1. Weekly News

Russia

Russia Extended Zero Export Duty on Sunflower Oil until Sep-26

The executive director of the Oil-and-Fat Union of Russia announced that the zero export duty on sunflower oil has been extended until Sep-26. This extension aims to protect the local market from price volatility caused by currency fluctuation. The zero duty on sunflower oil was initially set in Jun-23 and extended to Aug-24 in Aug-2023. In addition, Russia has decided to allow rapeseed exports from September 1, 2023, to August 31, 2026.

Russian Oilseed Stocks Drop by 23% YoY in Jul-24

Russia reported a significant decrease in carry-over oilseeds stocks in Jul-24, with a 23% year-on-year (YoY) drop, bringing the total to 1.11 million metric tons (mmt). This reduction includes a notable 65% YoY decline in sunflower stocks due to processors actively purchasing raw materials, effectively lowering the previously high carry-over stocks.

Kazakhstan

East Kazakhstan Emerges as a Key Hub for Oil and Fat Industry

The East Kazakhstan region has become a major center for the oil and fat industry, processing more than 60% of Kazakhstan's agricultural products. The area hosts 12 enterprises dedicated to oilseed processing, producing 255 thousand metric tons (mt) of vegetable oil annually, accounting for 38% of the country's total sunflower oil production. In 2024, the sunflower, rapeseed, flax, and soybeans sowing areas are expected to expand by 13 thousand hectares (ha). Additionally, the completion of a new oil extraction plant, Altai Mai LLP, and an oil refining workshop, Altyn Shygys LLP, which is set to be completed in 2025, is anticipated to further enhance the region's vegetable oil production capabilities.

Ukraine

Ukraine’s Sunflower Harvest Suffers Record Low Oil Content Due to Drought

Due to severe drought and high temperatures, the sunflower harvest in southern Ukraine is experiencing record low oil content, ranging from 33% to 36% on dry matter. As a result, newly harvested sunflowers are traded at USD 490 to 500/mt, including Value Added Tax (VAT), according to analysts from commodity brokerage Spike Brokers. Prices vary depending on the oil content.

USDA Lowers Ukraine's Sunflower Harvest and Production Forecasts in the 2024/25 Season

The United States Department of Agriculture’s (USDA) Aug-24 report lowered Ukraine's sunflower harvest forecast for the 2024/25 season. The new estimate is 13.5 mmt, down by 1 mmt from the previous estimate in Jul-24. This reduction also affects oil and meal production projections, with sunflower oil production estimated at 5.66 mmt, a decrease of 408 thousand mt from Jun-24. Oil exports are forecasted at 230 thousand mt, down by 30 thousand mt from the previous estimate. Sunflower meal production is projected at 5.43 mmt, and exports are anticipated to be 4.23 mmt, marking decreases of 392 thousand mt and 200 thousand mt, respectively. Globally, the sunflower harvest forecast has been revised down to 52.54 mmt, with oil and meal production at 20.58 and 21.77 mmt, respectively.

Ukraine's Sunflower Processing Hits Record Highs in Jul-24

In Jul-24, Ukraine saw a 10% month-on-month (MoM) decline in sunflower processing, attributed to seasonal factors and a shift towards canola. Despite this, processing volumes still exceeded expectations, surpassing 1 mmt, making it one of the biggest July processing volumes on record. Over the first 11 months of the 2023/24 season, Ukraine achieved its highest sunflower processing volumes in four years, processing approximately 14.4 mmt. Given the current trends, the 2023/24 season forecast has been raised to 15.2 mmt, nearing pre-war period maximums.

Russia and China

Russia Sees Significant Increase in Vegetable Oil Exports to China in H1-2024

In the first half of 2024, the Russian Federation experienced a 36.6% YoY increase in vegetable oil exports to China. This growth was primarily driven by a 620% YoY rise in sunflower oil exports and a 210% YoY increase in soybean oil exports, though rapeseed oil exports saw a decline of 37.4% YoY. All exported products undergo rigorous testing in accredited laboratories to meet China's stringent quality and safety standards, particularly concerning residual pesticides and phthalates. Rosselkhoznadzor has accredited laboratories in St. Petersburg and the Moscow region to test for phthalates in vegetable oils to meet Chinese quality standard, which is forecasted to boost Russia's exports to the Chinese market.

2. Weekly Pricing

Weekly Sunflower Oil Pricing Top Producers (USD/kg)

Yearly Change in Sunflower Oil Pricing Top Producers (W33 2023 to W33 2024)

Russia

In W33, Russia's sunflower oil prices decreased week-on-week (WoW) by 1.08% to USD 0.92 per kilogram (kg) compared to USD 0.92 in W32. The MoM price remained unchanged, and the YoY price increased by 2.22% compared to USD 0.90 in W33 2023. Russia's sunflower oil market remained stable in the first half of 2024 due to implementing a zero export policy and surging exports to China. In particular, the country’s sunflower oil exports to China surged 620% YoY in the first half of 2024. Given the low oil content from Ukraine's new sunflower seed harvest due to drought and heat, Russia's price will likely remain resilient.

Ukraine

Sunflower oil prices in Ukraine remained unchanged at USD 0.94/kg in W33. However, the price increased by 1.08% MoM and 3.02% YoY, reflecting a strong market demand. In Aug-24, the USDA lowered Ukraine’s sunflower seed production for the 2024/25 season due to climate challenges, negatively affecting oil production and export forecasts. In addition, Russia’s sunflower seed stock declined significantly in Jul-24 due to active purchasers from the oil processors, which is expected to fuel the market. However, the competition from other rival oils, such as palm and soybean oil, will continue to influence the market.

Argentina

Argentina’s sunflower oil prices dropped to USD 0.93/kg in W33, marking a 1.06% WoW and a 2.11% MoM decrease. However, compared to the previous year, prices rose by 1.09%. Due to the competitive prices, sunflower oil demand has remained strong, especially in the biofuel sector, which has boosted global trade activities. However, given the rising concerns about global supply in the 2024/25 season, especially in Ukraine, Argentina’s sunflower prices will likely remain resilient, influenced by global supply disruptions and local production dynamics.

3. Actionable Recommendations

Diversify Sourcing Strategies Across Regions

The sunflower oil market faces significant challenges due to reduced production in Ukraine. With the USDA lowering its forecast for Ukraine’s 2024/25 sunflower harvest, production, and exports, companies that rely heavily on Ukrainian sunflower oil should begin diversifying their sourcing. Russia and Argentina are viable alternatives. Traders should engage with multiple suppliers across these regions to help ensure a steady supply chain and reduce dependency on any single country, mitigating risks associated with geopolitical instability or climatic events.

Actively Monitor and Respond to Global Market Dynamics

The sunflower oil market is in flux due to multiple factors, including climate challenges in Ukraine, shifts in global supply, and rising competition from alternative oils such as palm and soybean oil. Companies should prepare for potential price hikes or supply shortages by securing inventory or adjusting procurement strategies. Additionally, monitoring the seasonal shifts and processing trends in Ukraine can provide insights into future pricing and availability, enabling better forecasting and decision-making.

Sources: Tridge, Sosng, Specagro, Agrosektor, UkrAgroConsult, Agrotimes, Milk News, AgroPortal.ua