Marketing Your ’02 Sunflower Crop
Saturday, November 2, 2002
filed under: Marketing/Risk Management
Marketing Your ’02 Sunflower Crop
Sunflower prices likely to trend higher into spring, but that doesn’t mean there aren’t opportunities now—explore your market options
Storing a portion of your sunflower crop into spring has generally been worthwhile, and this year may be no exception. However, don’t hold your breath for a repeat of the red hot market rally that occurred this past summer.
The fundamentals support strength in the sunflower price into next spring, says George Flaskerud, NDSU extension crops economist. The first sunflower production forecast for 2002 indicates a drought-affected crop that will be down about 24% from last year, with lower yields expected in 6 of the 7 major sunflower growing states.
U.S. canola production is expected to decline 21% from last year, and Canadian canola production is forecast to be down about 30% from 2001.
Although world sunflower production in 2002/03 may rebound from the last marketing year led by higher production from Argentina and the Ukraine, global oilseed production is projected to be down from the year before, and vegetable oil stocks continue to tighten.
Oil World, which tracks global vegetable oil marketing trends, said in its October
18 report that “bullish fundamentals are now asserting themselves,” and with the U.S. soybean harvest nearing completion, the focus will turn to South American weather and crop prospects. South American weather into February will probably determine the direction of soybean prices in Chicago, Oil World said.
Typically, delivery of sunflower during harvest results in a wider basis for the local cash sunflower price, relative to the soy oil futures price. The seasonal price trend for sunflower then rises into the winter, peaking in the spring. “Sunflower—year in and year out—it pays to store a portion of your crop,” says Flaskerud.
Argentina is currently the number one exporter of soybean oil and meal, as well as sunflower oil and meal. Thus, Argentina’s production alone has a large impact in price direction. Weather problems in South America would be certain to trigger market rallies, and the market will need to bid for sunflower acres next year, he says.
If you decide to put your sunflower in the bin, be sure to take storage costs into account, Flaskerud adds, including in/out expenses such as equipment, shrink, insurance, management, labor and trucking.
NuSun, Confection Pricing
Sunflower producers have the advantage of multiple market options: the hulling market, the crush market or the bird food market. Supply and demand drives prices in all three markets, with prices rising and falling accordingly. Marketing opportunities won’t fall in your lap—do your homework.
“You’ll do yourself well to check to see what markets are available for the product you grow. There are very specific, unique markets out there with different values associated with them. Have your sunflower sampled so you know what the grade and quality is. Then find out who’s bidding for it. Talk directly to buyers and find out what they want, and when,” says Bob Majkrzak, president and CEO of Red River Commodities, Fargo, N.D.
Key quality factors for most confection buyers: Variety/hybrid, seed size, sclerotinia damage, insect damage, and weed seeds, chaff, and other foreign material. “Probably in that order,” says Majkrzak. Try to segregate lower quality sunflower that may bring a lower grade. “I know farmers who combine the outer edge of their fields and keep it separate from the rest. They isolate the sunflower that may have insect damage, and create a better marketing opportunity for the rest of it.”
Lynn Hoelting, general manager of Mueller Grain, Goodland, Kans., says that typically, more sunflower in the High Plains is contracted prior to harvest. That means there’s usually less sunflower stored on-farm in the High Plains. “Producers here are used to storing more traditional crops, and are more apt to haul the sunflower to town.”
This year, however, there’s likely to be more sunflower stored on-farm in the High Plains. “They realize there’s not as much crop out there, and some are willing to wait for higher prices. But that doesn’t necessarily mean there won’t be market opportunities at harvest. Harvest pressure generally means lower prices, but different markets can be hot, even at harvest. Keep on top of the markets, no matter what time of year it is,” he says.
“Keep the global supply in perspective when you’re marketing, but at the same time, with the localized markets we have and a short local crop, there will be opportunities,” says Hoelting. “If your elevator accepts open storage, great. If you store sunflower on farm, take care of them.” Delayed pricing options offered by most crushing plants can also be an attractive alternative to on-farm storing.
Differences in moisture aside, wheat and oil sunflower are similar in the fact that, just like the protein premium for wheat can fluctuate with the market (in fact, there were reports of some spring wheat being discounted at the elevator this harvest, for protein too high) so too can the premium for NuSun.
An automatic price premium for NuSun “is probably the biggest misconception out there,” says Guy Christensen, merchandiser with Northern Sun, Enderlin, N.D. “The thinking is that whatever the regular price is, tack on a fixed premium for NuSun, where that isn’t always the case.”
Christensen explains that the price for NuSun is affected by several market variables. The premium may rise to be competitive with the price offered by other segments of the market, such as bird food and hulling. It may fall if processors have less need for mid-oleic oil. “Crushers need to be able to expand and contract the premium, to accommodate the market supply and demand for NuSun,” says Christensen. “The premium isn’t static. It’s dynamic, changing with the needs of the marketplace.”
There is not enough market history to accurately determine a price premium trend for NuSun, but Christensen says that generally, the likelihood for a price premium is best during the last half of the marketing year, from April to September.
Sunflower prices that neared $20 per hundredweight this past summer was driven by bird food buyers, caught short by low supplies. Christensen expects buyers to be more prepared next summer; thus, more seasonal prices can be expected in 2003, with market highs more likely in the spring. “It just takes someone to misstep, not being able to cover (their supply needs), and you’ve got the start of a market rally,” he says. “But I think you can count on a more seasonal price pattern. No one will wait until July to cover. No one will want to get burned two summers in a row.” – Tracy Sayler
Daily Sunflower Prices, Buyers Online
Get the scoop on daily sunflower prices and sunflower market news on the National Sunflower Association web site, www.sunflowernsa.com. Click on “News and Events,” then “Daily Market News.” There’s also a link to daily LDPs. Sunflower buyers who are members of the NSA can also be found online. Click on “Buyers Information,” then “Suppliers.”