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Brazil could cash in on sunflower oil shortage

sunflower closeup
India, China look to South America for replacement supplies.

Many are the repercussions of the Ukrainian-Russian conflict in the Brazilian agribusiness, but one that has directly affected consumers is regarding ag by-products like sunflower oil.

Both countries together represent 77.25% of worldwide exports of sunflower oil, according to USDA, and the interruption of that supply has sparked a search for replacement oils.

Big consumers of sunflower oil, like India and China, are now migrating to other vegetable oils, like soybean, redirecting demand to South American countries. As a result, Brazilian soybean oil exports destined to India in January and February represent almost 30% of the entire last year’s exports. As a result the prices of the by-product in Mato Grosso have increased already 15% in the first half of March, reaching BRL 8,849.50/ton (USD $1,835.43/ton).

Dry spell takes toll

All eyes are now on the soybean harvest in progress. With over 45% of harvested area, the yields are coming in as expected based on rainfall shortages during the growing season. In the south states and Mato Grosso do Sul, yield is 45% and 30% lower than last year. The rains that happened in February were not enough to reverse the damage of the drought.

In Paraná and Rio Grande do Sul states, second and third biggest producer of the crop, it is practically impossible to recover the yield potential of some areas, causing very significant loss in yield and grain quality. Grains planted in early October have the biggest losses, making it hard for the industry to extract oil, pushing the grains into animal feed markets.

On the other hand, Midwest and northeast states have yields higher than what they had in 2021/2022 season. In Mato Grosso, rainfalls were recurrent during several harvest days, which caused some delays. Although the last harvested lots had a lower quality, the overall yield was still high, around 53.43 bushels per acre.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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