same time, much will depend on how tightly the prices for sunflower oil will be regulated and whether an export duty will be introduced on it.
The first half of the 2020/21 oilseed season passed for all market participants in alarming expectations. Drought and fears of crop failure against the backdrop of high world prices for oilseeds and oil have given ground for discussion of unprecedented government regulation measures. And they were not long in coming: from January 9 to June 30, 2021, export duties on sunflower and rapeseed were increased from 6.5% to 30%, but not less than € 165 / t. Introduced an equivalent duty on soybeans from February 1 to June 30, 2021. And from January 1 to April 1, the government fixed the upper limits of wholesale and retail prices for sunflower oil at 95 rubles. and 110 rubles / liter, respectively.
Lack of expectations
preliminary showed in 2020 a decrease in the gross yield of sunflower by 13.7% to 13.3 million tons, soybeans – by 1.8% to 4.29 million tons, but an increase to a record rapeseed crop (+ 27.9% to 2, 58 million tons). The volume of soybean production can still be adjusted by updating the data for the Far East. The final total result may be 20-40 thousand tons higher, draws attention to the general director of the analytical company Vladimir Petrichenko. But for sunflower, the real harvest, on the contrary, is most likely by 0.8-0.9 million tons less than announced by Rosstat, the expert believes. “Additional volumes may have appeared on paper just in those regions where sunflower was most affected by the drought – in the Krasnodar and Stavropol Territories, as well as in the Rostov Region,” – he suggests.
The gross harvest of sunflower due to weather conditions has decreased especially strongly in the Volga and southern regions, – says Daria Snitko, head of the Center for Economic Forecasting at Gazprombank. The Volga Federal District lost 15% of the harvest per hectare, the Krasnodar Territory and the Rostov Region – 25%. On the other hand, rapeseed, on the other hand, became the most successful agricultural crop in 2020: an increase in production by 0.5 million tons occurred in fact only due to an increase in yields in the Central Federal District and Siberia, she reports. The gross harvest of soybeans in recent years has shown stability. Last year, a slight decrease in the center of Russia was fully offset by an increase in yields in the Far East, the expert says.
Director General of the Institute for Agricultural Market Studies () Dmitry Rylko echoes the others: the main negative factor that influenced the market in the first half of the 2020/21 season is the weather: drought in the center and in the south reduced the yield of soybeans and sunflower seeds. But the gross harvest of rapeseed has become a record in the history of the country, and for the first time Russia has overtaken Ukraine in this indicator, the expert emphasizes. “This result is due to the fact that the sown areas under winter rape are growing, agricultural technology is improving, and weather conditions are developing successfully. Previously, this agriculture was exotic for Russia, now it is more and more included in the crop rotation, ”he explains.
Prices have broken records
Another significant factor in this agricultural year, according to Rylko, was the “colossal high” prices on the domestic market for all oilseeds as a result of the good world situation amid a 20% depreciation of the ruble. In particular, in February sunflower reached a peak – 50 thousand rubles / ton with VAT on the gates in the Central Federal District (the previous maximum was in the summer of 2020 – 30 thousand rubles / ton). Soybeans rose in price to 48 thousand rubles / ton, and rapeseed – up to 46 thousand rubles / ton. “On the one hand, this has a positive effect on the production of oilseeds, and on the other hand, it negatively affects those who care about the stability of the domestic market,” – the expert says.
In the first half of the 2020/21 season, soybeans on the domestic market rose by 68%, says Daria Snitko. Sunflower prices increased by almost 80% from September to January. For rapeseed, the increase was minimal in comparison with other items – by 37%. She explains the rise in prices by the devaluation of the ruble, as well as by an increase in demand and prices for oilseeds and oils in the world. “The latter is extremely important: for several years the price of oilseeds and oils has been at an unequally low level,” notes Snitko. “This is especially true for sunflower and sunflower oil, which in some periods were inferior even to rapeseed and rapeseed oil.” Due to the pandemic and panic of food importers, all food products have seen a rise in prices in the global market, and of course this has become especially noticeable in non-mass products, where there are few global suppliers. These include sunflower,
Vitaly Shamaev, general director of Agrospiker, says that the rise in prices for oilseeds is associated with the same rapid rise in quotations of vegetable oils at the global level. “Low interest rates by central banks and generous financing of the world economy to overcome the consequences of the pandemic led to an influx of money into the markets and made the dollar cheaper, from which the prices of goods went up,” he explains.
The increase in prices for oilseeds in Russia was more active than in the world, due to the devaluation of the ruble, says the director of the analytical centerAndrey Sizov. He explains the active dynamics of growth in prices for soybeans on the world market with good demand from China, where the pig population is rapidly recovering after ASF outbreaks. Domestic sunflower oil prices rose on the back of higher world sunflower oil prices, which are derived from the more tradable palm and soybean oil prices. Starting from September and already by December, prices for sunflower and sunflower oil have doubled.
In the second half of December, prices on the domestic market fell back by 10-15%, although the world market was growing, which was associated with the announcement of an increase in duties on sunflower. “However, in January – and we predicted this – the reduction was completely redeemed, and by the end of the month prices were renewing records against the background of continued growth in world prices and a decrease in the likelihood of imposing duties on oil,” the expert says. “Such price levels allowed farmers in Russia as a whole to have fantastic profitability.”
The world oil market is a pricing factor for oilseeds, reminds Vladimir Petrichenko. However, this season, in addition to the fact that there were high prices for all oils, the price of raw materials was influenced by the decision of the Russian government to restrict the export of oilseeds. Because of this, the price of sunflower in the world has risen sharply: if in September it cost $ 500 / t FOB Odessa, then in February it was already $ 700 / t. The situation was approximately the same in the oil market: against the background of discussions on increasing the duty on oilseeds in Russia, Turkey began to actively buy sunflower oil and thus warmed up the Black Sea market. It has risen in price from $ 850 / ton in September to $ 1.27 thousand / ton in early February, – the expert cites the figures.
According to Petrichenko, with the start of the last month of winter, the market has already approached a local maximum. “It is overheated, I do not think that the price will move upwards, rather, the market will cool down in February, March and April against the backdrop of a new harvest from South America,” – he commented then. – Sunflower, soybean and rapeseed oils will become cheaper, and with them raw materials. In addition, there is a tendency for the ruble to strengthen in Russia, which means that domestic prices will not grow. Reversing the downward trend in the world market could only be the government’s decision to impose an export duty on oil – in this case, prices will receive an additional impetus and begin to rise again.
In February, a downward trend was outlined in the oilseed market, Shamaev confirmed. “Prices cannot rise forever, they are already overbought, and the new crop is trading cheaper,” – he said then.