Indian sunflower oil imports to hit five-year low

India’s sunflower oil imports are expected to a hit five-year low in the 2020-21 marketing season to 30 October, reflecting tight global supply, high prices and strong competition from other vegetable oils, according to the Mumbai-based Sunvin Group consultancy.

Sunflower oil imports into India — the world’s largest importer of soft oils — could fall below the 1.9mn t mark this season, down by over 30pc on the previous season, Sunvin’s Anilkumar Bagani told Argus.

“Demand for sunflower oil is going to be lower worldwide, because of higher prices and an unsustainably huge spread over soybean oil,” Bagani said.

In November, the Ukrainian sunflower oil price hit $1,165/t fob Chornomorsk, its highest since February 2013, as a result of tight export supply from key shippers Ukraine and Russia. Combined sunflower seed production in the two countries has fallen by about a fifth this year.

Combined exports of sunflower oil from Ukraine and Russia in the 2020-21 marketing year are expected to fall by about 2mn t to 8.6mn t, according to the US Department of Agriculture.

After prices hit multi-year highs, demand growth for refined sunflower oil slowed in major markets such as India and China.

Refined sunflower in India is trading at a big discount to imported crude sunflower oil, according to Bagani, who said Indian importers could stop purchasing crude sunflower oil and work with volumes already purchased.

In the last couple of months, India has only bought sunflower oil for the front month and only December shipments are currently priced, he added.

China, the world’s second largest sunflower oil buyer, has suspended purchases as importers wait for lower prices. The country, which was previously buying oil three, six and nine months ahead, has already faced washouts from Black Sea suppliers, with some Ukrainian and Russian exporters unable to meet their export commitments, following the domestic price surge and a sharp drop in seed crushing volumes.

“Only inelastic demand is there for sunflower oil now, while elastic demand is naturally shifting to competing vegetable oils, like soybean oil and palm oil,” Bagani said.

Strong competition on the vegetable oil market

Sunflower oil will lose market share this season to competing vegetable oils, especially soybean oil, which is currently trading at discounts of around $280/t cfr India.

Bagani said the sunflower-soybean oil spread would be key for sunflower oil demand, especially for deliveries in the first and second quarters of 2021, when new soybean crop supplies start to arrive in Argentina and Brazil and soybean oil prices begin to fall, as a result of greater availability. Sunflower oil prices should follow suit, otherwise there will be no demand, he added.

“Sunflower oil prices tend to come under a larger correction, because of historically high levels. Prices for April–June shipments, currently hovering around $1,100/t fob Chornomorsk, should fall to $950/t to attract fresh demand,” Bagani said.

In addition to soybean oil, sunflower oil will also face competition from palm oil in India this season, after the country reduced base import duty on crude palm oil from 37.5pc to 27.5pc — 7.5pc lower than base import duty on crude soft oil, such as sunflower oil, soybean oil and canola oil.

“People in India will switch more to palm oil products. Given the lower net payable import duties, palm oil prices will have a cushion over soft oils and there will be more room for the tropical oil to attract demand from the food sector at the expense of costlier soft oils,” Bagani said.

India, the world’s largest vegetable oil importer and consumer, imported 13.2mn t of vegetable oils in the 2019-20 marketing year, with palm oil taking a 55pc share, while soybean oil and sunflower oil accounted for 26pc and 19pc, respectively, according to the Solvent Extractors Association of India.

Argus

Tags: sunflower oil, Indian imports