Market of crude sunflower oil in the Russian Federation: troubles of the current season




To date, Russian market of crude sunflower oil has faced a rather difficult situation. High level of sunflower oil production in the terms of rather low volumes of export sales and keeping low domestic demand assisted to development of market overstocking. In the current terms, oil producers had to essentially decrease own selling prices for the product. Taking into account, the economic situation on the world market of vegetable oils, the export prices still stays rather unattractive, and the demand keeps extremely low level. In the article, we provide the consistent examination of the main factors, which influence formation of the market of sunflower oil in the current season.

According to preliminary data of analysts of АPК-Inform Agency, in the current season, the general production of sunflower seed in the Russian Federation in the current season will total 6.22 mln tonnes, a decrease of 12% compared to the previous year result. However, we should also retain that the average index of oil content of sunflower seed in the current year exceeds the previous year index by 3%, and in several agricultural enterprises - by 4% (mostly in Central Black Earth Region and Volga Region). From the very beginning of the current season till December, prices for oilseeds continued strengthening. And from the beginning of the calendar year, the indices started gradually lowering. To date, oilseed processing enterprises declare about rather low rates of delivery of the oilseed, but taking into account the economic situation on the market of crude sunflower oil, such enterprises plan to purchase sunflower at even higher prices.

In the current season, the dynamics of sunflower oil production in the Russian Federation demonstrated the record indices almost till January, despite the decrease of the general production of the oilseed. During the period of September-February of the current МY, the general volumes of sunflower oil production totaled 1.48 mln tonnes, at the same time, during the same period of the last МY, the country produced 1.39 mln tonnes. To date, the maximum monthly volume of production of sunflower oil totals 232 thsd tonnes (December).

At the same time, in the current season, domestic prices for crude sunflower oil essentially exceeded the export prices, as a result, oil producers preferred selling sunflower oil on the inner market. Devaluation processes of RUR played an important role in the period too. The export volumes greatly decreased, which also caused the overstocking of the domestic market and the fall of the domestic prices. In the current MY, sunflower oil exports decreased by almost two times, and according to preliminary data, in March the tendency of reduction will continue developing. According to data of our analysts, in the current season (September-February period), the export volumes of sunflower oil totaled 232 thsd tonnes as opposed to 408 thsd tonnes in the same period of the previous season. At the same time, import volumes of vegetable oils to the Russian Federation stayed at the level the previous season indices.

To date, the selling rates of sunflower oil stay rather low, and the saturation with such product of the domestic market continues growing, which assists to the fall of oil prices. Several large-scale oilseed processors make attempts to keep own purchasing prices for sunflower seed at the high level, and provide support to sunflower oil prices in such way, however, the market continues feeling the decrease of demand. Prices for crude sunflower oil lowered from 27000-28000 RUR/t EXW (the end of December 2009 - the beginning of January 2010) to 25000-26000 RUR/t EXW in the current moment. As a result, to date, medium-scale enterprises of the industry face rather difficult market situation: prices for sunflower seed still stay rather high, at the same time, sunflower oil purchasing prices of export-oriented companies continue decreasing. The majority of the mentioned enterprises stocks own reserves of the raw material for the further processing works at the average term of 1-1.5 months. Thus, in the nearest future, such enterprises plan to stop own production activity in order to provide the plan scheduled repair works, or essentially lower own processing volumes. The lack of storage capacities of enterprises also causes worsening of the situation.

Sunflower oil, thsd tonnes
  07/08 08/09 09/10*
Beginning stocks 214 193 217
Production 2 119 2 727 2 435
Imports 141 38 50
Total supply 2 474 2 958 2 702
Consumption 1 950 1 900 1 950
Exports 330 841 550
General distribution 2 280 2 741 2 500
Ending stocks 193 217 202
Stocks / General distribution 8% 8% 8%
* Forecast

The rates of sunflower oil production started decreasing, when the enterprises faced certain difficulties, while selling the product, taking into the account the presence of rather essential reserves of both crude and refined sunflower oil on the domestic market. In the mentioned period, we faced the reduction of sunflower oil production volumes by small plants and large-scale processing enterprises.

The keeping high saturation of the domestic market and the growing problems with selling of vegetables oils, especially in the export trading sphere, strengthen the pressure at prices for sunflower oil and th raw material.

Nevertheless, the market also has several optimists that still expect for the growth of prices for crude sunflower oil, and rely on the possible increase of prices on the world market of vegetable oil. But taking into account, the fundamental factors, such as the world production of soybean and soybean oil, the world market of vegetable oils does not expect for any growth of prices and demand indices. And according to the majority of analysts, in the current MY, the domestic market of the Russian Federation will not meet the seasonal growth of prices for sunflower oil in May. In the nearest future, the prices will probably continue decreasing, or the market will fix low-scale price fluctuations within the previously formed ranges of. But the market has also some chances to lower prices for the raw material in the current season. And at the end of the season, Russia will possibly reach rather favorable positions and start supplying crude sunflower oil on foreign markets.

Viktoria Gorbenko,

expert of Russian market of oilseeds of АPК-Inform Agency