Source: Oleoscope (Russia)
From February 1, the export duty on Russian sunflower oil will increase by 1719 rubles, to 17786 rubles/ton at an indicative price of $1068 against $1027 per ton a month earlier. Duty on sunflower meal in February will decrease by 882.9 rubles, to 3888 rubles per ton. The rate is calculated at the indicative price of $212.2/ton ($221.1/ton in January).
Dmitry Rylko, General Director of the Institute of Agrarian Market Conjuncture (ICAR), says that the duty on sunflower oil has risen inertially – world prices for it are not growing. At the same time, agrarians are restraining sales of “seed”, and their prices give a “guaranteed minus” even to large processors. “Therefore, many refuse to buy sunflower <…>. This situation may last up to several weeks, but not forever,” commented Rylko to ‘Agroinvestor’.
The expert also draws attention to the fact that up to December inclusive, both processing volumes and exports were at record levels, and this was happening at a time when the harvest decreased relative to last year by about 2 million tons and reducing carryover stocks. So now, he said, small plants may even begin to suspend work, and large ones – to reduce the volume of processing. And this situation is typical for all sunflower producing countries, Rylko emphasizes. “The crisis has affected everyone,” he says. – There is less sunflower in the world, and prices for soybean oil were formed against the background of expectation of another record of soybean production”.
In addition, now the market is affected by the uncertainty associated with the policy of U.S. President Donald Trump – he may start “pushing” the biodiesel program, which is likely to create a downward trend in the soybean oil market. That said, South American soybean production could also be below expectations due to drought conditions. “In general, there needs to be an upward movement in world oil prices, and/or a meaningful drop in the ruble, otherwise the “scissors” of prices between buying seed and selling oil will, unfortunately for everyone, only grow,” Rylko believes.
It is unlikely that the current duty increase will have any effect on domestic prices, as the rate increase turned out to be insignificant, says Agroinvestor’s interlocutor on the oilseed market. According to him, the price of oil on the Russian market will directly depend on the external conjuncture and the situation with the cost of oilseeds, which obviously will not decrease due to the new duty. “Plants may make an attempt to lower sunflower prices within 1.5-2 thousand rubles, but this step will obviously not activate sales. Even now there are very few sales – only for the acute need to close loans, etc.”, – knows the source of ‘Agroinvestor’.
He also says that now there is a “race for sunflower seed”: prices for it have already jumped significantly since the beginning of the year, and in conditions of urgent need to load processing plants to avoid their costly downtime, the market may face a new wave of sunflower prices, but then the oil itself will go up, although such dynamics will be directly influenced by the situation on the world market.