In the recent years Russian market of sunflower seeds and derivative products has gained a record harvest of sun seeds, sunflower oil and oilseed meal/ cake production increase. The current trends became a motive for us for the new events holding, the ones as the international Conference «Oilseeds & Oils 2014", to be in Barcelona on October 6-7, 2014. Thus, the Conference speaker on the topic: " Russian market of oilseeds and vegetable oils: results of 2013/14 season and perspectives of 2014/15 MY" – the Analyst of the holding company "Solnechnye Produkty" Vladimir Zhilin kindly agreed to share a brief assessment of 2013/14 MY and forecast for the coming season.
- Please provide you estimation for the passed season? What challenges did your company face in 2013/14 season?
Thus, 2013/14 MY was balanced. There was high general production, so most of the processing companies were able to work during the whole season, but still there was no sunflower seed prices essential decrease - the price didn't fall lower of a reasonable level of profitability for agrarians. The downward trend was short-term due to the seeds high moisture content and as consequence the large-scale costs for drying.
The weather was a big problem for agrarians. The rains caused essential difficulties for harvesting, thus the large-scale areas were left unharvested. Besides, the agrarians faced losses due to the seeds acidification being limited by crop high yield. Still, the sunflower unharvested areas wintered rather well and were cropped in spring, but not completely.
- Why did the sun oil exports double in 2013/14 MY compared to the previous season?
Note, in 2012/13 MY the sunflower seeds general production exceeded 8 mln tonnes, meanwhile in season 2013/14 - exceeded 10 mln tonnes. Thus, sun oil production rate increase updated product exports owing the domestic consumption stability. The similar situation to be in the near time – sun oil exports will dependent on the general production.
- Despite the sunflower seeds high crop in 2013, a lot of processing companies faced the oil and meal/ cake shortage during the season. Did your company face the same situation and how did you satisfy the buyer?
In the end of 2012/13 season there was the sun oil shortage on the domestic market. As a result, we started 2013/14 MY with the product limited stocks being followed by high demand on the stated market in the first months of the season. The rains delayed the sunflower seeds harvesting campaign beginning, so the processing was also late. Still the oil sun production has been started quickly, and there was the agiotage on the market. So it is not about the deficit but the balance of the domestic supply and demand in the first half of the season. Meanwhile, in the second half of the season the global market faced the sun oil prices essential decrease compared to the soybean and rapeseed oil due to the record crop of sun seed, by causing the export demand and market balancing, by providing good sales for processors. The sun meal domestic market has been facing the active export demand during all over the season.
As for our company, this season we have supplied low volumes of sun oil on the domestic market, being more focused on the exports and satisfaction of the Holding's needs. Meanwhile the stated rate for sun meal was high without exports affecting.
- In 2014 it was evident the sunflower seeds crop to reach record of the recent 10 years. However, the agrarians are worried due to the drought being faced by some regions. What will be the general production of sunflower seeds in 2014/15 MY?
On my opinion, it is unreasonable to provide the current season estimations being based on the last year yield rates.
It is necessary to admit that the fields condition is worse compared to the previous season, but nothing awful. Thus the yield rate will be lower than in 2012/13 MY, but higher of the average rate. Do remember about agricultural machinery quality improve and the agricultural technologies development. Nowadays the sunflower general production forecast is nearly 9.5 mln tonnes.
- Ukraine is in TOP-3 of sun oil exporters. How will the situation in the South-East of the country influence on the Russian export market?
I expect that the situation in the East of Ukraine will not affect the export market. According to the current estimates the crop acreage exceeds the previous season result and the productivity to remain on rather high. Thus, there is expectation of the situation in the South-East to be resolved, so the harvesting campaign will pass as usual.
- What should the market participants expect in 2014/15 season? What effect will the world market have on sunflower and its by-products?
Now we should back to the previous seasons which caused the current situation. Note, in 2012 in South America and in the USA the general production of soybeans essentially decreased due to the drought. Meanwhile, in 2011, in the United States the stated rate was low, and the prices rose due to the soybean mean global demand increase. However, the situation changed. In autumn 2013, in the United States the soybean crop was rather high and in spring 2014 South America harvested a record crop owing the favorable weather conditions. Actually in autumn 2014, United States to harvest the record crop of the oilseed, so the prices to decline.
Whether the oilseeds global market prices grow in the coming season – is under the question. The prices for maize remain low and meanwhile wheat prices have decreased in the current season due to the high general production. Thus, the soy remains the best alternative for agrarians, which means that the soybean global acreage not to be reduced in the next season.
Considering the current conditions apart from weather problems or other difficulties, so it is necessary to wait until the growing consumption to reach the production level, which can take a number of years.
Besides, other oilseeds and their by-products depend on soybean. The soybean meal prices summer decrease caused the same trend development for other meals so we started the new season with low prices. Meanwhile in the current season in Europe the rapeseed harvest is very high. The growth of the soybean oil production owing the active processing of soybean caused the prices rise for other oils. The continuous growth of palm oil production was the reason for supplies increase. As a result, the price of soybean oil has been in the red sector for almost two years and it is difficult to say when it will be over because there are no any other factors to increase prices up to the high level of previous years.
- What prices of sunflower and by-products will be declared for the new season start?
In the new season the Russian prices for sunflower and its by-products will be determined by the global market. Thus, in the current season there will be the essential increase of sun oil global production, so it will compete with other fluid oils and it will be the price competition, i.e. next season sun oil price to be under the soybean rate. So in the current season by-products export prices, being the guide for the domestic market, and for seed market as well, to be rather low. So the new season entering is rather smooth – there is no essential deficit on the oilseed and meal markets as well. The domestic prices have already reached the export level and to be lower rather soon.
The situation on the vegetable oils market directly affects the sunflower prices on the domestic market. The USD current rate partly compensates the low export prices, but it is influenced by the risks related to the current situation in Ukraine. If the situation in Ukraine is stabilized the USD rate will decrease and the domestic prices will fall too.
- Please share the company's plans for the new season
We plan to continue to be active, to process oilseeds, to sell veg oil and meal on the domestic and global markets as well, in order to develop the new export destinations. Also we aim to expand our activity and start to work with other oilseeds, as with soybeans and rapeseed and alternative crops as well, with camelina primarily. Our company has been researching the camelina for a long time and it is worth to note that oilseed is rather prospective crop. It is a new crop for Russian and global markets, but its global development is active and there are active sales of its by-products and they are not limited by biodiesel only. Thus, we seriously consider the possibility to work on camelina the next season. Unfortunately, in the current season the agrarians faced looses while harvesting the camelina due to the unfavorable weather conditions.
Remind
The holding "Sun Products" is a vertically integrated company, which is in the TOP-3 of leaders of the Russian market of vegetabgle fats and oils and joins the largest companies in the industry: Saratov Oil Factory, Moscow Fat Plant, Novosibirsk Fat Plant, Atkarsk oil extraction factory, SWC Armavir, JSC "Elevatorholding", which consists of 7 elevators. The holding was founded in 2004, employs nearly 5 thsd employees, and to date takes the second position in Russia on sunflower seed processing volumes, and is one of the TOP producers of mayonnaise with a market share of 14%, is the second largest producer of margarine products, as well as the largest CIS producer of soap.
Interviewed by Anna Skotar, APK-Inform
