Thursday, November 13, 2003
filed under: Marketing/Risk Management
Good fall weather allowed crop producers to make quick work of this year’s sunflower harvest, with variable yields and oil content, depending on growing conditions.
Early reports from receiving facilities show surprisingly good test weight averages of 30-33 pounds and average oil yields of 42 to 43%. Moisture content generally has not been an issue given the favorable weather conditions. The confection crop is generally good quality, although there is some concern about smaller seed size. Limiting factors on the total crop will be yield reductions due to droughty conditions and weed control issues.
USDA’s early all sunflower (oil & non-oil) production forecast for 2003 is 2.62 billion pounds, up 5% compared to last year. Based on conditions as of October 1, the average yield for all sunflower was forecast at 1,152 pounds per harvested acre, up slightly from 1,142 pounds last year. It is estimated that 2.274 million acres will be harvested, up 94,000 acres from last year.
With sunflower coming off fields so quickly this fall, some new crop ended up piled outside for short-term storage, and some crushing plants refused delivery of regular linoleic sunflower, accepting NuSun™ only.
The sunflower market has been caught in a quandary this fall, with conflicting price signals: on one hand, some crushing plants are full and have issued ‘no bids’ for the near term, and the bird food market has been quiet. On the other hand, surging U.S. and Chinese soybean prices this fall has offered support to the oilseed complex and oil products.
Despite the fact that both Argentina and Brazil are expected to establish new soybean production records next year, strong oilseed demand will continue to lend support to prices. Some wonder whether an already tight soy oil stocks situation could get even tighter.
In fact, with projected soybean supplies the lowest since 1996/97, it’s possible that the ending U.S. soy oil stocks-to-use ratio at the end of the 2003/04 marketing year could be the tightest ever. Says one oil merchandiser: “Will the industry be able to ration demand? What oils will be available to get us through the crush? The back end of the crop year on oil looks to me like it could be very volatile.”
Lynn Hoelting, general manager of Mueller Grain Co, Goodland, Kan., says that the strong soybean price has his customers bullish on oilseeds. “They see soybeans so strong, and hope sunflower will tag along.”
Whether to sell now, sell later, or sell incrementally is a decision each producer makes differently. “They’ll sell according to cash needs, storage situation, and tax purposes. Each producer needs to decide what value they want out of their crop, and try to remove greed and fear from that decision as much as possible. We try to advise them on trends, taking into account their other crops as well, and have them look at things from an overall marketing perspective.”
John Sandbakken, marketing director at the National Sunflower Association, says that since some buyers aren’t even bidding for them right now, producers could put traditionals under loan if they need cash in the near term, then sell them later.
“If you look at the current NuSun price, it’s really not too bad at the current time (early November). You could consider selling some now, hold some for rallies in January-February, and the rest next spring. Factor in the oil premium too, and consider the total return you need, not just the cash price,” Sandbakken says.
The oil premium for sunflower is 2% of the price for each 1% of oil over 40%. Thus, a 45% seed oil content translates to a 10% price premium or an additional $1.15 cwt at today’s prices.
Low oil contents are usually related to moisture stress. It is best to sell lower oil content seed into the bird food market. While bird seed buyers will adjust their prices to be competitive with crushers, there is no established oil premium or discount in the bird food market.
Typically, bird food buyers bid to meet their needs at the front of the sunflower harvest, with bids picking up again in the winter as bird food processors work to fill their orders. – Tracy Sayler