Ukraine and Russia still keep the leading positions in the supply of sunflower oil on the global market. In 2018/19 MY, and as of the beginning of April, the share of exports of the reporting countries covered nearly 80% of the market, despite the unfavourable price situation and low trading activity.
Heavyweights on the global market of sunflower by-products
The long-term trend of increasing of the production of sunflower oil in the world also continued developing in 2018/19 MY. The maximum harvest volumes of the oilseed for 5 recent years stimulated oil-producing companies to increase its capacities and loading of the existing lines. According to preliminary estimations of the USDA, in such terms in the current season the potential of sunflower oil production increased to 19.5 mln tonnes, against 18.3 mln tonnes last season. Ukraine and Russia still remained the key players in the reporting market segment, which contribution to the global production totaled nearly 32% and 24%, respectively. The TOP-5 of countries-producers also included the EU (19%), Argentina (7%), and Turkey (5%).
The permanently growing stocks of sunflower oil, in terms of the increase in its global consumption, contributed to enlarging of the supplies on the foreign market. According to the April report of the USDA, the general global exports of the product reached almost 10 mln tonnes. Traditionally, in the season-2018/19 Ukraine remained the main exporter of sunflower oil, which covers 56% of the total supply, as well as Russia with the potential of shipments at 23%. Argentina (7%) takes the third position in the rating. It should be noted that despite rather significant differences in the export capacities of the main producers, the global competition rates remained rather high, and still continues increasing every year.
Sunflower oil in the Black Sea region
According to APK-Inform analysts, in the first half of the current season Ukraine produced more than 3.5 mln tonnes of crude sunflower oil (55% of the forecast), up almost 0.3 mln tonnes compared with the same period last MY. The high production rates allowed to the country to strengthen its positions on the global market not only as the leading producer, but also as the top-exporter.
As a result, in September-February of the current season Ukraine supplied 3 mln tonnes of sunflower oil (including refined oil) on the foreign market, which became the absolute record for the reporting period of the season in the whole contemporary history. Ukraine shipped the product to 123 countries. For 6 months of 2018/19 MY, India and China showed the greatest interest in the purchases, and imported nearly half of the exported volumes, as well as the Netherlands, Spain and Iraq, which doubled their imports.
Malaysia and Poland, which were in the TOP-10 of the largest importers of Ukrainian sunflower oil in the same period last season, did not appear in the TOP-10 in the current year. At the same time, the United Kingdom and Egypt increased the purchases by 92% and 6.3 times, respectively, which allowed to the countries to get the 8th and 10th positions in the rating.
The growth of the forecast of global production and the decline in consumer demand became the main reasons for development of the large-scale carry-over stocks of sunflower oil, which, in turn, affected the prices and slowed down the trading rates on the foreign market. In addition, another escalation of the current trade conflict between the USA and China made significant adjustments to functioning of the segment, because the two countries announced about their plans to impose new import duties. For the first time since 2009/10 MY, the bid/offer prices of crude sunflower oil in the ports of Ukraine (FOB basis) decreased below 700 USD/t — to 685 USD/t in the beginning of the current season. In September-December of 2018, the price situation in the market segment mainly developed in the downward direction, due to the similar dynamics in the world, in particular in the palm oil sector, as well as in the adjacent market of soybean by-products. Only in the beginning of the new calendar year, the market faced some stabilization of the situation: the trend changed its direction vector, in terms of activation of the demand. As of late March 2019, the bid prices for crude sunflower oil reached 653 USD/t FOB.
Taking into account the growth of sunflower seed production in Russia in the season-2018/19, APK-Inform analysts forecasted the exports of Russian sunflower oil at the level of 2.5 mln tonnes, which became the record figures. However, in the first half of the year the country exported nearly 1.1 mln tonnes of the product only (according to the Federal Customs Service). Russia supplied sunflower oil to 60 countries. But in the same period last season, these products were delivered to 68 countries.
For 6 months of the current season, Iran, Turkey, Egypt, Uzbekistan and China were the main countries-buyers of Russian sunflower oil, which covered nearly 64% of the general supplies. However, the shares of the reporting countries slightly changed compared with last season.
