The article will focus on the distinctive features that were characteristic for both domestic and export markets of Russian crude sunflower oil in 2010/11 MY.
The season-2010/11 provided rather optimistic expectations of the harvest for the Russian market of oilseeds and by-products, mainly due to the record sowing areas under sunflower, which in the previous season totaled 7.2 mln ha. Taking into account the fact, the initial forecast of APK-Inform Agency of the general production volumes of sunflower seeds totaled 7.5 mln tonnes (in bunker weight) or 6.9 mln tonnes (in clean weight). However, due to extremely unfavorable weather conditions (drought) Russia lost nearly 30% of the sowing areas of sunflower in most affected regions. Thus, in the season-2010/11 agrarians managed to harvest 6 mln tonnes of sunflower seed, a decrease of almost 15% compared to 2009/10 MY (the production volumes in the season-2009/10 totaled 7.05 mln tonnes). The market of sunflower seeds faced high demand for raw materials since the beginning of the season, accompanied by rise of the purchasing prices. In order to generate the necessary volumes of raw materials, some companies overstated the purchasing prices for the maximum attracting of the oilseed offers.
In the terms of stable demand owners of sunflower seed stocks either restrained sales or increased own selling prices. Such pricing situation on the market of the oilseed had rather significant impact on the policy of price formation for the primary sunflower by-product - crude sunflower oil. As the majority of oil-producing companies became involved in processing of sunflower seeds, the number of sunflower oil offers on the domestic market did not increase due to the fact that the major share of the product was sent to their own needs (production of bottled oil, margarine and mayonnaise commodities).
Most of Russian sunflower oil producers, which had free volumes of the product for selling operations, held back sales of the finished product, hoping to strengthen prices in the long term prospect, or insisted on the maximum selling prices. Thus, the increase of the offer prices for crude sunflower oil was proportional to the increase in prices for the raw material, and became observed since the beginning of the season until the end of November 2010. At the same time, the selling prices, depending on the region of the commodity production, varied within the range of 48000-53000 RUR/t EXW. The maximum selling prices were mostly typical in the West Siberian region (Altai Krai), where is rather little concentration of oil-extraction plants.
As a result, the prices, prevailing on the domestic market of sunflower oil, did not satisfy customers who believed them high enough. In this regard, the demand for sunflower oil on the domestic market was estimated by market participants as rather low, at the same time the price situation somewhat stabilized. However, in the first half of December 2010 on the market of sunflower oil the price adjustment was observed, which at the end of 2010 was replaced by the bearish trends, which dominated on the market almost to the end of the season-2010/11. Saturation of the market with sunflower oil offers became the main reason for the situation development, which, respectively, was accompanied with a decline in the supply / demand prices. The offers of crude sunflower oil in the areas of local concentration of oil-extraction enterprises (the Southern, Central Black Earth and Volga regions) formed the price ranges of 46800-47500 RUR/t EXW. The product offers in the Altai Krai formed the average price level of not below 54000 RUR/t EXW.
Export market of crude sunflower oil in the season-2010/11
Due to the present situation on the domestic market of crude sunflower oil, the main consumers of the product had to look for cheaper alternatives of the vegetable oil, which assisted to reducing the consumption level of sunflower oil in Russia. Last season palm oil was still popular among the manufacturers of margarine products in the country. During 11 months of the reporting period, the import volumes totaled 593.9 thsd tonnes. The record volume of palm oil was imported in November 2010, and totaled 95.14 thsd tonnes, when the offer price of sunflower oil on the domestic market reached the peak.
Thus, last season competition between Russian commodity producers and foreign producers of vegetable oils, which export own products to Russia (in particular, Ukraine), was high enough. During recent seven seasons, Russia imported the record volume of crude sunflower oil. The importers supplied sunflower oil at low prices compared to prices on the domestic market of Russia. The average level of purchasing prices under DAP terms in the season-2010/11 totaled 1223 USD/t (sunflower oil).
Moreover, the situation was aggravated by the circumstances on the export market of sunflower oil. Due to unattractive prices, declared by importers under the terms of FOB-Black Sea ports, which usually last season did not exceed the level of 1390 USD/t, the export flow of sunflower oil of Russian origin was quite low. Thus, the exports of sunflower oil in the season-2010/11 declined by over 3 times compared to 2009/10 MY - to 151.6 thsd tonnes.
Summarizing the above stated data, we can conclude that the distinguishing feature of Russian market of crude sunflower oil in the season-2010/11 was the large number of the product offers in the terms of low demand and, consequently, slow sales of sunflower oil, accompanied with adjustments in prices mainly to the downside. It should be noted that the situation on the export market, which in 2010/11 MY was characterized with low bid prices on the basis FOB-Black Sea ports, provided the significant influence on the pricing trends on the domestic market of sunflower oil. As a result, the export outflow volumes to foreign markets were quite low, which increased the number of offers on the domestic market.
To date, some oil-producing enterprises began providing offers of the by-product from sunflower seeds of the new crop. The average offer price in the Southern, Central Black Earth and Volga regions vary within the range of 35000-36000 RUR/t EXW.
You can receive more detailed information on the work of the Russian market of crude sunflower oil in 2010/11 MY, taking part in the international conference "Fat-and-Oil Industry – 2011", to be held on November 23-25, 2011, in Kiev. The reporting event is designed to gather participants from all previous similar conferences to mark the decade of successful development of the oilseed sector in the Black Sea countries and develop the strategy of conducting fat-and-oil business in the future.