A decrease in the sunflower harvest in the Russian Federation and an increase in world oil prices have led to a sharp increase in the cost of oilseeds on the Russian market. According to Sovecon, last week average prices jumped by 3.9 thousand rubles, to 26.47 thousand rubles. per ton, which became a new record. Processors are already warning about a possible increase in oil prices at retail due to rising prices for raw materials.
Sunflower processors last week began to actively increase purchase prices for raw materials, Sovekon, an online publication about agricultural markets, reported in its report. Rates in the south of the country increased by 3–5 thousand rubles, to 27–28 thousand rubles. per ton, and in some cases prices exceed 30 thousand rubles. per ton. Average prices for sunflower seeds over the week jumped by 3.9 thousand rubles, to 26.47 thousand rubles. per ton is an absolute record that was achieved at the beginning of the season, Sovecon points out.
The fact that sunflower prices may rise sharply in the near future, Soveconwarnedin early September.
The reason is the expected reduction in this year's harvest by 23%, to 11.8 million tons year on year, due to unfavorable weather conditions, primarily in southern Russia.
As a result, this year's sunflower harvest could be the lowest since 2017, when 10.5 million tons were harvested. General Director of the Institute for Agricultural Market Studies (ICAR) Dmitry Rylko considers Sovecon’s assessment too pessimistic; ICAR will present its own forecasts later. In 2019, according to Rosstat, a record 15.37 million tons of sunflower were harvested in the Russian Federation, which is 20.6% more than the previous year.
Sovecon director Andrei Sizov adds that the increase in the cost of sunflower is also facilitated by the rise in oil prices on world markets: last week, average quotes increased by $40, to $875 per ton (FOB). On the Russian market, trade in sunflower oil has not yet begun this season, but current prices are at the level of 65–67 thousand rubles. per ton are already at record levels, adds Mr. Sizov.
Dmitry Rylko explains that the rise in world oil prices was provoked primarily by the actions of speculative funds that actively entered the market for exchange-traded agricultural goods, as well as fears of a shortage of raw materials.
Executive Director of the Oil and Fat Union Mikhail Maltsev points out that more than 90% of the cost of sunflower oil is formed by the cost of raw materials. In the context of a record increase in the cost of sunflower and, accordingly, an increase in production costs, processors will be forced to notify retail chains about changes in oil prices, he adds. General Director of Rusagro (brands “Dream of a Housewife”, “Generous Summer”, etc.) Maxim Basov confirmed that the company intends to notify the networks about the price increase. Kommersant sent questions to X5 Retail Group (Pyaterochka, Perekrestok, Karusel), Magnit, Auchan and Lenta. According to Mr. Sizov, the effect on retail prices will be less pronounced and more extended over time, since contracts in networks are renegotiated more slowly.
The Ministry of Agriculture stated that the gross sunflower harvest in Russia in 2020 is expected to be at the level of long-term average values, which will provide raw materials to processors and maintain a stable situation in the market. The Federal Antimonopoly Service (FAS) noted that there is no direct correlation between sunflower production volumes and prices for sunflower oil.
The retail market for sunflower oil over the past five years has been characterized by a stable price situation, regardless of the volume of production of raw materials,” said Larisa Vovkivskaya, head of the department for control of the agro-industrial complex of the FAS.
According to Andrei Sizov’s forecasts, sunflower harvesting will begin in the near future in the Volga region, where the harvest suffered less than in the south, and the rise in prices for raw materials may slow down or stop.