The first half of 2010/11 MY is over for the Russian oilseeds market. During the stated period, sunflower oil producers faced and continue to face the range of difficulties. What is the reason of the current situation? The downstate material will tell about the features of the current season, the price tendencies, which appropriate for the Russian non-refined sunflower oil market in the current season. In addition, we try to forecast the development scenario on the market in the short and long-term prospects.
Features of the season-2010/11
The active production capacities growth during the last few seasons promoted the essential increase of the domestic production of crude sunflower oil. However, we should note that from the beginning of the season-2008/09, the situation changes into the opposite side – production volumes of crude sunflower oil face the constant decline.
The main factors, affecting the market of crude sunflower oil at the beginning of the season-2010/11:
low level of sunflower seed production;
sunflower seeds high prices;
early start of work of oil extraction plants;
export supplies volume decline;
import volumes growth.
The current season is rather difficult for producers. Before the beginning of the harvesting campaign there were a lot of talks that sunflower seeds crop low level may cause the fact that a lot of producers of sunflower oil will not be able to satisfy own raw-material demands and the certain part of the enterprises will delay due to the raw-material absence. Indeed, half year late some processors had to reorient on the processing of the alternative oilseeds (soybean rather often), to decrease production volumes, and in some cases even to stop production capacities. Especially it was about the small-capacity enterprises, which from the beginning of the season work with the low level of profitability (due to high prices for raw-material and low ones for oil). However we should note that the current situation was caused not by sunflower seeds shortage, but by the low demand level for crude sunflower oil on the domestic market. What facts caused the current situation?
The beginning of the season is the only time when sunflower oil market faced the prices increase. During September-October the low production volumes and sunflower oil supplies low level on the domestic market promoted the increasing tendencies. It was on the base of rather high prices level for the raw-materials, that were non-typical for the beginning of the season. Besides, the range of the factories did not supply oil for free sale, they just realized the supplies within holdings for its further processing. However, soon sunflower supply volumes increased, and prices growth stopped. The increase tendency was placed by brief stabilization and went down for the decline tendency, which is still active on the market. The main factor, having the impact, was that oil producing enterprises, holding the sales while waiting for the favorable moment, increased sunflower oil offer volumes; and due to the fact that a lot of buyers had already formed the certain stocks. This all used to happen and still happens along with sunflower oil supplies high level, mainly from Ukraine. Besides, the certain part of fat-and-oil enterprises due to high cost of domestic produced oil preferred and still prefers purchasing the cheaper palm oil. Due to the current fact, the share of the Russian sunflower oil consumption essentially decreased.
As about the current situation on the domestic market of crude sunflower oil, the most part of oil producing enterprises work with non-full loading. The main reason is oil supply surplus on the domestic market. Thus, according to the official data, during the period of September-October 2010/11 MY the enterprises produced about 1.15 mln tonnes of sunflower oil (to compare: last year the current rate was 1.29 mln tonnes). At the same time, the domestic consumption during the period of September-January of the current season totaled 766.8 thsd tonnes (last year during the same period – 784.7 thsd tonnes). However, the situation mainly is worsened by the essential import volumes increase and the export volumes decrease. Thus, sunflower oil import volumes during the period of September-January of the current MY totaled 88.02 thsd tonnes, up almost 68% from the last year rate. On its turn, sunflower oil export volumes essentially decreased. During the period of September-January of 2010/11 MY the country exported about 49.5 thsd tonnes (last season – 192.25 thsd tonnes).
Prospects of development
According to estimations of the market participants, on the large and middle-scale enterprises as of February 2011 sunflower oil stocks totaled about 417.4 thsd tonnes (according to the estimation of APK-Inform Agency, sunflower oil ending stocks in all categories of the enterprises of Russia as of February 1, 2011, totaled 716.7 thsd tonnes). Taking into account all the factors (import/ export volumes, production/ consumption), it is probable that supply/ demand disbalance will be rather essential during the nearest prospects. According to our estimation, the domestic production decline will total about 26.5% (compared to the last year level) – 2.064 mln tonnes.
It will be on the base of sunflower export supplies decrease and import volumes increase. Last year the country exported about 505.2 thsd tonnes, down 40.7% compared to the current level – till 300 thsd tonnes. According to our Agency forecasts, in the current season sunflower oil import volumes will total about 140 thsd tonnes, up 85.5 thsd tonnes compared to the last year rate.
As about the prospects of the price situation on the domestic market, with so low level of demand and production level saving the last year positions, the prices for sunflower oil will continue to decline in the short-term prospect. Besides, the further price situation will depend on the export prices. Fair domestic supply and high competition level from the side of the Ukrainian exporters will continue to press on sunflower oil export prices in Russia in the short- and middle-term prospects.
expert of the Russian market of oilseeds of