Volga Baikal AGRO NEWS Update on the Sunflower Prospects !!!
Against the background of the expected record harvest this year in Russia, sunflower began to become cheaper.
Prices are going down amid expectations of a record harvest and the introduction of export duties.
The Sovecon Analytical Center has raised its forecast for the oilseed crop this year amid expectations of a higher sunflower harvest. According to the updated calculations, which RBC has reviewed, the sunflower harvest may become a record in 2021 and reach 15.9 million tons, although only 15.4 million tons were expected in May. The previous record was recorded in 2019 — 15.4 million tons. In 2020, only 13.3 million tons were collected.
The fact that a record sunflower harvest is expected in 2021 is confirmed by Mikhail Maltsev, Executive Director of the Fat and Oil Union of Russia, and Maxim Basov, CEO of Rusagro, the largest producer of raw sunflower oil. The forecasts for the sunflower harvest are really “very good”, this is facilitated by an increase in acreage, says a representative of the Efko group.
Sunflower was sown on 9.2 million hectares, which is 11% higher than last year. This year, the gross harvest of oilseeds is expected to be at least 22.5 million tons, including sunflower — more than 14 million tons.
a representative of the Ministry of Agriculture said.
What happens to the prices of manufacturers
Now the expectation of a higher harvest in Russia, as well as in Ukraine, in the two largest sunflower oil exporting countries, has led to a “landslide” drop in prices on the world market in recent weeks, says Andrey Sizov, director of Sovecon. According to him, export prices were actively declining in the first half of June due to weak demand for Black Sea oil from importers (Turkey, China and India are among the main buyers), expectations of a record sunflower harvest and a decline in world prices for soybean and palm oil. If a few months ago, world prices for sunflower oil peaked at $1.7 thousand per ton (on FOB terms, that is, the seller pays for delivery and loading on board, in the ports of the Black Sea), now they are around $1.1 thousand per ton, – cites the example of Sizov.
What will happen to prices next
The price of sunflower oil on the Russian market is determined by the price on the world market, and this, in turn, affects the cost of sunflower, explains Andrey Sizov. The export duty on sunflower oil that has entered into force has an additional impact on the decline in domestic prices. Ruble prices for oil and sunflower in the new season will be relatively low, the expert believes.
From July 01, 2021 to August 31, 2022, sunflower is subject to export duty in Russia at a rate of 50%, but not less than $ 320 per ton. In addition, a floating export duty on sunflower oil will be introduced from September 1, 2021 to August 31, 2022. Its size will be 70% of the difference between the base price of $1 thousand per ton and the indicative price (the arithmetic average of market prices for the month), reduced by the value of the correction factor ($50 per ton). The duty will be effective at an indicative price of $1050 per ton.
The damping duty on the export of sunflower oil and the duty on the export of sunflower seeds will allow preserving raw materials for processing within the country and ensuring a “stable level” of oil prices on the domestic market, the representative of the Ministry of Agriculture assures.
Duties, Sizov objects, mean large exemptions for the oil processing sector, but they will be shifted to agricultural producers. The expert does not exclude that if prices fall, producers will begin to reduce sunflower crops due to loss of profitability. If in 2020 sunflower cost 55-60 thousand rubles per ton, now the price for a new crop is already more than twice lower — 22-25 thousand rubles per ton.
In retail, prices for sunflower oil are “too low” for processors to feel comfortable, the cost should be “about 1.5 times higher”, – Sizov is sure.
Oilseeds have always been more marginal compared to other agricultural crops, the demand for them is high, they are sown more from year to year, so it is not necessary to say that someone will refuse to produce them, I do not agree with Sizov Maltsev. In his opinion, domestic prices for sunflower, taking into account the export duty, will be in the region of 30-35 thousand rubles per ton.
Now prices are falling as a result of falling world prices and the expectation of the beginning of the export duty on oil, Maxim Basov clarifies. The duty will allow balancing the prices of sunflower seeds and bottles of oil on the shelf and will remove the need for price agreements from the agenda, the representative of Efko adds. According to him, sunflower will remain the most profitable crop in crop production and agricultural producers will be able to get a good return.