Russia’s sunoil export tax to hit producers, exporters

Russia’s floating export duty on 2021-22 sunflower oil (SFO) shipments could hit the country’s entire sunflower seed (SFS) sector, putting pressure on local prices, as well as exports of the product in the new marketing season.

Russia’s agriculture ministry last week set the first SFO floating export duty at $169.90/t, which will be applied for shipments from 1 September, in a bid to ensure inland supplies and stabilise SFO prices in the local market. The duty rate amounts to 70pc of the difference between the basic export price of $1,000/t and the indicative price calculated by the agriculture ministry on a monthly basis and reduced by $50/t.

Russian SFO exporters have mixed sentiments about the move, with some of them expecting the duty to result in falling export prices for Russian product, so that it could remain competitive on the global market. Meanwhile, others predict an oversupply of SFO in Russia’s local market amid a high export tax on SFS shipments, combined with expectations of bumper SFS production in the new season.

Russia’s government on 1 July raised the SFS export duty to 50pc from 30pc previously, with the threshold set at $320/t. The measure initially was aimed at providing support to domestic crush, which was negatively affected by insufficient SFS supplies in 2020-21 amid large crushing capacities. But since Russia is on track to harvest a large SFS crop in 2021-22 — at 15.5mn t, according to the US Department of Agriculture (USDA) — the current export restrictions could lead to a drop in local SFO prices, which in turn could put pressure on SFS prices, with big losses for Russian producers.

Prospects for new export season

Meanwhile, Russian SFO exporters could also suffer from export restrictions, and the start of the 2021-22 season in September could be extremely challenging for them.

A bumper SFS crop in the Black Sea region could result in a sharp downward correction of SFO prices globally, while the revised Russian floating export duty will be enforced only from the start of October.

In addition, Russian SFS producers increased their own financial resources during the 2020-21 season and could hold off from new-crop sales at the start of the season, which could also negatively affect local crush margins and the profitability of SFO exports.

Meanwhile, key SFO importers India and China — which are typically price-sensitive — could significantly ramp up their Ukrainian SFO purchases in the 2021-22 marketing season, if Russia-origin product is more expensive.

“Indian importers purchase Russian sunflower oil only when its price is $10/t below the Ukrainian equivalent. At current price levels, the export duty for Russian SFO makes its import to India unprofitable,” Indian trading company Athena Tradewinds’ director, Vivek Pathak, told Argus.

India predominantly buys Ukrainian SFO, with about 2.2mn t of product expected to arrive in the country in the 2021-22 marketing year, while imports of Russian SFO are projected at just about 300,000t, Pathak said.

Russian SFO exports could soon face strong competition from Ukraine, as the latter could export a record 6.55mn t of product in the 2021-22 marketing season (September-August), according to the USDA, following forecasts of record SFS production.

Agrus Media

Tags: Russia, sunflower oil, taxes, sunoil