The Changing Sunflower Market
The sunflower market has been one of change and adaptation. The market started over 25 years ago as seed export out of the Great Lakes. That all changed when Europe put their own production of sunflower in place with lucrative subsidies. The market shifted to oil exports and depended on export subsidies for some time.
Just a few years ago, over 80% of the sunflower oil produced in the U.S. was exported. Mexico was the primary market but there were markets such as Algeria, Egypt and Turkey as well. All were price sensitive markets – in other words, the U.S. had to be very competitive. These markets took huge volumes of oil, but the U.S. had to move the majority of the sales prior to the Argentine sunflower crop harvested in March. The U.S. crushing plants crushed most of the sunflower crop from November to March to take advantage of these markets. They looked to other oilseeds to fill in the crush for the rest of year.
That situation has now changed with the onset of NuSun™. Domestic users are now the principle market. It is likely that only about 20% of the sunflower oil produced in the U.S. will be exported this year, with most of that going to Canada and Mexico.
Domestic users such as potato chip companies need a supply of oil each month of the year. It is not possible to store huge volumes of oil. Thus, the sunflower crush has to be spread out over 10 or 11 months. Crushers will need to provide a price incentive for farmers to store the crop longer than in previous years. That is already happening at one of the crushing locations with a 30 to 45 cent cwt premium to deliver in February and March.
The situation this year has been a bit unusual with strong selling pressure which has filled up the crushing plants in the north. With huge crops of most commodities and no elevator storage and limited rail transportation, the pressure to sell sunflower at harvest has been unprecedented. Thus, several of the plants have had to pull their daily quotes and only take deliveries of previously purchased seed. One way to avoid limited marketing options at harvest is to sell some 2004 production prior to planting or harvest.
There will continue to be a market for traditional sunflower oil both domestically and overseas. This market is small but important. A high oleic market will also continue (and may in fact expand) with production that will likely remain mostly contracted.
The hulling market is also going through some changes. Germany has been a very significant market taking half of the kernel exports. In the last two years China has taken much of that market with cheaper product. It is anyone’s guess if the Chinese will continue to dominate this market. NuSun has pushed seed values higher at the farm level, thus making kernels less competitive overseas.
Bird food dominated the market last year, but has been relatively quiet this year so far. This continues to be an opportunity market, taking lower oil content seed or seed that is too far from the crushing plants. It is a wonderful market that approximates about 500,000 acres. Sunflower continues to be the preferred seed among most bird species and bird feeders. That is not expected to change. Again, this is primarily a domestic market.
The advent of NuSun has brought about tremendous change in the sunflower industry. It has come an incredibly long way in a short amount of time – from conception to adoption in eight years – and has flipped the U.S. sunflower domestic and export markets around. Such production and market transformation may be unprecedented for agricultural commodities in this country.
Still, it is an industry in its infancy. Production is building, as is demand. The new Food & Drug Administration requirement for food labeling of trans fats by Jan. 1, 2006, may mark another important development in the future of NuSun. The FDA labeling requirement is prompting food companies to look to oils such as NuSun, which is naturally trans-fat free.
Competition with corn and cotton oil exists, and our small level of NuSun production has major oil users somewhat hesitant to switch their processes and products at this point. The strategy of NuSun is to gain long-term stability in domestic markets. This is our charge as we work as an industry to convey the year-to-year reliability of NuSun in the marketplace. – Larry Kleingartner
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