W37: Sunflower Update

In W37 in the sunflower oil landscape, the United States Department of Agriculture (USDA) has lowered its global oilseed production forecast in its Sept-23 report by 2.81 million metric tons (mmt) to 660.89 mmt for the 2023/24 marketing year (MY). Regarding sunflower production, a drop is forecasted for the European Union (EU) by 200 thousand mt to 10.65 mmt, Argentina by 100 thousand mt to 3.9 mmt, and Turkey by 50 thousand mt to 1.6 mmt. However, Ukraine's sunflower harvest forecast is up by 500 thousand mt to 14 mmt. The EU's sunflower import forecast for the 2023/24 MY remained stable at 800 thousand metric tons (mt), pending Bulgaria's decision on sunflower supplies from Ukraine. Turkey's sunflower import forecast for 2023/24 MY remains at 1.2 mmt, a slight increase from the previous estimate of 1.08 mmt for the 2022/23 MY.

For the 2023/24 MY, Ukraine has raised its sunflower seed export forecast by 150 thousand mt to 950 thousand mt. Sunflower consumption in Ukraine during the same period is estimated at 13.3 mmt, marking a significant increase of 900 thousand mt compared to the previous season. Additionally, Ukraine is projected to produce 5.0 mmt of sunflower oil in the 2023/24 season, with exports reaching 4.7 mmt. In the 2022/23 season, Ukraine experienced a notable 25.4% increase in sunflower oil exports, totaling 5.6 mmt. This increase was driven by neighboring EU countries banning Ukrainian sunflower seed imports, which resulted in increased sunflower processing within Ukraine. However, sunflower seed exports for the first eight months of 2023 witnessed a sharp decline of 58% year-on-year (YoY) due to the increased domestic processing.

Ukraine's oil producers are facing an excess of raw sunflower material, resulting in a sharp drop in domestic sunflower purchase prices to range from USD 283/mt to USD 325/mt CPT plant. This is due to blocked sunflower oil and meal exports through Black Sea ports, coupled with increased shipping costs through Romania and Poland. The Ukrainian sunflower market is anticipated to hit its lowest price in early Oct-23. Furthermore, the limited export demand for sunflowers in EU countries adds pressure to prices within Ukraine.

In anticipation of the potential lifting of the ban on Ukrainian sunflower imports from Bulgaria, active trading in sunflower crops has commenced in the Ukrainian market. As a result, sunflower prices for delivery in northern Bulgaria have declined by around USD 40/mt over the past two weeks. Moreover, Ukrainian exporters benefit from the flexibility of Bulgarian buyers willing to use big bags, granting Ukrainian sunflower exports a significant price advantage of up to USD 50/mt compared to domestic sales in Bulgaria.

Bulgarian sunflower producers are experiencing losses exceeding 30% due to low demand from processors. Despite these challenging conditions for Bulgarian producers, processors in Bulgaria still do not prefer sourcing sunflowers domestically. Prior to a recent decision by deputies from the Economic Commission, the sunflower price in Bulgaria was USD 415.17/mt. Subsequently, the price dropped by USD 32.78/mt, resulting in a complete halt in demand and leaving Bulgarian grain producers unable to sell their products. The carry over stock from the previous harvest is around 600 thousand mt with the expected harvest, which is currently ending, expected to be between 1.9 to 2.1 mmt. The stocks are sufficient to satisfy the needs of the Bulgarian processors, if not for a year, at least for 10 months.