“Dependable Crop, Reasonable Price”
Thursday, December 15, 2005
filed under: Utilization/Trade
The National Sunflower Association hopes 2005 will be the pendulum that swings domestic sunflower supply into balance with increasing demand.
Food companies in the U.S. are required to include trans fats on labels by Jan. 1, 2006. Many are eliminating the use of unhealthy trans fats altogether, turning to naturally stable vegetable oil sources, such as NuSun™ and high oleic sunflower oil.
With brand reputation, consumer market share, and millions of dollars at stake, changing ingredients and food processes is a significant undertaking that major food companies and oil users don’t take lightly. They are understandably hesitant to switch to an oil that cannot be assured of a stable supply, especially in light of declining acreage in recent years and the short crop in 2004, with Northern Plains production cut severely by cool weather and a bout with late-season Sclerotinia.
So 2005 was just what the doctor ordered for the acreage-ailing U.S. sunflower industry. To win acres, sunflower buyers stepped up to the plate with attractive production contracts, and growers responded. Both acreage and production increased significantly in 2005 (see table), spurred on by nearly ideal growing conditions in many areas of the Plains.
It was indeed a banner year for sunflower in 2005, now the challenge is to maintain the production momentum. The excellent production experience in 2005 will certainly encourage many growers to plant sunflower again in 2006, but price will be a major factor. Mike Clemens, a Wimbledon, N.D. grower and chairman of the NSA, says contract prices will need to be attractive again for 2006 to compete with soybeans for acres.
“The new crop prices that began coming out last November/December really got guys thinking, and announcing the bids early was key,” he says. “It helped lock in acres, and once seed orders are in place, it’s pretty hard to change a producer’s mind about what he’s going to plant.”
Clemens says he, like all growers, compares the bottom line in deciding what to plant the next crop season, taking expected yield and price into account. “To plant sunflowers, I figure I need a $30 to $40 better gross return per acre over soybeans. Two thousand pound sunflower at 12 cents a pound is $240 an acre, and 32 bushel soybeans at $6.25 is $200 per acre. So there’s your $40 an acre. Now I’m willing to commit the acreage to raising sunflower.”
The NSA has an ambitious five year plan for sunflower produced in the U.S. – four million acres by 2010, most of that in the form of oil type sunflower. Weather, price, and other factors such as input costs, farm programs, and crop insurance will have a large say in whether that plan is met. One thing is certain, however: it would be a tremendous blow for industry growth to take a step back in acreage.
“To feed a domestic market, we’ve got to have carryover, enough product available that takes us 12 months out of the year. We need carryover in case we get one of those awful years like last year, to help cushion supply. To sustain the market over the long-term, we cannot run out,” says Larry Kleingartner, executive director of the NSA. “Ultimately, what we all want to see, growers and buyers alike, is a dependable crop at a reasonable price.” – Tracy Sayler