Ukraine and Russia cover 80% of the global exports of sunflower oil

Source

APK-Inform

2976

 

The season-2016/17 for the Ukrainian and Russian markets of crude sunflower oil demonstrated record volumes of exports, due to high production volumes of the commodity. According to APK-Inform figures, Ukraine increased the supplies of sunflower oil on the foreign market by 28% compared with the previous season, in turn Russia increased the exports by 36%. So, it can be said that the market segment of sunflower oil in the Black Sea region develops in very active rates.

 

Ukraine

During 11 months of the season-2016/17, Ukraine showed rather high level of sunflower oil exports, which became a record in the country`s history. But in the last month of the season, when it was possible to continue the upward trend, most oilseed processing plants stopped for scheduled maintenance works.

In the reporting season (September-July), Ukrainian oil-extraction enterprises produced over 6 mln tonnes of sunflower oil, due to the growth of sunflower seed harvest volumes. Since the country prefers exporting the major produced volumes rather than consume on the domestic market, APK-Inform analysts estimated the exports of sunflower oil at 5.75 mln tonnes, against 4.5 mln tonnes in the season-2015/16. It should be noted that during 11 months of the current season, Ukraine shipped nearly 5.5 mln tonnes on the global market. The export geography was quite extensive, and Ukraine sold sunflower oil to 125 countries.

 

 

For 9 recent years, India became the main country-importer of sunflower oil from Ukraine. According to the customs statistics, in September-July of 2016/17 MY India purchased 1.88 mln tonnes of Ukrainian sunflower oil (up 46% compared with the same period in the season-2015/16), and in the whole season the export volumes can even exceed 2 mln tonnes. However, in late March 2017 the Government of India decided to reduce the import duties on sunflower seed from 30% to 10%, in order to increase the supplies of sunflower seed from the Black Sea countries, and reduce sunflower oil purchases. Thus, in 2016/17 MY India purchased 1.26 thsd tonnes of sunflower seed from Ukraine, as opposed to 0.55 thsd tonnes in the previous season. And in the season-2014/15, Ukraine did not supply the oilseed to the country at all.

It is worth noting that in 2016/17 MY the supplies of Ukrainian sunflower seed on foreign markets increased in 2.3 times compared with the previous MY, and totaled more than 190 thsd tonnes, and became the maximum figures for five recent seasons. Also, Russia increased its sunflower seed exports to 322 thsd tonnes, against 62.5 thsd tonnes in 2015/16 MY.

At the same time, large-scale Indian importers of sunflower oil reported that the imports of sunflower seed to the country remained unprofitable, despite reduction of the import duties, as well as required high logistics costs. It is worth noting that the major Indian importers (Solvent Extractors` Association of India) continues gradually increasing the demand for Ukrainian sunflower oil, and in 2017/18 MY they even plan to increase the imports.

During 4 recent seasons, China remained the second largest importer of sunflower oil from Ukraine. At the same time, in 2016/17 MY the country slightly reduced the import volumes compared with the previous season. According to the customs statistics, in September-July China purchased 540 thsd tonnes of Ukrainian sunflower oil (10%), and preliminary estimations for the whole season provide the figures at nearly 590 thsd tonnes. In the season-2015/16, China imported 620.6 thsd tonnes of sunflower oil from Ukraine (14% of the general exports), and in 2014/15 MY - 451.5 thsd tonnes (12%).

For the second consecutive season, Spain kept its leading positions and once again became the third largest country-importer of sunflower oil with a share of 9%. According to the customs statistics, in September-July period Spain imported 484 thsd tonnes of Ukrainian sunflower oil, and preliminary estimations for the whole season provide the figures at nearly 520 thsd tonnes. In the season-2015/16, Spain purchased 382.9 thsd tonnes of the product from Ukraine.

 

Sunflower oil stocks → pressure on prices

Despite the record exports of sunflower oil from Ukraine, its stocks in the Ukrainian seaports also significantly increased. According to the sea terminal reports, as of August 17, 2017, sunflower oil stocks in the ports totaled nearly 208.3 thsd tonnes, up 60% compared with the same date in 2016 (128.8 thsd tonnes).

Congestion of the port capacities provided a significant impact on trade activity rates on the export market of sunflower oil, as well as offer/bid prices. Thus, last season the export market of crude sunflower oil showed a downward trend for bid prices in terms of rather sufficient number of offers.

In addition, the forecasted record harvest of soybeans in 2017 contributed to some decline of the prices.

In the first quarter of 2016/17 MY, the market of crude sunflower oil faced some consolidation of the prices. However, since December to mid-April the bid prices in the ports of Ukraine fell by 60 USD/t, and varied within the range of 715-720 USD/t FOB.

Since the end of April to August 2017, the prices somewhat fluctuated under the impact of the global soybean complex, and at the end of the season a bullish trend started dominating. So, in the third ten-day period of August the bid prices increased to 760-770 USD/t FOB (delivery in September-December).

