In a follow-up to a story published here, a lack of buying interest from the EU was once again countered by Chinese and Indian traders, who were seeking volumes throughout the week. However, despite this buying interest, prices have also begun to decline on the international market, because Ukrainian sellers are attempting to sell quickly by lowering prices in case the grain corridor ends prematurely before the allotted time in mid-March. The result is that Argentina and other nations that export sunflower seed and oil are being ‘forced’ to compete and are also lowering prices. To that end, prices have started to move down sharply, with trades of sunflower oil of Ukrainian origin CIF Marmara being reported to Mintec at $1,072/mt, down over $160/mt from trades heard earlier in February. If this downward price trend continues, prices over the next few weeks may likely trend lower, according to market players, unless the grain corridor deal ends.
A Ukrainian trader told Mintec, “I don’t think the grain corridor deal will last much longer. Russia is already complaining that it doesn’t benefit them and would be ‘inappropriate' to allow an extension without getting something from their end, such as the removal of sanctions. We are preparing as if the deal may end at any time and are looking to export as much as we can before then. The issue is, of course, that many players are in the same situation as us and thus prices are moving lower. Farmers are also looking to sell to generate cash flow for the new planting season.”
The new sunflower seed crop has not yet been planted in Ukraine (this usually commences between April and May), but market players are being ‘forced’ to sell sunflower seed and oil to keep cash flowing that is needed to buy supplies, such as seed and fertiliser for the new planting season, adding further downward price pressure to the market. Yet, the market is already speculating that more sunflower seeds may be planted by Ukrainian farmers at the expense of corn acreages. If this is the case, in regular years it would be expected that Ukraine would produce circa 17 million metric tonnes of sunflower seeds when harvested in October and November. Yet, if the Russia-Ukraine war is still ongoing during the planting period, it is very unlikely that even if a significant crop is planted that all of these crops will survive. Sunflower seed supplies from Ukraine are therefore constrained and thus the supply and demand balance sheet may be tight, particularly when the EU, thus far, will not import from Russia. According to market players, these factors may cause sunflower seed and oil prices to move up from current levels in the coming weeks.
A trader told Mintec, “a lot of sellers have come to the market at once, as one side is worried about the corridor deal ending its operations, while the others need to sell to buy materials for the new planting season. The market is seeing this as a very bearish sign which in the immediate term it is. Yet, they are forgetting that Ukrainian production is going to be very poor this year. We are not expecting more than 10 million metric tonnes, with our rough estimate being around 8 million metric tonnes. Supply in the long term is going to be constrained even if right now prices are moving lower.”