Russia: market of flaxseed and mustard seed in 2018/19 MY. Forecasts for 2019/20 MY

Key insights

According to the Federal State Statistics Service (FSSS) in 2018 the planted areas under flaxseed in Russia reached their historical maximum — nearly 746 thsd ha (+31% to 2017). However, despite the record areas the agrarians harvested 551 thsd tonnes — the lowest volume since 2015.

Taking into account the date-to-date data, our agency lowered the estimations of the oilseed export to 430 thsd tonnes (-22% to the previous forecast and -12% to 2017/18 MY). Herewith, the reduction of the production of flaxseed in the European part of Russia and the increase in Siberian Federal District led to some changes of export deliveries in 2018/19 MY.

The planted areas under mustard seed in 2018 also reached the record and totaled 334 thsd ha (twice higher compared with 2017). At the same time, unlike flaxseed the production of mustard seed reached its maximum — 124 thsd tonnes (+26% year-on-year).

According to APK-Inform estimations, the export of this crop in 2018/19 MY can total 60 thsd tonnes (+17% y-o-y).

Speaking of the prospects of flaxseed and mustard seed planting campaign in 2019, according to the spring report on the planted areas (FSSS), agrarians against increased the areas under these crops.

The flaxseed was planted on 815 thsd ha this year (+19% to the previous record in 2018).

The growth of the planted areas, according to our estimations, will allow to increase the production of this crop to 3-year maximum (nearly 620-625 thsd tonnes). Herewith the export is not going to increase significantly, because the crop harvest in Kazakhstan – the main competitor of Russia on the global market of flaxseed — also expects to harvest a high crop this year.

In Russian the areas under mustard seed in 2019 can total nearly 380 thsd ha, so the production of the oilseed in case of favorable weather conditions can break the last year record and reach nearly 170 thsd tonnes.

Price trends. Flaxseed

In the second half of 2018/19 MY in the European part of Russia the prices were mostly stable, while the prices in Siberian Federal District were increasing due to the stock reduction. The market participants in Siberian Federal District informed that they faced difficulties with form stocks of the oilseed because the main volumes of the crop were sold for export, mostly to China.

In March-May the supply of flaxseed was still limited. In some cases, the buyers increased the product in order to attract the volumes needed. However, the market stayed inactive until the end of July. Many market participants informed that they will resume the purchase with the start of the new season.

Mustard seed

In the second half of 2018/19 MY the market of mustard seed demostrated rather stable price conjuncture, due to rather sufficient number of the offers. In the European part of Russia the offer prices of white mustard were declared mostly within 42`000-43`000 RUR/t EXW, and in Siberian Federal District they totaled 38`500 RUR/t EXW.

In July the agrarians startd to harvest the new crop mustard seed which together with ragather large stoks (25% y-o-y) led to the significant price deline.

By the end of the month the prices of yellow mustard fell to 30`000 RUR/t EXW and for white — to 29`000 RUR/t EXW. The market participants noted that the purchasing activity was rather low.

Global trade. Flaxseed

According to the date-to-date data by APK-Inform Agency, in September-June of 2018/19 MY Russia reduced the export of flaxseed by 13% y-o-y to 385 thsd tonnes. There are several reason for export deliveries decline. The main reason is the crop reduction in 2018 in Russia and consequently the reduction of its supply on the global market. In particular, the share of the export in the total supply of the oilseed in 2018/19 MY decreased to 36% compared with 69% in 2017/18 MY and 79% in 2016/17 MY.

The reduction of the production in the European part of Russia and its increase in Siberian Federal District led to the redistribution of the export flow of flaxseed. In 2018/19 MY there was a reduction of the deliveries to the European countries, while China increased the purchases of Russian oilseed.

In particular, the decline of the deliveries was observed in terms of Belarus — to 165 thsd tonnes (-20%), which nevertheless still was a main importer of Russian oilseed (43% of the total export of flaxseed from Russia), and Turkey — to 27 thsd tonnes (-40%). Poland and Latvia declined the purchases to 18 thsd tonnes (-26%) and 13 thsd tonnes (3 times) respectively.

At the same time China more than doubled the import of Russian flaxseed — to 111 thsd tonnes, thus reserved the second largest importer of the crop. Egypt also doubled the import of flaxseed from Russia – to 13 thsd tonnes.

Moreover, we should note that Vietnam that in the previous season was one of the TOP-5 importers of Russian flaxseed, in 2018/19 MY purchased only 257 tonnes of the oilseed in September of 2018.

According to APK-Inform Agency estimations, the total export of flaxseed from Russia in 2018/19 MY can total nearly 430 thsd tonnes and become the lowest since 2015/16 MY.

Mustard seed

The export deliveries of mustard seed from Russia in 2018/19 MY are record-high, due to both annual production growth in 2018 and favorable price conjuncture on the global market in August-October of 2018.

In general, for 11 months of 2018/19 MY Russia exported nearly 56 thsd tonnes of the oilseed, which is 15% higher compared with the same period last season-2017/18.

The main 3 importing countries in the reporting period stayed unchanged, but the countries shifted.

Germany became the first largest imported, increasing the purchases of Russian mustard seed by nearly 40% to 20 thsd tonnes.

Poland also significantly increased the import of the Russian oilseed (by nearly 70%) and bought nearly 14 thsd tonnes for 11 months of 2018/19 MY, thus becoming the second largest importer.

At the same time Bangladesh, which was a leading importer of Russian oilseed in 2017/18 MY, in 2018/19 MY has become only third imported and declined the purchases by 26%.

Also we should note that in October-September nearly 2 thsd tonnes of Russian mustard seed were exported to China which is 6 time higher compared with the total China’s import in 2017/18 MY.

According to our estimations, in July of 2019 Russia can export nearly 3-4 thsd tonnes of mustard seed which is possible based on the harvested started in this month.

Main trends of the Russian market of flaxseed and mustard seed in the short terms perspective

— On the market of flaxseed the number of the offers will be limited which will support the prices of oilseed.

— In a long term perspective the prices of flaxseed will possibly form in a downward tendency under the pressure of the harvest prospects in Russia in 2019.

— Taking into consideration the export orientation of Russian flaxseed the prices and the export deliveries in 2019/20 MY can be still under significant pressure of Kazakhstan which according to the preliminary data drastically increased the planted areas under the crop. As a consequence, in a new season the export deliveries of Russian flaxseed may appear to be lower than expected.

— On the market of mustard seed, the main factors of price formation will be: the harvest progress and the forecasts of the significant increase of mustard seed production.

— As a consequence of the expected increase of Russian mustard offers on the global market in August the prices may form in downward prices dynamics both on the export and domestic markets.

By Svetlana Kirichok, Analyst of APK-inform Agency