Sunflower prices are stronger than normal for this time of the year as tight beginning seed stocks and strong demand have crush plants searching for seed supplies.
Since harvest began, nearby prices have added $1.65 to $2.05 per cwt. Historically, harvest pressure and heavy producer selling have caused prices to fall in the early part of the marketing year. That will likely not be the case this marketing year as a large reduction in global sunflower production is anticipated.
According to Oil World, global sunflower production is forecast down 5.45 million metric tons to 50.4 MMT from last year’s total and represents a three-year low. Drought-related yield reductions in the Black Sea region and area reduction for Argentina are mostly responsible for the decrease.
Given the location of the crop losses, this bears watching as international trade would assume much of the impact and could open some market opportunities. It is very possible that the market low has already been established, and prices will remain relatively firm for the foreseeable future.
Bird food prices also have had some upward movement of $1 per cwt in some locations after being somewhat quiet. Warmer than normal temperatures with little snow on the U.S. East Coast, the primary market for bird food, have slowed demand. Bird food prices could rally if tougher winter conditions set in.
In the world vegetable oil market, palm oil prices are expected to continue an upward trend as production levels are significantly reduced because of pandemic-related labor shortages. Oil demand is robust, and this has propped up soybean oil values on the Chicago Board of Trade and is good news for sunflower.
Sun oil values are closely tied to soy oil values, which could result in upward price momentum in seed prices at crush plants.
Looking ahead to 2021 new crop, NuSun and high oleic sunflower prices are expected to be aggressive the next few months as the industry tries to secure 2021 production given current demand. New crop contracts have increased substantially since they first rolled out last fall.
Plan for tight margins
When looking at new crop sunflower prices and crop budgets, producers need to consider the value of oil premiums paid on oil sunflowers. Oil premiums are offered at the crush plants on oil content above 40% at a rate of 2% price premium for each 1% of oil above 40%. For example, 45% oil content results in a 10% price premium, which pushes gross returns from oil sunflower even higher.
Once again, 2021 will be another challenging year in terms of marketing commodities. Margins will be tighter, so producers are going to have to buckle down and watch their marketing in the year ahead. You also will have to sharpen your pencil when it comes to figuring the bottom line, as crops that were profitable last year may not be in 2021.
In the months ahead, price direction will be determined mainly by export demand news and South American oilseed production prospects. To keep up with price movement and find seed buyers, visit sunflowernsa.com.
Sandbakken is the executive director of the National Sunflower Association. He writes from Mandan, N.D.