Dakota Farmer

Budgets show that confectionary and oil sunflowers could be very competitive with other crops this year.

February 28, 2016

3 Min Read

Crop budgets are still showing both confectionary and oil sunflowers among the top-earners in 2016. New crop sunflower prices are very competitive with other crops and processors are still offering 2016 new crop contracts. Processors want to build on the momentum the large 2015 crop allowed to rebuild product demand and expand market opportunities. All of the sunflower demand sectors are offering Act of God (AOG) contracts for fall delivery.  These “fail safe” contracts have become very popular with farmers throughout the production region. It provides an opportunity to “lock in” attractive prices now for fall delivery and removes that all important factor of price risk in these very volatile times. 

Most fundamental news for oilseeds has been negative lately. Traders continue to talk about U.S. soybean export sales lagging, record high South American soybean production, and large world carryout stocks. Adding more pressure is the U.S. dollar continuing to trade higher against a basket of currencies. The downside of a stronger U.S. dollar is that it could lead to a slowdown in exports as importers look for cheaper sources of product. Meal values are expected see further reductions as the South American crop hits the world market in earnest this spring into summer. This should result in oil values gaining on meal making up more of the crush margin. This scenario coupled with tighter oil stocks than a year ago and El Nino related concerns for palm oil production this year looks promising for high oil content seeds such as sunflower. Overall good demand should support seed prices allowing sunflower to hang in there and buck the negative trend in oilseeds.

Taking a look at the global picture, sunflower production in 2015/16 is forecast lower to 39.5 million metric tons (MMT). Crop reductions for Argentina and South Africa were the main reason. Drought is expected to limit 2015/16 sunflower area in South Africa to a four-year low. Argentine sunflower planted acres are lower than what was initially expected in the beginning of the season as market conditions discouraged producers from dedicating a greater amount of area for sunflower production. As a result, USDA’s forecast of sunflower production declined by 250,000 tons to 2.35 MMT. The 2016 Argentine sunflower crop will be 400,000 tons smaller than last year’s crop. The shortfall in production is giving some price premium to global sunflower seed and oil prices.

Consistent demand for seed from crushers, birdfood and confection processors is expected in the final months of this marketing year. The main market mover from April onward will be USDA's March Prospective Plantings report. Trade expectations about planted acreage will likely be in a wide range, but it seems reasonable to expect wheat acreage to decrease and corn and soybean to show an increase over 2015 levels. Oil sunflower acres should show an increase. I expect confection sunflower acres to be unchanged. With the release of the report, North American weather conditions and 2016 U.S. oilseed crop prospects will progressively become a more important factor in price.

To keep up with price movement you can go to the NSA website at: www.sunflowernsa.com.

Sandbakken is executive director of the National Sunflower Association.

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