The production of vegetable oil in Russia in October set a record, reaching 761 thousand tons, TASS reports with reference to the data of the SovEcon analytical center. Analysts attribute output growth to favorable market conditions and low export duties. Against the backdrop of high demand from oil refineries, sunflower prices continue to grow, analysts said. The output of sunflower oil in October amounted to 577 thousand tons, rapeseed oil - 104 thousand tons, soybean oil - 74 thousand tons. High demand for vegetable oil from exporters contributes to record production rates, SovEcon analysts say. According to their data, 295 thousand tons of sunflower oil have been exported since the beginning of the season, which is second only to the record 351 thousand tons of the 2019/20 season. Exports are going at an active pace against the backdrop of high world oil prices and zero duties.
According to SovEcon, cited by TASS, the recovery in demand from oil refineries has led to an increase in prices for oilseeds. By December 7, sunflower prices within the country rose to 24.4 thousand rubles/t from 20.9 thousand rubles/t in early November. Sunflower prices are also driven up by record low harvesting rates. At the beginning of December, the share of harvested areas of sunflower was 75%. The last time harvesting was so slow was in 2017, when 15% of the crop was lost as a result, analysts said. They believe that in the short term, sunflower prices may continue to rise. However, their upside potential looks limited on the back of declining world oil prices. According to analysts, the market may stabilize as soon as processors replenish their stocks.
According to Mikhail Maltsev, head of the Fat and Oil Union, over the three months of the current season, the production of vegetable oils as a whole increased by 23% compared to the same period last season and amounted to 2.16 million tons. The production of soybean and rapeseed oils increased especially - by 60% and 40% respectively. This is due to the fact that these oilseeds were harvested before sunflower and immediately sent for processing, he commented to Agroinvestor. “By the end of this year, the total capacity of oil refineries in Russia will be almost 30 million tons per year, which means that the industry can potentially process about 2.5 million tons per month. Therefore, with an even load of capacities throughout the season, we will be able to process the entire record harvest and significant carry-overs from last season,” the head of the union believes. The export of vegetable oils for the first three months of the season, according to Maltsev, increased by 13% compared to the same period of the 2021/22 season and exceeded 1 million tons. Soybean oil was exported the most, its supplies increased by almost 30%.
Export of sunflower oil increased by 10%. Although, in order to realize the export potential of 5 million tons, it is necessary to ship at least 400 thousand tons monthly, Maltsev added. According to him, the low growth rate of sunflower oil exports is associated both with the delay in the start of the harvesting campaign and with the restraint of sunflower sales by farmers in the expectation of an increase in the price of oilseeds, although there are no fundamental reasons for this. “Given the record harvest, such tactics threaten to repeat the situation of last season, which we warned about at the beginning of the 2021/22 season. As a result, carry-overs in the 2022/23 season may be even higher than in the past, which will lead to a collapse in prices. Additional pressure on the cost of sunflower will be exerted by a decrease in the quality of seeds that have not yet been harvested,” he concluded. Dmitry Rylko, director general of the Institute for Agricultural Market Studies, told Agroinvestor that the potential for vegetable oils inlet in Russia is close to a record high against the backdrop of a large harvest of rapeseed, soybeans and sunflower.
“It is quite possible that we will continue record production against the backdrop of high export volumes,” the expert believes. He noted that the world prices for sunflower oil in the last two or three weeks are approximately at the same level, and it is quite low. Rylko sees no prospects for increasing the cost of oils on world markets. “Domestic seed prices, on the contrary, went up: since the margin of processors is close to a record, they were able to share their high profitability with farmers,” he said.
