Records for plants – seeds – Newspaper Kommersant No. 233 (7434) dated 12/15/2022

Favorable market conditions and the absence of export restrictions allow oil refineries to reach almost full capacity at the beginning of the season. In October, the production of vegetable oils in Russia exceeded 760 thousand tons, having updated the absolute monthly record, comparable figures should be in November. Agrarians are already beginning to restrain sunflower sales in anticipation of rising prices, processors point out.

The production of vegetable oil in Russia in October reached a record 761,000 tons against 489,000 tons a month ago and 636,000 tons a year earlier, according to a Sovecon review. According to analysts, the previous maximum of 720 thousand tons was recorded in April 2022. 577 thousand tons of sunflower oil were produced in October, which is also close to record levels, Sovecon writes. Andrey Sizova, director of Sovecon, says that vegetable oil production should also be at its maximum in November, although plants can already operate at almost full capacity. Since the beginning of the season, the country has produced 1.3 million tons of vegetable oils compared to 1 million tons a year earlier, analysts calculated.

The high rates of oilseed processing at Sovecon are explained by favorable market conditions and zero export duties. According to Sovecon, since the beginning of the season, the Russian Federation has exported 295 thousand tons of sunflower oil, which is second only to the record of the 2019/20 season, when 351 thousand tons were exported. About 70% of oil produced in Russia is exported, so the production rate also depends on the throughput of the export infrastructure, says Mikhail Maltsev, executive director of the Oil and Fat Union.

Exports from the Russian Federation, including supported by a decrease in oil supplies from Ukraine, Kommersant’s interlocutors noted. According to the Ministry of Agrarian Policy and Food of Ukraine, in October the country exported 433,000 tons of sunflower oil, which is 24% less than in September. As stated on the website of the Ukrainian electronic exchange GrainTrade, the main oil terminals in Nikolaev are damaged, almost all plants on the Black Sea coast do not work, so the export of oil through the ports is very slow.

According to Sovecon, the average export prices for sunflower oil from Russia on FOB basis are now at the level of $1.14 thousand per ton. Recently, world quotations for vegetable oils have slightly decreased, but the margin of oil refineries should still be high, given the relatively low prices for sunflower seeds, the export of which is actually banned, Andrey Sizov notes.

Until August 31, 2023, the export of sunflower is limited by a duty of 50%, at least $320 per ton. Since the beginning of November, according to Sovecon, sunflower prices have increased from 20.97 thousand rubles. up to 24.47 thousand rubles. per ton. Although, Mr. Sizov notes, the dynamics is most likely temporary and is associated with active purchases by oil refineries before the New Year holidays.

Director General of the Institute for Agricultural Market Studies Dmitry Rylko says that the main risks are related to the volume and quality of the new sunflower crop. According to him, due to the weather, there are big losses, and the cleaning is delayed until March-April 2023. According to Rosstat, by November 1, 10 million tons of sunflower were harvested against 14.5 million tons a year earlier. But for the time being, a record production of vegetable oils is expected this season, says Dmitry Rylko.

According to Mikhail Maltsev, processors are working on stocks of raw materials formed at the beginning of the season, which should end in January-February 2023. And agricultural producers, seeing record volumes of oil production and difficulties with harvesting, begin to hold back sales based on the rise in sunflower prices, he points out. As Mr. Maltsev notes, against the background of the absence of fundamental reasons and a record harvest, such tactics threaten to repeat the situation of the last season – the accumulation of even larger carry-over balances by the end of the season and a collapse in prices.

According to Andrey Sizov, given the significant sunflower harvest and large carry-over stocks, Russia this season can set a record for sunflower oil production, producing more than 6 million tons for the first time. Last season, the production of crude sunflower oil in the Russian Federation decreased by 9%, to 5.3 million tons, according to a report by Rusagro.

Anatoly Kostyrev