Nosedive on Ukrainian markets of sunflower seed and oil: what’s going on?




Analysis of price development ahead and at the start of oilseed season both on inner and export markets shows that 2020/21 MY is the most volatile especially in sunflower seed segment. Usually, prices decline in off-season time and at the start of the new season. After that prices increase in 1-2 months as far as market operators close forward contracts and farmers decrease selling as they have already got funds and have taken wait and see attitude. However, people who work on this market for a long time say that they could hardly recall such impressive volatility we see at the start of 2020/21MY.

Surge of prices by 30-35%. Reasons

The start of 2020/21 MY was really impressive. No one expected so rapid appreciation of sunflower seed of the harvest-2020. The bid prices of processors grew by 35% within a month. Moreover, the prices were already 700-1000 UAH/t higher than the last year at the start of the season. The bid prices of sunflower seed increased from 10000-11000 to 13400-14900 UAH/t СРТ from the third ten-day period of August to the second ten-day period of September.

Prices were mainly supported by lower than expected sunflower seed crop in Ukraine and quality problems (low oil content, large number of hollow seeds and higher impurities). Unfavorable weather was the main reason for this. Moreover, delayed harvesting campaign and weak supply of new-crop sunflower seed to the market raised the competition between processors for high-quality product.


Prices were additionally supported by upward price trend of the export market of crude sunflower oil. In mid-September, the appreciation was so rapid (+80-110 UDS/t per week) that the export prices of crude sunflower oil reached the 7 years high - 1020-1080 USD/t FOB with delivery in October. This trend was based on growth of vegetable oils prices on the global marker (due to lowering of sunflower seed crop prospects in Black Sea Region among other things) and high demand form importers who were nervous because of limited supply of Ukrainian product.

Start of the nosedive

In the third ten-day period of September, export prices of Ukrainian sunflower oil started to decline after 30% growth within a month. Export prices of sunflower oil pushed the inner prices of sunflower seed down. In a week, the offer prices of sunflower oil decreased by 115-160 USD/t and reached 905-920 USD/t FOB with November-December delivery as of September 25. The bid prices of sunflower seed reduced by 1400-1900 UAH/t (or 10-12%) to 12000-13000 UAH/t СРТ-port over the same period.

What to expect? Crop vs demand

It is likely that the prices will decline, however, the pace of the reduction will be slower. Higher number of offers of sunflower seed and its products in Black Sea region due to the progress of the harvesting campaign could weighted on the prices. As of September 24, Ukraine harvested 6.8 mln tonnes of sunflower seed throughout 3.6 mln ha (56% of the plan).

Currently, APK-Inform expects sunflower seed crop at 15.5 mln tonnes in Ukraine in 2020/21 MY, compared to 16.2 mln tonnes forecasted before. Export of sunflower oil could decline by 7% in 2020/21 MY to 6.17 mln tonnes. Downward revision of the oilseed crop was based on lower area and yield of sunflower seed amid unfavorable conditions of the crop.

Export prices are mainly pressured by lower demand from importers due to high prices. Moreover, the downward trend on the global market of vegetable oils weighted on Ukrainian prices. Low price of crude oil and deterioration of biofuel production profitability pushed the prices down as well.

Crude oil after the Lockdown

Here we should probably mention several key notions from the September Annual Energy Outlook 2020 according to which the crude oil prices will decline. According to experts, the peak period of oil consumption is over or will be over soon. The Outlook has presented three possible scenarios, and two of them forecasted the decrease of demand on crude oil by 2040 by one third or even twice. If the events will take the third and the most favorable scenario, the oil producing companies will still face the 5% decline of demand. Currently, there are no opportunities for global oil consumption recovery to pre-quarantine rate. This is caused by the increase of the competition between the oil exporters for target markets. The rapid development of the e-transport and the increase of cheap renewable electric energy production also contributed.

Consequently, we should not expect the prices for crude oil to be high, rather on the contrary, which will definitely influence the prices for edible oils and also corn.

Possible second wave of pandemic

The prices for crude oil and edible oils are also under great influence of the concerns over possible re-establishment of quarantine measures because of the drastic growth of COVID-19 cases in many countries, which can lead to the edible oils demand to drop. At this point the key importers do not plan to increase significantly the domestic stocks of edible oils and correspondingly the purchases. But as soon as the strict quarantine measure are set in place, they can start monthly purchases depending on the domestic consumption rate.

What are the conclusions?

Such a drastic decline of prices for sunflower seeds and oil was caused partially by their speculative rise at the beginning of harvest, and as the harvesting progressed, the situation was leveling. In general, the rumors of the significant decrease of sunflower production have not materialized, although some media continue to escalate the situation. Of course, Black Sea sunflower production will decline due to lower yield (by 5%). However, the production figures will decline compared to the preliminary expectation, which were the renewal of the last year’s record crop. At the same time, the production of sunflower seeds in Ukraine and Russia will correspond to the average annual level. And if we take into account the global S&D of edible oils, the situation is rather balanced. Basically, we’ve seen similar situation at the beginning of wheat season.

Of course, we cannot say that there were no causes for concerns, as in some oblasts (especially on the south of Ukraine) the situation is critical and the yield is minimal. And it is for all crops without exceptions. We can only sympathize with the farmers of this region and advice to revise the list of crops, their varieties and hybrids favoring the thermophilic and drought-resistant. Probably, after the current season sunflower will not be referred to as most profitable. Although… There is time and it is only the beginning of a season and it is not yet known what can be the prices in 2020/21 MY.

If we speak about the export, the seasonal increase of palm oil production helped to decline the feverish demand of the importers and to defuse the prices. But at the same time, if at first the palm oil was a driver for price rise, currently it is first to fall down. Apart from all the above-mentioned factors, the prices are also under pressure of the seasonal growth of palm oil production in Malaysia and Indonesia and also the possible increase of stocks in Malaysia in case of the second wave of the pandemic.

As of now we know one thing – 2020 is not going to end up boring for any market.

We can only wish everyone to be healthy, and agrarians to have successful planting. Good luck!

By Anna Tanskaya