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War in Ukraine impacts sunflower market

SAMUEL CORUM /Getty Images Woman wearing ukranian flag holdssunflowers
MAJOR PRODUCERS: Ukraine and Russia account for about 80% of sunflower meal and oil in a typical production year.
Sunflower Extra: Suspended production in Ukraine and trade sanctions against Russia will limit global supplies.

Russia’s invasion of Ukraine has significantly impacted global markets. Since the start of the conflict, oilseed crush facilities and ports in Ukraine have suspended operations, and other countries have imposed sanctions on Russia, limiting trade from the region.

How big of a deal is this? In a typical year, Ukraine and Russia account for about 80% of global sunflower meal and sunflower oil trade. Finding alternative vegetable oils will be a challenge in a market that has been facing tight supplies even before the war in Ukraine. As a result, the U.S. has a strong opportunity to gain sunflower oil market share from the Black Sea trade disruptions.

Will sunflower acres increase this year to take advantage of this opportunity? From the chatter I am hearing from producers and processers contracting acres, I would say yes. The common theme heard is that oil and confection sunflowers are a good alternative to be put into a crop rotation this year.

Based on smaller 2021 production, tight seed stocks and product demand, nearby sunflower prices continued to increase throughout this winter. Adding further interest in sunflowers are attractive new-crop prices, which are much higher than a year ago at this same time. New-crop cash prices are trading from $29.65 to $31.40. Last year, new-crop sunflower cash prices were trading from $22 to $22.50 at the crush plants.

Crushing plants are still offering new-crop cash and Act of God production contracts. AOG clauses basically mean producers don’t have a production risk. Should drought, hail, insects, disease, etc., result in a yield loss and production per acre can’t cover a sale, the AOG clause kicks in. In other words, producers are only obligated to deliver what they produced, not what they contracted.

Oil premiums

Something else to consider is the oil premiums crush plants pay on NuSun and high-oleic sunflower contracts. Sunflower is the only oilseed that pays premiums for oil content above 40%. A 2% price premium for each 1% of oil above 40% pushes a contract with 45% oil content gross return 10% higher per cwt, raising the value of a $31.40 base contract to $34.50 per cwt.

How much can acres increase before it impacts prices in 2022? Based on historical usage, an increase in acres of 20% to 25% in 2022 can easily be added given current demand without impacting present prices to a great degree. Several new domestic customers have come on board adding sunflower oil to their product mix. If Ukraine is unable to ship oil, more opportunities in export markets will exist.

In the months ahead, weather in North America will be the main price-setter. The market will also be focusing on any lingering effects of the Ukraine war and its impact on U.S. exports. To keep tabs on sunflower prices, visit the National Sunflower Association at sunflowernsa.com and follow it on Twitter @NatlSunflower

Sandbakken is executive director for the National Sunflower Association and writes from Bismarck, N.D.

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