In the first half of 2018/19 MY, Iran increased the purchases of sunflower oil of Russian origin in almost 2.5 times, compared with the same period last season, which allowed to move from the fourth position to the first one in the TOP-10 of countries-importers. Turkey increased its purchases by 10%. On the contrary, Egypt reduced the impots of Russian sunflower oil in more than 2 times, and mainly prefered importing Ukrainian sunflower oil. The exports of sunflower oil to Uzbekistan increased by 24.3%, and to China — down 29.2%. The supplies of the Russian product to China decreased, due to reorientation of the market towards Ukrainian sunflower oil.
The trend of increasing of sunflower seed production in Russia stimulated the reporting development of the processing industry. In the season-2017/18, the oilseed harvest totaled 11.1 mln tonnes, which made it possible for oil-producing companies to increase the production and exports of sunflower oil to 4.6 mln tonnes and 2.2 mln tonnes, respectively. In the first half of 2017/18 MY, Russia exported 1.18 mln tonnes of the product. In the current season, agrarians managed to increase the harvest of sunflower seed by 15.4%, which also allowed to oilseed processors to increase the production and exports of sunflower oil. However, in the first half of 2018/19 MY Russia decreased the supplies on the foreign market by 80 thsd tonnes compared with last season, which indicates rather low trading activities. According to market participants, the shift of balance of the offer/bid prices became the main impact factor in the reporting market situation. Since the beginning of the current season, the offer prices of sunflower oil decreased by nearly 40 USD/t, and usually varied within 650-655 USD/t FOB. As a reminder, in the first half of last season the offer prices mainly varied within the range of 750-755 USD/t FOB.
Sunflower meal/cake in the Black Sea region
In addition to formation of nearly 80% of the global export market of sunflower oil, Ukraine and Russia also realize rather active supplies of sunflower meal/cake. According to APK-Inform figures, in the first half of 2018/19 MY Ukraine exported more than 78% of the produced volumes of sunflower meal/cake — nearly 2.5 mln tonnes in physical terms (53% of the forecast). For 6 months of the season, China became the key country-importer of Ukrainian sunflower meal, due to its acute need in purchasing of the products, in terms of the insufficient level of supply. Ukraine shipped the record volumes of 0.6 mln tonnes of sunflower meal to China, up almost 18 times compared with the figures in the same period last year. France, which was the main country-importer in 2017/18 MY, moved to the second position.
In the reporting period (September-February of 2018/19 MY), the price situation on the Ukrainian export market of sunflower meal developed in the multidirectional way. Since the beginning of the season and till the end of the calendar year, Ukraine had a moderate consumer demand and gradual decreasing of the purchasing prices in terms of rather sufficient number of product offers from the main countries-producers, as well as the similar dynamics on the global market of oilseed meals. In February 2019, the trading and purchasing activities started expanding, when importers were forced to raise the prices, in order to stimulate sellers to supply the available volumes. However, the bullish trend was rather short-lived, and by the end of the month the bid prices were announced at the level of 200 USD/t FOB.
As for the exports of Russian sunflower meal/cake, in the first half of the season-2018/19 Russia exported 783.4 thsd tonnes of the product (according to the Federal Customs Service). At the same time, in the same period last season the exports totaled 765.7 thsd tonnes. In the reporting period, the geography of supplies did not significantly change in comparison with the same period last season. Turkey (down 24.6%) and Latvia (down 6.9%) took the first and second positions in the rating of importers. Italy took the third position, and increased the imports of the product in almost 2.3 times. Belarus slightly reduced the purchases of sunflower meal (down 1.5%).
The trading activity rates on the Russian export market of sunflower meal were estimated as rather low. Most market participants reported that they preferred selling the product on the domestic market at the higher bid prices in RUR equivalent. Since the beginning of 2018/19 MY and till the present day, the offer prices of sunflower meal decreased by more than 25 USD/t, and usually varied within the range of 195-200 USD/t FOB.
Conclusions and forecasts for the second half of 2018/19 MY
— According to APK-Inform analysts, by the end of the season Ukraine will export nearly 2.9 mln tonnes of sunflower oil, as well as Russia — nearly 1.4 mln tonnes. However, in terms of keeping of the current low export rates from Russia, APK-Inform will possibly revise the export forecast.
— In the following months, the demand for sunflower oil is likely to keep low.
— In the sunflower meal segment, by the end of the year Ukrainian companies can export nearly 2.2 mln tonnes of the product, while Russian companies — nearly 720 thsd tonnes.
— It is worth noting that in the summer of 2019, Russia will start the supplies of sunflower meal to China.
Anna Skotar, Tatyana Khromenko, APK-Inform Agency