 

 

 

Russia

During three recent years, Russia demonstrated a rapid growth of the exports of crude sunflower oil, due to the similar growing trends in production of the commodity on the domestic market.

So, the record harvest of sunflower seed in 2016/17 MY in Russia, which APK-Inform analysts estimated at the level of 11 mln tonnes, and increasing of oilseed processing capacities in the country, allowed to oil-producing companies to produce 4.4 mln tonnes of crude sunflower oil (data for September-July + forecast for August). The figures broke a record, and exceeded the production rates in 2015/16 MY by 12.6%.

In turn, the domestic consumption of sunflower oil did not significantly change compared with the previous season, which allowed increasing the export volumes. Thus, in the season-2016/17 the exports of sunflower oil from Russia can reach 2.1 mln tonnes (up 36%), which will be a new record for the Russian oilseeds market.

However, Russian traders had to do much work to achieve the record export figures. In the beginning of the season, Turkey, which is the key consumer of Russian crude sunflower oil, increased the import duties on the product from 12% to 36%, and processed sunflower oil – from 50% to 67.5%. However, in the first half year Turkey imported almost 330 thsd tonnes of Russian sunflower oil (up 6.6% compared with the same period in the season-2015/16). Also, there was the second wild card which significantly affected the shipped volumes - on March 15, 2017, Turkey imposed the minimum value of sunflower oil at the sum of 1`500 USD/t. Market participants had to look for alternative distribution channels, which resulted in the April exports of sunflower oil (down 66.1% compared with March 2017, or 147.7 thsd tonnes), and Russia shipped the major volumes of sunflower oil to Egypt – 34.5 thsd tonnes. Generally, during 11 months of the season the supplies of Russian sunflower oil to Egypt totaled 306.5 thsd tonnes. In May 2017, Turkey cancelled the reporting trade restrictions. During 11 months of the season, Turkey imported 517.2 thsd tonnes of Russian sunflower oil.

 

 

Also, in March 2016 Iran imposed 10% import duties on sunflower oil. At the same time, the measure did not have any impact on the volumes of sunflower oil supplies to the country. In the season-2016/17, Iran closed the TOP-3 of countries-importers of Russian sunflower oil, and in September-July of 2016/17 MY Iran shipped almost 180 thsd tonnes of the product.

 

Anti-record: prices at the level of 2009

As for trade activities throughout the whole season-2016/17, the market mainly demonstrated rather low demand for crude sunflower oil, due to some imbalance of offer/bid prices. On the one hand, traders were pressured by low foreign exchange prices in the ports on FOB terms, and on the other hand, Russian producers failed to lower the offer prices due to the high RUR prices for oilseed raw material on the domestic market. Many traders had to decrease the prices, lowering their marginal profit.

During the first 7 months of the season, the market segment faced a bearish trend. Thus, in April 2017 the offer prices for crude sunflower oil dropped to the figures of 2009. The minimum selling prices for the product varied at the level of 685 USD/t FOB. This situation developed in such way, because sellers planned to attract new customers of Russian sunflower oil.

Due to expectations of the seasonal reduction of carry-over stocks, in May-August period market operators started slightly increasing the prices. At the end of August 2017, the offer prices reached 765 USD/t FOB.

 

 

Despite the expected increasing of sunflower oil consumption in the world to 16.9 mln tonnes (16.4 mln tonnes in the season-2016/17), the USDA forecasted some reduction of the exports of crude sunflower oil from Ukraine and Russia, taking into account the expected decline in the harvest volumes of sunflower seed in the reporting countries in 2017/18 MY (according to forecasts of APK-Inform analysts).

Thus, the forecast of crude sunflower oil exports from Ukraine totals 5.45 mln tonnes (down 5% compared with the season 2016/17). In 2017/18 MY, sunflower oil exports from Russia will likely remain the same - 2-2.1 mln tonnes.

Also, most traders agree that in the short term the purchasing activity rates will be low, due to a sufficient number of offers for the foreign market. At the same time, bid prices for sunflower oil of the harvest-2017 will reduce by nearly 10-15 USD/t FOB compared with the last year prices.

 

Comment

Julia Ivanitskaya, oilseed market analyst at APK-Inform Agency

After analyzing the commodity structure of foreign trade, it is important to note that in 2016/17 MY the exports of fat-and-oil products from Ukraine and Russia demonstrated the upward trends in individual lines with the higher cost, which shows some development of the market and increasing of its capacities not only in natural, but also in monetary terms.

Thus, in terms of the general increase in the exports of all types of sunflower oil from Ukraine by 28%, the foreign supplies of crude oil increased by 26%, refined oil - up 51%, high-oleic oil - up 2.3 times, and margarine - up 57%.

The exports of Russian sunflower oil of all types (excluding the Customs Union) increased by 46%, including crude oil - up 51%, refined oil - up 26%, and packed oil - up 19%.

It is important to keep the upward trend in 2017/18 MY, expand the product range and sales markets.

 

Viktoria Zelenaya, Anna Skotar, oilseed market experts at APK-Inform Agency.

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