Sunflower oil market update: harvest surplus, price fluctuations, and intense global competition
Recent shifts in the sunflower oil market have signalled a slight price downturn alongside a softened demand as major players adjust their strategies, resulting in slightly reduced activity. These market adjustments have resonated globally, notably impacting the 6 ports market, but less so as Mintec noted demand was still occurring particularly from Turkey. Despite this, offers declined significantly, sliding by approximately $60 per metric tonne compared to the previous week, with shedding around $40 per metric tonne at the time of writing. Mintec's observations attribute this price adjustment, in part, to the conclusion of Ukraine's sunflower seed harvest, of an estimated 11.929 million metric tonnes, surpassing last year's volume. However, insiders speculate the actual harvest might exceed this reported figure, potentially reaching an estimated 14 million metric tonnes, hinting at a surplus supply that could enter an undisclosed market, informally termed 'the black market' among traders.
In a notable shift from the previous week, Ukrainian farmers pivoted towards selling seeds to bolster cash flow and reduce inventory, leading to increased crushing activities. Despite paying higher prices for sunflower seeds, crushers managed favourable margins, albeit at reduced prices, driven by the urgency to meet the growing demand for sunflower oil. However, reports indicate that the majority of farmers remained cautious, retaining their seeds and selling only what was necessary, potentially constraining sunflower seed supply until a broader sell-off among farmers occurred.
Meanwhile, Russian industry insiders disclosed significant sunflower oil sales to major markets like India, China, and the Middle East, albeit with relatively fewer documented transactions. If confirmed, Russia's substantial stockpile and the potential for increased crushing activities following a year of robust production and sustained demand could mirror dynamics akin to the wheat market. Competitive pricing strategies on Russian volumes might exert broader downward pressure on sunflower oil prices, posing a challenge for other sellers to compete against these attractively priced volumes.
Adding complexity to the market is the near price convergence among rapeseed, sunflower, and palm oils. This convergence holds significance, particularly in the EU, as closely aligned price values often elevate preference for buying rapeseed and sunflower oils over palm oil. Currently, while Mintec has not observed a significant surge in rapeseed oil purchases, demand for sunflower oil remains robust from international buyers albeit at reduced price levels to prior weeks. Market players advise close monitoring, as a notable shift towards rapeseed or sunflower oils over palm could create a bearish sentiment for palm oil while bolstering the market sentiment for the other oils.
