S&P Global Platts assessed sunflower oil, FOB Black Sea, at $805/mt on July 31, the highest since $795/mt on January 14, on tight supply of old crop oil.
The new sunflower crop in Ukraine is due in mid-August and old crop seed and oil availability is at seasonal lows. Seed supplies at farms, crushing plants and silos were 1.2 million mt in July, a market source said. Typically, seed supply drops in August to 500,000-600,000 mt, the annual low, before recovering in September and October.
Consequently, sunflower oil FOB Ukraine prices are in backwardation, with nearby loading at a $30-$40/mt premium to deferred positions for loading of new crop oil.
"Terminals are empty and plants have really small volumes -- there's no supply at all," a trader said. "Soybean [prices], palm oil [prices] and empty stocks of sunflower seed are boosting the market but it is a matter of time until participants see that new crop [sunflower oil] is already on the market and prices will drop significantly."
The seven-month high milestone signals the V shape recovery of the Ukrainian sunflower oil market to pre-coronavirus levels. Lockdown-induced demand destruction and the Russia-Saudi crude oil price war weighed on the vegetable oil market, pressuring sunflower oil prices to nosedive in the first three months of 2020.
Trading for old crop oil on the spot market has been illiquid in recent weeks, with attention focused on the new crop.
"There's a very good sunseed crop and a very good corn crop in Ukraine," a Ukraine-based source said. "There's very good conditions for the crop in Central and Eastern Ukraine and the dry winter meant a lot of fields reseeded with spring crops; and sunseed is the most profitable crop, so the planted area is higher than reported," the source added.
The crop is likely to reach around 16 million mt but could even be 16.5 million mt, the source said. A 16 million mt crop would be 10.7% higher than the five-year average, according to data from the US Department of Agriculture.
