Prices and crop - new records and letdowns of oilseed market - APK-Inform

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APK-Inform

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As of September 10, the average bid prices of Ukrainian sunflower oil reached 7-years high and totaled 915 USD/t FOB. A number of reasons caused it.

- Export of Ukrainian sunflower oil reached record high in 2019/20 MY and exceeded 6.6 mln tonnes. High demand was observed from China, India and the EU at the start of 2020/21 MY that supported the prices.

- Deterioration of sunflower seed crop prospects due to long-lasting drought in Ukraine and quality concerns raise the risks of feedstock appreciation and decline of processing margin. This strongly supports the prices.

- Decline of sunflower seed crop will be observed in Russia as well, that additionally supports Ukrainian prices. Russia exported record volume of sunflower oil amid high external demand. It caused the decline of oil stocks to the record low level and resulted in low export of sunflower oil in summer period.

- Growing spread between Ukrainian and Russian prices is one more peculiarity of the start of 2020/21 MY. We consider the current supply of sunflower oil in Russia is very low, and prices are mainly declarative that will remain until the large volumes of new-crop oil will enter the market.

Further appreciation of sunflower oil is slightly limited by the decline of crude oil prices. However, the influence of this factor is insignificant.

We suppose that there will be no notable decline of sunflower oil prices in the short-term. Harvesting campaign has just begun. Mass processing of the new crop will start in late September. Thus, the significant price corrections will be observed after the size of the crop and quality characteristics will be clear in both Ukraine and Russia.

We forecast Ukraine to decrease the production of sunflower oil to 6.6 mln tonnes and export - to 6.2 mln tonnes. Russia will produce 6 mln tonnes and export 3.3 mln tonnes of sunflower oil.

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