Overview of the sunflower market in Ukraine
Before the conflict, Ukraine occupied first place in the production and processing of sunflower seeds (November 21). The closing of the marketing year (September 2021-August 2022) makes it possible to assess the impact of the conflict on the trade flows of sunflower seeds. Prior to the conflict, Ukraine produced sunflower mainly for processing within the country, and also exported to China, the EU, and Turkey, and oil to India, China, and the EU.
The outbreak of hostilities dealt a huge blow to logistics, infrastructure, and access to ports, as railways, roads, warehouses, and processing plants were blocked. Processors have reduced operations, faced with both limited opportunities for export via regular sea routes and a reduction in storage space. As a result, the excess sunflower had to be sent to new export destinations to geographically accessible countries with affordable processing capacities, such as the EU, Turkey, and Moldova.
Global consumption affected
Shipments increased significantly in September, less than a quarter of a million tons of sunflower seed products were shipped from Ukraine as part of the “Grain Deal” on the Black Sea between its beginning on August 1, 2022 and the end of the marketing year. Taking into account the dynamics of the market, sunflower seed products accounted for a small share in the total volume compared to feed grain and sunflower shipments were minimal. Changes in destinations and types of products affected global consumption as prices rose and exports declined, reports oilworld.ru with reference to the USDA.
Access to inexpensive Ukrainian sunflower seeds in the EU for processing led to the production of sunflower meal and oil, which accounted for a larger percentage of the total consumption of oilseeds in 2021/22 MG.
In China, restrictions related to the pandemic, a weaker economy and sluggish consumption, combined with high world prices and a decrease in supplies of sunflower oil from Ukraine, contributed to a decrease in the total volume of vegetable oil imports for the year.
In general, Ukraine exported sunflower seeds more than seven and a half times more, 26 percent less sunflower meal and 15 percent less sunflower oil than in the previous year. Sunflower stocks have grown strongly in the 2022/23 season.
Instability, damage to infrastructures
Forecasts of trade in sunflower and processed products from Ukraine for the current year reflect a decrease in production expectations, as well as the assumption that distorted models of trade and limited processing will remain. Currently, Ukraine’s exports for 2022/23 MG are projected at 1.95 million tons of sunflower, 2.75 million tons of sunflower meal and 3.60 million tons of sunflower oil. It is expected that the EU will continue to import large volumes of sunflower seeds due to the impact of drought on its own oilseeds. The continuing instability in the region, the damage to infrastructure and the fragility of the Black Sea “Grain Deal” remain points of uncertainty that will determine the volume and direction of exports capable of leaving the country.
Palm oil
The export of palm oil from Malaysia is high, despite the decline in overall indicators. Palm oil exports from Malaysia have increased market share this year mainly due to restrictive trade policies in Indonesia, the world’s largest producer and exporter of palm oil. However, Malaysian exporters could not fully benefit from the global demand for palm oil due to persistent problems with attracting foreign labor, which led to a decline in exports in 2021/22 MY.
Malaysia’s palm oil exports peaked in 2018/19, but have since declined by 15 percent to 15.5 million by 2021/22. Global import demand declined in 2021/22 due to weaker economic growth and very high vegetable oil prices. In addition, attracting foreign labor to grow and harvest crops in Malaysia has become a problem due to the limitations of COVID-19. Despite the downward pressure faced by the global palm oil trade in 2021/22, Malaysia has increased global market share, offsetting Indonesia’s weaker exports. While exports are projected to increase in 2022/23, Malaysia’s share is expected to decrease due to increased competition from Indonesia, reports oilworld.ru with reference to the USDA.
Global oilseed production
The forecast of global oilseed production for 2022/23 has been reduced by 1 million tons to 645 million, reflecting a decrease in the soybean harvest in Argentina and sunflower in Ukraine, which more than compensates for the increase in rapeseed production in Australia and the European Union. The volume of trade in oilseeds increased slightly due to an increase in exports of Argentine soybeans and Australian rapeseed. Global production declined slightly due to lower processing of Argentine soybeans and Malaysian palm kernels. The total global stocks of oilseeds increased mainly due to an increase in soybean stocks in China.
The seasonal average farm price for soybeans in the United States has not changed and is $14.00/bu.
Review of 2021/22
The global production of oilseeds in 2021/22 will increase slightly to 605 million tons, as a larger sunflower crop in Argentina compensates for the reduction in the production of Argentine soybeans, Chinese sunflower and palm kernel crops in Malaysia. The trade in oilseeds is growing due to an increase in soybean imports to China. The world’s final stocks of oilseeds have grown amid an increase in soybean supplies to China and Argentina. Meal production is declining, and world trade is declining due to a reduction in soybean meal exports from Argentina and India. Food consumption has increased slightly. Global vegetable oil trade is declining, mainly due to a decline in palm oil exports from Indonesia and soybean oil exports from Argentina.
Soybean
The average seasonal farm price for soybeans in the United States has not changed and is $ 13.30/bu.
Soybean prices in October were slightly lower on average compared to the previous month for the two market leaders of exporters, but during the month showed an upward trend. The late recovery was caused by geopolitical events and the growing demand for meal, with soybean oil for biodiesel being the main reason for the growth. In Argentina, the expiration of the “soy dollar” incentive at the end of September led to relatively slower sales this month, according to oilworld.ru with reference to the USDA.
Soybean meal
In October, the average prices for soybean meal in South America were slightly higher. The premium for soybean meal in the United States compared to South America has significantly decreased this month compared to last, with all three exporters trading within $10 per ton of each other. In the United States, there is still a high profitability compared to other countries due to the high demand for soybean oil for biodiesel production.
Soybean oil
Soybean oil prices rose in October on the back of positive sentiment in the vegetable oil market and the strengthening of crude oil prices. The premium for U.S. soybean oil to soybean oil from South America decreased slightly in October compared to September. Average palm oil prices have declined compared to historical highs at the beginning of this year, supported in the second half of the month by growth from other vegetable oils and uncertainty in the Black Sea.
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