Slippage of the harvesting campaign rates, long-lasting heavy rains, deficit of sunshine and, as a result, immature oilseeds and low-quality condition – the beginning of 2017/18 MY for the Russian market of sunflower seed demonstrated the following factors only. Nevertheless, Russia managed to harvest almost 10.5 mln tonnes of the oilseed, which became the second largest figures for 10 recent years.
Sunflower seed: dependence on quality
In 2017/18 MY, the general harvest of sunflower seed in Russia totaled 10.5 mln tonnes, a decrease of 10% compared with the previous season figures, despite the initial forecasts of many analysts of the leading agencies concerning the record production of the oilseed in the current season. The shortfall in production developed due to reduction of the yield indices in the period of sunflower ripening – down almost 11%, to 1.43 t/ha.
In terms of the insufficient level of sunshine and heavy rains in the period of the mass harvesting campaign, in 2017 Russian agrarians harvested not only shrinked sunflower seed, but also with high moisture content, which led to some increasing of its acid value. Depending on the region of production, the rate of moisture content in sunflower seed varied within 20-50%, and the acid value reached 15 КОН. At the same time, agrarians, which had the oilseed with quality characteristics meeting the GOST requirements, chose not to make any sales, and waited for a significant price growth.
Thus, in the first half of the season most processing enterprises had to purchase oilseed raw materials of low quality only, and make additional treatment works (dry). Under the reporting circumstances, many plants reduced their prices while purchased such sunflower seed by the following ratio: excess moisture by 1-1.5% compared with the GOST = minus 1-1.5% of the established price. Therefore, many representatives of plants considered wet oilseed as a nice bonus, but not the adverse situation on the market, because some cheapening of raw materials contributed to the improved economic performance of the enterprises.
Nevertheless, despite some declining of the oilseed quality in Russia, since mid-November 2017 the market demonstrated a low-scale bullish trend. The trend appeared, due to the desire of oilseed processors to attract large-scale stocks of high-quality sunflower seed. So, as of mid-March the bid prices increased by nearly 2`000-2`500 RUR/t CPT compared with the previous 4 months. At the same time, the prices increased by 200-500 RUR/t (depending on dates) compared with the same month last year.
Oilseed by-products: aftermath of low-quality raw materials
The limited supply of high-quality sunflower seed also impacted on the production volumes of sunflower oil and meal/cake. For the first 5 months of the season, Russian oil-producing enterprises produced 2.14 mln tonnes of sunflower oil and 2.1 mln tonnes of sunflower meal/cake, down 3% compared with the last year figures on the same date. Decreasing of sunflower oil production did not make any impact on the export shipments of the product: for the first 5 months of the season (including January estimations), the exports totaled 1.05 mln tonnes, up 19% compared with the last year figures.
As for sunflower meal/cake, in the current season many producers preferred selling the products on the domestic market. The situation developed, due to more attractive prices in RUR terms, as well as reduction in the product quality, in particular low protein content (down 2%) in terms of usage of low-quality raw materials in the production. The reporting trend led to the fact that in September-January of 2017/18 MY the exports of sunflower cake and meal from Russia decreased by 20.5% compared with the same period last season, and totaled 0.57 mln tonnes.
Also, the market of sunflower by-products faced a bullish trend. However, the trend developed not only in terms of increasing of the purchasing prices for raw materials, but also due to the growth in buying activity. Since November 2017, many producers of sunflower oil and meal/cake starting reported on conclusion of large-scale contracts for the supply of their products in 1-1.5 following months. Also, it should be noted that bid prices on the market of sunflower meal exceeded the last year's figures, due to high demand rates.
As for the market of sunflower oil, the reporting upward price dynamics developed for 3 months only – in the period from the second half of November 2017 to the second half of February 2018. Since mid-February, many sellers had to reduce the prices under the impact of RUR strengthening and lowering of the bid prices. At the same time, the trade activity rates were low. Some sellers preferred declaring the previous price levels and sell small-scale batches of the product.
Prospects
According to APK-Inform Agency, as of February 2018 the stocks of sunflower seed in Russia totaled 5.82 mln tonnes, which in terms of full loading of oilseed processing enterprises will be enough for not more than 4 months. Therefore, in April-May many oilseed processors plan to temporarily stop their operations and provide the required maintenance works or reduce the loading level of production capacity by 20-40%. Also, it is expected that in February-August oil-producing companies will produce 2.17 mln tonnes of sunflower oil and 2.12 mln tonnes of sunflower cake and meal.
It should be noted that in the first half of the season-2017/18 the Russian market mostly offered sunflower seed, which qualitative characteristics did not meet the GOST requirements. However, the "quality-price" ratio almost did not work in such situation. Since March 2018, the market started providing even higher prices for the oilseed and sunflower meal/cake compared with the same period last year. In case of keeping of RUR strengthening trends, the same situation will develop on the market of sunflower oil.
Anna Skotar, APK-Inform Agency
