Article Archives
Sunflower Market Outlook 2019

Saturday, December 1, 2018
filed under: Marketing/Risk Management

       Saying the past marketing year for commodities was challenging is probably an understatement, given the environment producers faced.  Mother Nature is enough of a challenge each growing season, and no one wants to deal with additional uncertainty that is beyond their control.  That was the case in 2018, as large global crop production pressured prices for a third straight year.  The strong U.S. dollar continues to be a drag on exports — and, coupled with the U.S.-China trade war, did not give U.S. producers a break in the past year. 
       On the bright side, after more than a year of intense negotiations, the United States, Canada and Mexico reached an agreement to update the North American Free Trade Agreement. The new deal — to be known as the United States-Mexico-Canada Agreement, or USMCA — should return market certainty to these export markets for producers. 
       “NAFTA has been an unequivocal success story for American agriculture, opening markets that since enactment have become vitally important to U.S. sunflower producers, providing certainty to the rural economy,” says Karl Esping, National Sunflower Association board chairman and Lindsborg, Kan., producer.  “While there were some improvements, the major relief for U.S. producers is that there was no movement backwards with regards to agriculture; all food and agricultural products that have zero tariffs under NAFTA will remain at zero tariffs, which has been NSA’s goal since the renegotiation started.  Having a USMCA agreement in place is great news for sunflower products, as oil, meal, in-shell seed and kernel currently have duty-free access in Canada and Mexico.”
       Canada is the largest export market for U.S. sunflower oil and sunflower kernel. Mexico is the second largest export market for in-shell seed and kernel.  Because it was a renegotiation of NAFTA, opening all chapters, USMCA will have to be approved by Congress, and the earliest it would likely be brought up for consideration would be March 2019. 
The 2018 Growing Season
       Before we look ahead to 2019, let’s revisit how the 2018 growing season turned out.
       In USDA’s October sunflower production report, 2018 production came in at 1.93 billion lbs, down 10% from the revised 2017 production of 2.16 billion lbs.  USDA shaved off 6.0 million lbs from 2017 oil sunflower production and 7.0 million lbs from nonoil production. 
       Area planted, at 1.30 million acres, is down 11% from the June estimate and down 7% from last year.  U.S. sunflower growers are expected to harvest 1.24 million acres, down 12% from June and down 7% from the 2017 acreage.  The overall average yield for all sunflower types is forecast at 1,560 lbs/ac.  This is 56 lbs lower than last year’s yield but will be the fourth highest on record, if realized.
       USDA expects lower yields in six of the eight major production states compared to last year, with increases expected only in California and Kansas.  Compared with last year, average yields forecast in North and South Dakota are down 45 lbs/ac and 100 lbs/ac, respectively. The forecasted production in South Dakota, the leading sunflower producing state this year, is 895 million lbs, down 13% from 2017.  In North Dakota, production is forecast at 674 million lbs, down 3% from last year.
       The next production estimate will be released in January.
       According to USDA, old-crop sunflower stocks in all positions as of September 1, 2018, totaled 386 million lbs, down 35% from a year ago.  All stocks stored on farms totaled 91 million lbs, and off-farm stocks totaled 295 million lbs.  Stocks of oil-type sunflower seed are 279 million lbs; of this total, 82 million lbs are on-farm stocks, and 197 million lbs are off-farm stocks.  Nonoil sunflower stocks totaled 107 million lbs, with 9 million lbs stored on the farm and 98 million lbs stored off the farm. 
       Stocks of oil-type sunflower seed were 40% lower than last year at this same time, but in line with trade expectations.  Nonoil stocks were down 30% from last year, also in line with industry estimates. The stocks figures for oils and nonoils are bullish market news; and, depending on 2018 total production, seed stocks will be extremely tight by September.
2019 Oil-Type Sunflower Outlook
       No estimates are out yet on 2019 oil-type sunflower acres, but industry analysts believe that acreage will increase, given the interest they are hearing from producers.  I wish there was a crystal ball to predict this, but as you know, there isn’t.  However, based on historical usage, an increase in acres of 20-25% in 2019 can easily be added, given current demand, without impacting present prices to a great degree.                     
       “Several new domestic customers have come onboard adding sunflower oil to their product mix.  Export markets are growing as well, giving several market options to sell oil,” states Clark Coleman, NSA board president and Bismarck, N.D., producer. “Obviously, world events can change markets in a hurry. But based on the reduced 2018 oil-type production and product demand, the sunflower market should be aggressive in 2019 to get acres to replenish stocks and meet demand,” he adds.
       As of this writing, crushers were offering 2019 cash NuSun and high-oleic contracts at around $17.00/cwt with Act of God (AOG) contracts at $16.50.  Something else to consider is the oil premium that crush plants pay on sunflower.  Sunflower is the only oilseed that pays premiums for oil content above 40%.  Factoring in oil premiums offered at the crush plants on oil content above 40% at a rate of 2% price premium for each 1% of oil above 40%, this pushes a contract with 45% oil content gross return 10% higher per cwt.  The AOG $16.50 contract increases to $18.15, and the cash $17.00 contract moves up to $18.70. 
       To keep up with price movement, go to:
Confection Sunflower in 2019 
       According to USDA figures, confection sunflower has been one of the highest return-per-acre options available in this growing region since 2010.  That trend is expected to continue this year as well.
       If you are going to take advantage of the profit opportunity producing confection sunflower offers, you should be selecting hybrids based on the percentage of large seed and percentage kernel fill they will produce.  Seed size is generally evaluated as percentage over a ‘___/64th’ round hole screen, comparing 16, 18, 20 and 22, the four most common sizes.  Processors are buying more on seed size, so the larger the percentage of seed over a 20/64 round hole screen, the better.
       Confection processors had ample beginning stocks to start last marketing year, along with good crop production in 2017. As a result, confection acres were at reduced levels in 2018 — but this is expected to change in 2019.  It is highly unlikely that there will be much of a carryover going into next fall’s harvest.  There should be strong demand at harvest for the 2019 crop as processors look to replenish seed supply to meet domestic and export market demand.
Act of God or Cash Contract?
       Both confection and oil sunflower offer cash or Act of God (AOG) production contracts.  The AOG clause basically means the producer doesn’t have a production risk. Should drought, hail, insects, disease, etc., result in a yield loss and you don’t have enough production per acre to cover your sale, the AOG clause kicks in. You are only obligated to deliver what you produced, not what you contracted.  These ‘fail safe’ contracts have become very popular with farmers throughout the production region.  It provides an opportunity to ‘lock in’ attractive prices now for fall delivery. 
       “Having the option of getting an Act of God production clause when contracting sunflower helps me sleep a little better at night during the growing season,” remarks Lance Hourigan, NSA vice president and Lemmon, S.D., producer.  “It removes that all-important factor of ‘price risk’ in these very volatile times.”

       If you haven’t considered growing sunflower for a few years, you’ll be surprised how this crop’s genetics have changed.  As you prepare your crop budgets for the upcoming season, take another look at sunflower. You just might be looking at your most profitable crop in 2019.
       To visit with confection and oil sunflower buyers about contracting opportunities, go to    
* John Sandbakken is executive director of the National Sunflower Association.                   
return to top of page

   More about Sunflower ►