Confection Sunflower Update
By John Sandbakken
The confection market has grown and changed a lot in the past few years and shows promise for more growth in the near future.
Hulled seed was the major use of confection seed in the 1980s. But that changed in the early 2000s, and now in-shell is in the driver’s seat when it comes to industry focus and consumer demand.
Why the change?
In the late ’90s, the industry began using oil-type seeds to produce hulled seed for the bakery market. This led to the development of “huller” varieties which took over as the feedstock for hulled seed. Consumers at home and abroad started demanding larger in-shell seeds than the older hybrids were producing, leading to a change in direction in hybrid confection sunflower seed breeding. The focus turned to producing more seeds that would go over a 20/64 screen rather than producing seeds for hulled seed production. Today, the confection industry is striving to produce hybrids with 80% of the production meeting the 20/64 seed size.
What does this mean for the confection sunflower producer?
The United States is a major global producer of confection sunflower, supplying both our domestic needs and export markets. This bodes well for areas such as South Dakota, where confection acres are the on the increase and yields have been fantastic. “South Dakota producers like the fact that we have two viable competing market options for our products,” says Tom Young, a central South Dakota sunflower producer and the new president of the National Sunflower Association. “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.”
For a producer of confection or hullers, product demand is high and continues to grow each year. Currently, 66% of hulled seed produced in the U.S. is consumed domestically. That compares to just 39% a decade ago. This trend is partly due to foreign competitors taking away some of the export markets; but domestically, more and more products are using hulled seed than in past years. You can find hulled sunflower seed in multi-grain breads, cereals, snack foods, SunButter® and other bakery items.
The domestic market for hulled seed grew 6% in the past marketing year and has grown 31% over the past 10 years. As mentioned previously, exports of hulled seed have lost some ground from where they were a decade ago, but U.S. exporters are still active in the hulled seed market.
Germany remains the most prominent customer for hulled U.S. sunflower seed, purchasing 27% of all U.S. exports. Much of the imported seed is used by the Germans to make sunflower bread — a very popular product in that European nation. Germans also use hulled sunflower seed in breakfast cereals, in confectionery products and as an ingredient in a variety of foods like vegetables, yogurt and soup.
While Germany is the major market for U.S. hulled sunflower seed, other European nations (e.g., Denmark, The Netherlands) have similar hulled seed consumption habits.
Competition for the sale of hulled sunflower seed in Germany has increased within the past few years with the main competitors being China, Hungary and Poland. Chinese exporters have made the most significant inroads in a market that has been dominated by U.S. exporters. To compete, U.S. companies are positioning themselves as reliable suppliers of high-quality hulled sunflower seed with impeccable customer service.
The U.S. confection industry also targets potential growth markets. Mexico’s nearly 100 million-strong population is markedly young. “Population and purchasing power are increasing, representing a growing market,” says Tim Egeland, CFO of Dahlgren & Company, Inc. Market research conducted by the NSA indicates that Mexican consumers are willing to try new products such as hulled sunflower seed.
Mexico has the potential to become a good hulled seed market. There are essentially 10 ways that hulled confection sunflower seed is available to consumers in Mexico: in bulk; packaged as a snack; as a component in a major snack; as a sweet snack; in bread; in other baked goods; in cereal; as a salad topping; in some “mole” sauces, and as an ingredient in healthy drinks.
The fastest growth in consumption is in snack foods. “Sales of hulled seed have been modest up to this point, but the potential for increased export sales is exciting,” according to Egeland.
Domestic demand for in-shell sunflower grew 2% during the past marketing year with U.S. consumer demand staying steady over the past 10 years.
In-shell exports were down slightly at 6% from the previous marketing year. However, over the last 10 years, in-shell exports have grown by a whopping 86%. So the change in industry focus to produce more seeds over a 20/64 screen is paying off!
“Bigger is better” when it comes to in-shell, according to Bob Majkrzak, president and CEO of Red River Commodities, based in Fargo, N.D. Consumers are demanding bigger seeds, and they are fussy about the quality of each and every seed, adds Majkrzak. “You can’t have one bad seed or it may turn away consumers, as they are expecting to have a perfect eating experience each time they buy seeds.”
The other main driver of domestic in-shell consumption at present is flavored seeds. This has opened up a whole new market with new consumers. Roasters are offering flavors such as barbeque, ranch, dill pickle, salt and cracked black pepper — and, for those of you who like it hot, jalapeno!
On the export side, Spain remains the most prominent customer for U.S. confection in-shells, purchasing 31% of total U.S. exports. As in the U.S., roasted and then salted in-shell sunflower seeds are a popular snack food in Spain. Spaniards are very particular about the quality they purchase and typically buy large confection sunflower in-shell, commonly called “22/64 size.” The U.S. seed industry spent a good deal of time developing long in-shell hybrids for this market. Young people ages 10 to 25 are the main consumers of sunflower in-shell, although other age groups also consume them on an occasional basis.
Spain itself produces only a small amount of confection sunflower seed, so is highly dependent upon imports to satisfy needs. Spain’s demand for U.S.-produced confection in-shell has been fairly stable with annual U.S. exports of 24,000-32,000 metric tons per year since 2002. Hulled sunflower seed also is used in Spain as a snack and food ingredient. Hulled seed imports have been over 2,000 metric tons in each of the past two years.
Though Spain remains our number one customer, U.S. producers actually have enjoyed the most dynamic growth in the Middle East, Turkey and Mexico, where exports have more than doubled during the past two years. One could summarize the overseas market for U.S. confection sunflower seed over the past two years in a single word: promising. And it promises to remain that way well beyond 2011.
With more confection hybrids now producing large seed, how many acres will be needed?
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” 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.
Confection processors had good beginning stocks to start this marketing year, along with good crop production in 2010. But they’ll need to replenish supply with another good crop in 2011. Annual acreage growth of 10-15% will be needed for the next two to three years to keep up with demand.
Producers interested in growing confection sunflower are encouraged to check out this link for a list of confection processors: http://www.sunflowernsa.com/buyers/ detail.asp?categoryID=3
Confection sunflower contracts offer Act of God production clauses. Some processors are 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’s site: www.sunflowernsa.com/daily-market-news/
John Sandbakken is marketing director for the National Sunflower Association.
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