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Confections: The 2013 Outlook
Friday, February 1, 2013
filed under: Utilization/Trade: Confection-Non-oil
The 2011 growing season was a year many sunflower producers want to forget. Excessively wet conditions prevented numerous acres from being planted in the Northern Plains, resulting in lost profit opportunities. In the High Plains, it was another story as severe drought took revenue from producers in a different way.
In 2012 the weather turned around in North Dakota and Minnesota as producers harvested one of the best crops in years. Unfortunately, the drought that affected the High Plains intensified and crept into South Dakota.
So what is in store for 2013? Well, at this point no one knows for sure, but it looks like we will stay in a dry cycle for the time being. Most climatologists believe that much-above-average moisture will be needed to break the dry cycle in the sunflower production region. Given the current situation and sunflower’s drought tolerance attributes, this may be the time to consider planting confections in 2013.
Confection sunflower has been one of the highest return-per-acre options available in this growing region. According to USDA figures, the national average price for confection sunflower has averaged $28.45/cwt since 2008. The national average yield during this same time was 1,415 lbs/ac. This represents a gross return of more than $400 per acre.
Confection sunflower contracts also offer Act of God (AOG) production clauses. AOG clauses basically mean 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.
“Given the dry conditions we experienced in 2012 in South Dakota, I like the fact that I can get an Act of God contract,” observes Tom Young, a South Dakota sunflower producer and chairman of the NSA Board of Directors. “It takes out some of the market risk and lets me sleep better at night.”
Is There a Market for My Product?
For a producer of confection or hullers, product demand is high and continues to grow each year. Domestically, consumption is increasing, with 75% of kernel produced in the U.S. consumed domestically. This compares to 10 years ago when only 39% of hulled seed production was consumed in the U.S. This is partially due to foreign competitors taking away some of the export markets, but domestically more and more products are using kernel than in past years. You can find kernel in multi-grain breads, cereals, snack foods, SunButter® and other bakery items.
The domestic market for kernel has grown 39% over the past 10 years. As mentioned previously, exports of kernel have lost some ground from where they were 10 years ago, but U.S. exporters are still active in the kernel market.
The domestic demand for in-shell grew 2% in the most recent marketing year, with consumer demand staying steady over the past 10 years. In-shell exports were down slightly at 6% from the previous marketing year. But over the last decade, in-shell exports have grown by a whopping 86%.
Domestic and international markets for U.S. confection in-shell sunflower seeds are growing each year. Though domestic demand has averaged about 5% growth annually, exports actually have enjoyed the most dynamic growth — especially in Mexico, the Middle East and Turkey — the past five years. “We want competition for our products so that we can create the best return per acre to the sunflower producer — and having strong export and domestic markets is great,” Young says.
The overall quality of the 2012 confection crop was excellent. This reality may increase demand and customer satisfaction even more when competing with other snack foods.
What’s on the Horizon for Confection Sunflower?
Confection sunflower really means in-shell, and farmers should be selecting hybrids based on the percentage of large seed they will produce. Seed size and percentage nutmeat are two key variables to keep in mind when selecting confection hybrids. Seed size is generally evaluated as percentage over a ‘___/64th’ round-hole screen, comparing 16, 18, 20 and 22, the four most common sizes.
In the United States, 90 to 95% of planted confection sunflower hybrids are considered “long types” by the industry. These would be seeds in a range of 5/8” to 3/4” inch in length. The remainder of the industry is divided into smaller round-shaped seeds and the extra longs that are 7/8” to 1” in length. In Canada, 75% of the seeds produced are the small round-shaped confection type.
Demand is particularly high for large-size seeds. The percentage of confection seed size over a 20/64 screen is becoming increasingly important with processors. The export market prefers the longer seed, so processors are buying more on seed size — which is becoming more of a price factor. So the larger the percentage of seed over a 20/64 round hole screen, the better.
“The advent of Clearfield® hybrid confection varieties is a huge step forward for the industry and will put us on a level playing field with other commodities,” says Tim Petry, field production manager for SunOpta Sunflower. Petry foresees more hybrids evolving with better agronomics as the main focus. “We want to maintain large seed size, coupled with enhanced agronomics and yields, while keeping profitability to the producer in mind,” Petry says. Other confection processors, such as CHS Sunflower, have an ExpressSun® confection hybrids that produce large seed for the in-shell market also available for the 2013 growing season.
With More Large-Seed Hybrids, How Many Acres Will Be Needed?
Confection processors had good beginning stocks to start this marketing year, along with good crop production in 2012. But they’ll need to replenish supply with another good crop in 2013.
Harvested confection ’flower acreage in 2012 was slightly less than 250,000 with an average yield of 1,548 lbs/ac. The confection industry is looking for a 15-20% increase in 2013 to reach a goal this year of 300,000 acres. Annual growth of 10 to 15% will be needed for the next two to three years to keep up with demand, as the industry focuses on reaching the 400,000-acre plateau.
The 2013 new-crop prices are out. Early contracts were offering $32.00/cwt in the Dakotas and Minnesota. In the High Plains, contracts are in the neighborhood of $36/$25 for split-price contracts. Producers interested in growing confection sunflower are encouraged to check out this link for a contact list of confection processors: www.sunflowernsa.com.
As mentioned, confection sunflower contracts offer Act of God production clauses. Some processors are also offering storage incentives for later delivery and freight incentives for various locations.
The best online resource for tracking new-crop sunflower bids is the National Sunflower Association website: www.sunflowernsa.com.
— John Sandbakken