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Sunflower Market Outlook

Sunday, December 1, 2024
filed under: Marketing/Risk Management

By John Sandbakken*

railroad and storage bins — Photo credit: Don Lilleboe

        From the looks of it, 2025 will again be another challenging year in terms of marketing commodities. Input costs are not expected to slow down in price anytime soon. Margins will be tighter, so producers are going to have to buckle down and watch their marketing in the year ahead. You will also have to sharpen your pencil when it comes to figuring the bottom line, as crops that were profitable last year may not be in 2025. It will also be important to watch the markets carefully to take advantage of market rallies when selling old-crop and locking in new-crop prices.
        Before we look ahead to 2025, let’s see how the 2024 growing season turned out. In October, USDA released its first production estimate of the 2024 sunflower crop. Two things stood out in the USDA production numbers. First, the combined oil and nonoil sunflower yield set another record at 1,889 lbs/ac. Second, total sunflower production dropped by 43% from 2023. That, of course, is the result of a sharp reduction in sunflower planted acreage.
        USDA pegged 2024 sunflower production at 1.3 billion lbs, down 43% from the revised 2023 production of 2.26 billion lbs. USDA’s October estimate for oil-type sunflower output was 3.64 million lbs below 2023, with nonoil production being down 2.19 million lbs from last year.
        Acreage updates were made in several states in the October report. Area planted, at 720,000 acres, was down 20% from the June estimate and down 45% from the previous year. Sunflower growers were expected to harvest 691,000 acres, down 20% from the June forecast and down 45% from 2023.
        The October sunflower yield forecast, at 1,889 lbs/ac, was 102 lbs higher than last year’s yield and will represent the highest on record for the United States, if realized. Higher yields were expected in California, Kansas, South Dakota and Texas compared to last year, with decreases expected in Colorado, Minnesota, Nebraska and North Dakota.
        The forecasted production in North Dakota, the leading sunflower-producing state this year, is 591 million lbs, a decrease of 47% from 2023. Compared with last year, the average yield forecast of 1,997 lbs/ac in North Dakota is down by just one pound. In South Dakota, the average yield is forecast at 1,998 lbs/ac, up 288 pounds from last year. The yield forecast in South Dakota will be the highest on record, if realized.
        The next USDA?2024 yield and production estimates will be released in early January.
        In its sunflower seed stocks report, USDA pegged old-crop sunflower stocks in all positions as of September 1, 2024, at 575.3 million pounds, up 57% from a year ago. All stocks stored on farms totaled 139.1 million pounds and off-farm stocks totaled 436.2 million pounds.
        Estimated stocks of oil-type sunflower seed were 507 million pounds; of that total, 133.7 million pounds were on-farm stocks, and 373.3 million pounds were off-farm stocks. Nonoil sunflower stocks totaled 68.3 million pounds, with 5.3 million pounds stored on the farm and 63 million pounds stored off the farm. Stocks of oil-type sunflower seed were 49% higher than last year and in line with trade expectations. Nonoil stocks were up 166% from last year and also in line with industry estimates.
        Big yields in four of the past five years have led to a buildup in oil sunflower stocks. This year’s significant reduction in production will bring the market back into historical alignment, and seed stocks could be extremely tight by September 2025.

Should You Plant NuSun or High Oleic?
        This year, a change took place at the crush plants regarding the seeds they will crush. Crush plants are now offering new-crop contracts for high-oleic seeds — but not NuSun.
        The NuSun era opened many opportunities in the U.S. and Canadian markets. However, the market has shifted as buyers now want oils that have high amounts of monounsaturated fats and saturated fat levels at or below 7%.
        High-oleic sunflower oil fits the bill in that regard. It has been around since the mid-1980s, though for several years its production was restricted to just one company due to patent issues. That limited oil availability, and high-oleic was mostly sold into high-end niche markets.
        Today, most hybrid seed companies offer high-oleic hybrids. “We have been growing high-oleic sunflower for years with no yield drag and great oil content,” says Lance Hourigan, NSA board chairman and Lemmon, S.D., grower. “As sunflower producers, we need to deliver the products our customers want — and there is increasing market demand for high-oleic oils.”
        The outlook for sunflower oil continues to be bright, thanks in part to the U.S. Food and Drug Administration’s qualified health claim for high-oleic oil and its heart health benefits, as well as the FDA’s ban on partially hydrogenated oils in the United States. Several new domestic customers have come onboard adding sunflower oil to their product mix. Export markets such as Canada and Mexico have potential to grow as well, giving several market options to sell oil.
        There will still be a market for NuSun seeds, but it will be mainly restricted to the birdfood market.

What About Confection Sunflower in 2025?
        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 that 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. “The export market is requiring the longer seed, so variety selection is important when planning confection sunflower production,” states Mike Kotzbacher, senior vice president of Fargo, N.D.-based Red River Commodities. “Processors are buying more on seed size, so the larger the percentage of seed over a 20/64 round hole screen, the better.”
        Confection acres were at reduced levels in 2024, but this is expected to change in 2025. It is highly unlikely that there will be much of a seed carryover going into next fall’s harvest. There should be strong demand at harvest for the 2025 crop as processors look to replenish seed supply to meet domestic and export market demand.

Act of God or Cash Contract?
        If you would like to sleep a little better at night during the growing season, maybe you should consider contracting sunflower with an Act of God (AOG) production clause. Confection and oil sunflower contracts offer AOG clauses.
          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 sunflower production region. This option provides an opportunity to “lock in” attractive prices now for fall delivery. It removes that all-important factor of “price risk” in these very volatile times.
        As of this mid-November writing, crushers are offering 2025 new-crop cash high-oleic contracts at around $21.50 per cwt., with Act of God (AOG) contracts at $21.00.
        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%. Considering oil premiums that are 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 $21.00 contract increases to $23.10, and the cash $21.50 contract moves up to $23.65.

        With harvest now wrapped up in the Northern Hemisphere, traders’ attention will turn to the Southern Hemisphere. There are thoughts that oilseed production numbers for South America might be too high based on the developing La Niña. If any major weather damage occurs to South American crops, it will be very bullish for new-crop values in the US.
        If you haven’t considered growing sunflower for a few years, take another look and you’ll be surprised how this crop’s genetics have changed. As you prepare your crop budgets for this coming year, sunflower might be your most profitable crop. To talk to confection and oil sunflower buyers about contracting opportunities, check out this link: www.sunflowernsa.com.

* John Sandbakken is executive director of the National Sunflower Association.