Prices Driven High: Global Market for Sunflower Oil

Sunflower oil packaging line at a crushing plant in Ukraine
Photo by: Latifundist.com

What factors drive the global sunflower oil market? Sunvin Group CEO Sandeep Bajoria puts crop failure in key producing regions, increased procurement by China, higher demand for soft oils among the major forces shaping vegoils market in the current season. President of the International Sunflower Oil Association (ISOA) also spoke about the reasons why India's imports of Ukrainian sunflower oil had dropped and the factors sending the prices to a 7-year high.

Latifundist.com: Why do you think sunflower oil prices recently went to a 7-years maximum?

Sandeep Bajoria: There are lots of factors involved in sunoil price rally this year starting from loss of yields in Ukraine and Russia, Chinese increased buying of sunoil for forward months, demand destruction for palm oil which has seen switching demand of palm oil to soft oils, India’s unwillingness to cover in the initial phase of the rally and then caught short and strong upside movement in soy oil on the back of lower crush in major exporter Argentina.

Learn more: TOP 10 Sunflower Producing Countries in 2019

Latifundist.com: Do you think delayed demand from China was one of the reasons for price rally?

Sandeep Bajoria: Yes, as have stated above, Chinese strong forward month buying of sunoil was one of the key reasons to initiate the rally despite larger crop forecasts initially at both Ukraine and Russia.

Latifundist.com: How do you estimate the current price situation on the global sunflower oil market?

Sandeep Bajoria: Even though sunoil prices corrected from the recent peak say USD 1020 per MT, still the prices are at an untradeable higher level over competing oils which will risk elastic demand moving from sunoil, therefore if sunoil wants to cater fresh demand, it will have to adjust its spread to remain competitive. Meanwhile, the recent downside correction from the peak may attract some short covering and keeping prices supported for some time.

Latifundist.com: How much do you think the decrease in the production of sunflower in Russia and Ukraine is influencing the total situation on the sunflower oil market?

Sandeep Bajoria: Perhaps this is the simplest question to answer, since Ukraine and Russia are the top two producers and crushers of sunseed, definitely any reduction in the crop there is going to affect the sunoil market globally. Larger the reduction, higher will be the deficit in export availability of sunoil and it will alter the sunoil prices as well at its elastic demand.

Related: GradOil: Sunseeds Shadow Market Weights 2-3 Million Tons

Latifundist.com: What are the main factors currently influencing prices for sunflower oil?

Sandeep Bajoria: Please refer to the point number 1, additionally, the second wave of coronavirus, US soybean harvest progress and Brazil’s 2020/21 soybean crop planting will be the key factors to influence sunoil prices moving forward. Moreover, there is a risk of La Nina which could alter the production prospects of soybeans in Latin America (Brazil, Argentina, Paraguay and Uruguay) as well as palm oil production in Malaysia and Indonesia.

Latifundist.com: Why India is decreasing purchases of Ukrainian sunflower oil?

Sandeep Bajoria: India is the biggest edible oil buyer but at the same time is a very price-sensitive market, the elastic demand for soft oils generally fluctuates between soybean oil and sunoil and the price spread between them is the major deciding factor to determine the switch. In recent time, sunoil prices were trading at an unusually wide spread over soybean oil and at the same time the prices were almost neck to neck with domestically produced and more premium peanut oil. Such a scenario was never seen in the past several years, on the other hand, it has slowed down India’s sunoil purchases. We expect India’s sunoil import in 2020/21 to fall to 2.2 MMT from 2.5 mln t estimated for 2019/20 due to sunoil’s unusually higher spread of USD 100-120 over soy oil.

Igor Vestin, Latifundist.com

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