Studies by international organizations (FAO, USDA, etc.) indicate a 1% decrease in world sunflower production and, at the same time, a rather sharp decline in sunflower oil stocks, which reached a historical minimum. This situation contributed to maintaining the average world sunflower oil price at around $1540/t. And this is despite the decline in Brent crude oil prices. As a result, market analysts note a rare phenomenon – diverging dynamics of vegetable oils and oil/oil products markets (usually tightly linked).
However, the situation may soon return to familiar characteristics. Argentina is preparing to supply significant volumes of oilseeds to foreign markets. And India, the world’s largest buyer of vegetable oils, is reducing purchases of sunflower oil at peak prices and looking for cheaper alternatives such as palm or soybean oil.
“Turkey’s ‘contribution’ to support the regional sunflower market has almost dried up
“An important factor supporting sunflower prices in the Black Sea region last month was Turkey’s fiscal policy, namely, Ankara’s decision to allow imports of 1 million tons of sunflower without customs duties,” notes Iurie Rizha, an expert in agro-marketing. “This ‘demand bubble’ raised the average price of sunflower in Moldova to 10.95 lei/kg on average. At the same time, the maximum price for this commodity in the port of Giurgiulesti this month rose to 11.30 lei/kg and higher”.
However, according to the expert, the potential of this market stimulus is almost exhausted. Turkish processors covered a significant part of the needs in the first week of February, which is indicated by the decrease in offers for sunflower purchase from their side.
“Market history shows that as soon as the raw material needs of large regional buyers are met, prices tend to enter a technical correction phase. In other words, there are clear signs that regional sunflower prices have reached a “ceiling level”. Accordingly, the “window of opportunity” to benefit from the active sale of expensive stocks of this product may close in the coming weeks.
“There is a real risk that the sunflower price in the port of Constanta, which has reached a level of more than $630/t, will fall to $570/t in the absence of new factors to support the progressive market dynamics, – believes Iurie Rizha. – Moreover, in the medium term, i.e. in case of more or less normal weather conditions and positive forecasts regarding the future harvest, the price level may return to the range of $430-450/t. This will put additional pressure on those who prefer to keep large stocks in the hope of further impressive growth in demand and prices”.
What should Moldovan farmers do?
Regional market dynamics show that holding large sunflower stocks is gradually transforming into a risky strategy.
Market analysts recommend Moldovan farmers to “take a cautious commercial position and use a step-by-step sales strategy”. That is, gradually, in a calm mode to realize the commodity remains of production until the middle of March – “it will allow to protect the profitability of sales from a possible correction towards lower prices”. And further, after Easter, to act based on the assessment of the state of crops for the future harvest.
Cesar Gheorghe, a well-known expert of agribusiness in Romania, also adheres to a similar opinion. He believes that in the context of shrinking processing margins and logistical risks in the Black Sea region, “converting sunflower stocks into cash flow remains the safest method of risk management this spring”.
