Russia may set a record for the export of sunflower oil for two seasons in a row

Russia can export record volumes of sunflower oil not only in the current season (from September 1, 2022 to August 31, 2023), but also in the future (from September 1, 2023 to August 31, 2024). The volumes may reach 4 million and 6.5 million tons, respectively, Mikhail Maltsev, executive director of the Oil and Fat Union, told pole.rf magazine.

     “Taking into account the record carry-over balances for oilseeds and provided that farmers do not continue the practice of curbing sales of oilseeds, which has proven to be ineffective, oil production volumes (in the 2023/2024 season. - Ed.) can reach more than 9 million tons, in terms of meal could grow to almost 12.5 million tons. This will be a new production record for our industry,” he said. “Since we fully cover the country’s needs for oils and meals, we expect that we will be able to export almost 6.5 million tons of oil and more than 4 million tons of meal.”

Speaking about the season ending on August 31, the head of the industry union noted that the production of sunflower oil is projected to be more than 6.4 million tons (+ 10% compared to the 2021/2022 season), and the export is a record 4 million tons. At the same time, Maltsev stressed, the potential for sunflower oil exports was not fully realized: record high carry-over stocks of sunflower were recorded in Russia. According to the Institute for Agricultural Market Studies (IKAR), they amount to more than 1.5 million tons, and according to the estimates of the Oil and Fat Union - about 2 million tons.

     “In the first half of the 2022/2023 season, agricultural producers were rather reserved in their approach to sunflower seed sales, which led to an uneven loading of processing capacities, a decrease in production and exports of sunflower oil. In addition, the dynamics of exports was affected by logistical problems and difficulties with calculations,” he said.

To protect the domestic market and increase the utilization of processing capacities in Russia, duties on the export of sunflower and meal are in effect until August 31. At the end of July, the Ministry of Economic Development proposed to extend this measure for another year. The oil and fat union pole.rf said they fully support this decision. Record-breaking sunflower oil production in the 2022/2023 season was achieved, among other things, thanks to the retention of the sunflower export duty.

According to Maltsev, it is important when the rules for the market are determined in advance and do not change during the season. “This makes it easier for both producers and processors to form market strategies and avoid unexpected losses. We hope that agrarians will not continue the vicious practice of curbing seed sales at the beginning of the season, but will adhere to a reasonable trading strategy. We are grateful to the Russian Ministry of Agriculture for supporting our initiative to change the base export price to calculate the export customs duty rate for meal, which will be increased by 2,000 rubles, which will allow us to translate more revenue into the price of sunflower,” Maltsev said.

In June of this year, the average prices for sunflower oil on the world market fell to the level of 2020. In the domestic market of the Russian Federation, sunflower began to rise in price after the termination of the "grain deal". By July 28, prices, depending on the region, grew by 1.4–2.0 thousand rubles per ton. In the South and in the Central part of Russia, the cost of a ton of sunflower exceeded 26,000 rubles.

     “The cost of oilseeds directly depends on export prices for vegetable oils and the ruble exchange rate. We expect that the two-fold drop in export prices for sunflower oil, which we have been observing since last season, has already stopped. Due to the stoppage of the “grain deal” and the unfavorable forecasts for the harvest of oilseeds and palm oil for the next season, associated with the natural phenomenon of El Niño, the global cost of vegetable oils will adjust to a level that will allow farmers to maintain traditionally high margins for oilseeds,” said the Executive Director Oil and Fat Union.

According to Mikhail Maltsev, taking into account the current exchange rate of the ruble and the global market conditions, the purchase prices for sunflower seeds will remain at the level of 30 thousand rubles per ton. According to IKAR forecasts, Russian farmers will harvest about 15.7 million tons of sunflower seeds in the beginning of the season, and given the high carryover stocks, the supply on the oilseed market will be a record.