Sunflower oil again began to rise sharply in price

Will the government return to price regulation for the product?

The other day, wholesale prices for sunflower seeds and sunflower oil in Russia rose for the first time in the last two months. Moreover, this happened despite the very high export duty for August, which is almost twice as high as July. Of course, there is a completely reasonable concern: what about retail, store prices, will we expect another jump in the foreseeable future?

Last week, sunflower rose in price by 500 rubles, up to 25.7 thousand per ton, sunflower oil – by 600 rubles, up to 73.6 thousand per ton (excluding VAT), follows from the report of SovEcon.

At the same time, the export duty on sunflower oil in August was set at 15.9 thousand rubles per ton, compared with 8.6 thousand in July. It would seem that this circumstance alone should keep the domestic market from any, even meager, price fluctuations. But world prices intervened in the situation: they are now rising due to the rise in price of soybean and palm oil, as well as crude oil.

If we talk about the global situation, then by today the cost of sunflower oil in the world has increased by 50 percent in annual terms. extremes. Interruptions in the supply of raw materials and finished products to the same Europe have become permanent and sustainable.

As for Russia specifically, according to Nikita Maslennikov, a leading expert at the Center for Political Technologies, demand for sunflower inside the country is now low, since many domestic oil plants switched to processing new-crop rapeseed in July. And this seasonal cycle of their work will last until September inclusive. Under these conditions, exporters are trying to compensate for their estimated losses (due to the forced waiting in July-September and high export duties) by slightly increasing prices. This situation will continue until the export duty on sunflower oil is reduced, and radically – to 8.7 thousand rubles per ton.

“And the current rise in world prices is largely due to the classic seasonal situation, when products made on the basis of the old sunflower crop are slowly exhausted, and the new one is just starting to go into processing, – Maslennikov explains. – And this gap is always accompanied by a price surge, although in general, food on the planet, according to the July index of the FAO (UN food structure), fell in price by 8.6%. Seasonality is always structurally complex: from year to year, somewhere there is a clear decrease in prices, and somewhere there is an equally obvious increase.”

Will we see new price tags in stores? So far, the increase in selling prices by manufacturers for oil refineries is not so large as to translate it into retail. But if growth in the wholesale segment of the market continues for another one and a half to two months, then yes, some effect of a rise in price is possible. However, it is too early to judge this now: according to Maslennikov, the low domestic demand for sunflower oil does not in any way attract the role of a price driver. If there is a noticeable growth in retail, it will probably be due to the dishonesty of retailers or manufacturers in certain regions.

“Now the market prices for sunflower oil are at the lows of 2022 and approximately at the level of October 2020, – says TeleTrade chief analyst Mark Goykhman. – So we are talking about a local technical bounce up after a long decline. It is associated with an increase in export prices, possibly with a drought in Europe. In this situation, domestic producers and exporters are striving to increase supplies abroad, albeit with some damage to the domestic market. However, this is a temporary phenomenon: high export duties hold back the growth of exports, and world quotations are unlikely to rise in autumn.” As for the Russian retail, prices for sunflower oil as of August 8 decreased by 1% compared to the end of July. So, according to the analyst, there are no serious reasons for concern, as it was a couple of years ago, when the state introduced administrative regulation of prices for sunflower oil, now there is no.

The sown area under sunflower this season is a record 10 million hectares – against 9.65 million hectares a year earlier, said Dmitry Leonov, deputy chairman of the board of the Rusprodsoyuz association. Due to this factor, as well as favorable weather conditions, the gross harvest of new crop sunflower may exceed 16 million tons. – against 15.6 million tons a year earlier. Which obviously will not contribute to the rise in prices – neither wholesale nor retail.

Published in the newspaper “Moskovsky Komsomolets” No. 28848 dated August 17, 2022

Newspaper headline:
Prices for sunflower oil reached the sun