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Black Sea Ukraine sunflower oil market enters third quarter at multi-year lows


Sunflower oil pricing hits 3-year lows in the week ended June 2

Obstruction of the port of Pivdennyi impacts prices

  • Author
  • Dominique Gomez
  • Editor
  • Richard Rubin
  • Commodity
  • Agriculture Energy Transition Shipping

The beginning of the summer months has been marked by a steep decline in the value of sunflower oil for FOB Black Sea Ukraine delivery, with the price falling $236/mt from March 1.

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Platts assessed sunflower oil FOB Black Sea Ukraine at $689/mt as of June 2, with value reaching the lowest level since early May 2020, amid problematic shipping conditions and a slump in global demand.

Black Sea grain corridor operations remain hindered

The 60-day extension of the Black Sea Grain Initiative confirmed on May 18 did little to relieve downwards pressure on sunflower oil prices, as the European market remained heavy on stocks purchased on a prompt basis prior to the deal's renewal.

Difficulties for exporters continued in the immediate aftermath, with the port of Pivdennyi -- one of the three ports covered by the agreement -- remaining inactive, in the absence of approvals for incoming ships.

The ongoing blockage of Pivdennyi is a suspected retaliation by Russia over the obstruction of its nearby ammonia pipeline, with continued impediment since April 29 reducing market optimism regarding grain corridor operations.

Market demand for Ukrainian shipments weakened in response, with trades for Russian origin product on a CIF Turkey basis reflecting a shift towards more secure transportation routes for some consumers.

"The question for buyers is how will the corridor work, the same as last month or better" a trader said. "With Pivdennyi blocked, its uncertain how many purchases we'll see."

Producers remained restricted as slower Odessa port operations and shifts towards the Danube ports limited their reach towards destinations such as India and China, while buy options remained wide amid low rapeseed oil prices and Russian availability.

"Danube ports are more efficient for freight and insurance, but still very limited," a market participant said.

Foreign policy limits sunflower product exports

External policies also weighed on Ukrainian sunflower oil prices, as key destinations for both oil and oilseeds attempted to limit cheap inflows to protect domestic industry.

On April 28, the European Commission imposed a ban until June 5 on the export of Ukrainian sunflower seed, rapeseed, wheat and corn to Poland, Hungary, Bulgaria, Romania and Slovakia after a series of complaints and unilateral restrictions from them. The neighboring countries have historically been major consumers of Ukrainian sunflower seeds exports.

Domestic prices for sunflower seeds saw a slow decline during May, according to market sources, with pessimism fueled further by the EC's potential decision to extend the ban beyond its expiry date.

The price of Ukrainian sunflower seeds decreased on the week on May 30, according to a producer, with values seen at Hryvnia 12,500-13,200, including VAT, on a CPT plant basis.

The decision of the Turkish government to impose a 36% duty on sunflower oil imports from June 1, from no duty, further accelerated the slide in Black Sea prices.

A sudden rise in bidding seen around mid-May quickly subsided, as consumer stocks filled and spot delivery windows moved into the higher duty period.

"There aren't many terminals in Turkey can take the oil and tranship it for re-export and may people just don't want to pay the duty," a trader said.

Buyer interest remained scarce at the beginning of June on high destination market supplies and the prospect of further price reductions, with buyers withdrawn from the market as sellers sought tradeable values.