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Sunflower Market Outlook 2023
Thursday, December 1, 2022
filed under: Marketing/Risk Management
By John Sandbakken*
Severe to extreme drought conditions occurred across much of the Dakotas and parts of Minnesota during the 2021 growing season. Producers had not dealt with such dire conditions since the 1988 drought. The impact of the drought showed up in USDA’s 2021 production estimate, as sunflower production totaled 1.90 billion lbs, down 36% from 2020. The United States average yield per acre of 1,530 lbs decreased 260 lbs from 2020. Planted and harvested areas were down by 25% from the previous year.
Photo credit: Don Lilleboe
What a Difference a Year Makes
The 2022 growing season was delayed by two blizzards that hit the Dakotas and Minnesota in April. Facing extremely wet soil conditions, producers in these states needed to wait for the ground to dry and firm up before attempting to plant.
The late start to planting in most of the sunflower growing areas led to crop development that was behind the five-year average most of the season. In July, Mother Nature cranked up the heat, turned off the water spigot — and most areas went back into abnormally dry to drought conditions in a hurry. This pushed crop development closer to the five-year average pace.
Harvest started about a week later than normal but quickly caught up to the five-year average, aided by dry weather in all states. The silver lining in getting the April moisture was it allowed the sunflower crop to reach top-end yield potential before running out of gas. Yield for the most part was well above average, with excellent quality seeds going into the bin.
In USDA’s October sunflower production report, 2022 production was forecast at 2.91 billion lbs, up 53% from the revised 2021 production of 1.91 billion lbs. USDA added 2.3 million lbs to 2021 oil sunflower production but left nonoil-type production unchanged from last year. Area planted, at 1.69 million acres, is up 1% from the June estimate and up 31% from last year. Sunflower growers were expected to harvest 1.63 million acres in 2022, up 2% from the June forecast and up 31% from 2021.
The overall average yield for all sunflower types was forecast at 1,782 lbs/ac. This is 253 lbs higher than last year’s drought-reduced yield and will be the second highest on record for the U.S., if realized. Higher yields are expected in Minnesota, Nebraska, North Dakota and South Dakota compared to last year, with decreases expected in California, Colorado, Kansas and Texas. Severe to extreme drought conditions were prevalent throughout areas of the High Plains states where sunflower is grown.
The forecasted production in North Dakota, the leading sunflower producing state this year, is 1.30 billion lbs, an increase of 70% from 2021. Compared with last year, the average yield forecast of 1,846 lbs/ac in North Dakota is up 265 lbs. In South Dakota, the average yield is forecast at 1,912 lbs/ac, up 280 lbs from last year. The average yield in both North Dakota and South Dakota will be the second highest on record, if realized.
Updated 2022 USDA production estimates will be released in early January.
Seed Stocks at Three-Year Low
In its old-crop sunflower seed stocks report, USDA pegged old-crop sunflower stocks in all positions as of September 1, 2022, at 295 million lbs, down 25% from a year ago and representing a three-year low. All stocks stored on farms totaled 45.5 million lbs, and off-farm stocks totaled 249.3 million lbs.
Stocks of oil-type sunflower seed were 223 million lbs as of September 1; of that total, 41.4 million lbs were on-farm stocks, and 181.7 million lbs were off-farm stocks. Nonoil sunflower stocks totaled 71.68 million lbs, with 4.1 million lbs stored on the farm and 67.6 million lbs stored off the farm.
Stocks of oil-type sunflower seed as of September 1 were 26% lower than last year at the same time and in line with trade expectations. Nonoil stocks were down 24% from last year and also in line with industry estimates.
What’s in Store for Oil-type Sunflower in 2023?
Industry analysts look for vegetable oil prices to maintain strength moving forward in the next marketing year. This bodes well for sunflower seed prices, as historically 80% of seed value is derived from the price of oil.
No estimates are out yet on 2023 oil-type sunflower acres, but industry analysts believe that acres will increase, given the interest they are hearing from producers. Based on historical usage, an increase in acres of 10-15% in 2023 can easily be added, given current demand, without impacting present prices to a great degree.
“The outlook for sunflower oil continues to be bright, thanks in part to the U.S. Food and Drug Administration’s 2018 qualified health claim for high-oleic oil and its heart health benefits, as well as the FDA’s ban on partially hydrogenated oils in the United States,” says Clark Coleman, NSA board chairman and Bismarck, N.D., producer. “Several new domestic customers have come on-board adding sunflower oil to their product mix. Export markets are growing as well, giving several market options to sell oil.
“There is excellent demand right now for both high and mid oleic,” Coleman observes, adding that sunflower oil consumption in the United States has grown by 50% in the last five years. He doesn’t see any signs of the trend slowing down, the sunflower market should be aggressive in 2023 to get acres to replenish stocks and meet demand.
Should You Plant NuSun or High Oleic?
There is a good market for both oils at this time. When deciding whether to plant NuSun® or high-oleic hybrids on your farm, do some research to see which hybrids have the best yields in your growing area. Yield trials conducted by USDA and universities are an important way for producers to look at a hybrid’s performance in several locations, over several years and environments. Use this link to the NSA website to see the latest yield trial data: https://www.sunflowernsa.com/growers/yield-and-survey/yield-trials-hybrid-disease-ratings/ .
What About Confection Sunflower in 2023?
According to USDA figures, confection sunflower has been one of the highest return-per-acre options available in this growing region since 2010. That trend is expected to continue this upcoming year as well.
If you are going to take advantage of the profit opportunity producing confection sunflower offers, you should be selecting hybrids based on the percentage of large seed and percentage kernel fill they will produce.
Seed size is generally evaluated as percentage over a ‘___/64th’ round hole screen, comparing 16, 18, 20 and 22, the four most common sizes. “The export market is very important and prefers the longer seed, so variety selection is important when planning confection sunflower production,” states Mike Kotzbacher, senior vice president of Fargo, N.D.-based Red River Commodities. “Processors are buying more on seed size, so the larger the percentage of seed over a 20/64 round hole screen, the better.”
A combination of increased demand and reduced seed stocks from previous crop years resulted in higher contracted confection acres for the 2022 crop year. Processors will want to keep the seed pipeline full to meet anticipated post-pandemic domestic and export market demand. Thus, the need for confection acres is expected to be strong in 2023.
Confection exports are expected to increase in the 2022/23 marketing year, and this trend is anticipated to continue in the 2023/24 marketing year. The domestic confection market continues to grow each year as well.
Act of God or Cash Contract?
Confection and oil sunflower offer cash or Act of God (AOG) production contracts. The AOG clause basically means 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.
These “fail safe” contracts have become very popular with farmers throughout the production region. They provide an opportunity to “lock in” attractive prices now for fall delivery. “Having the option of getting an Act of God (AOG) production clause when contracting sunflower helps me sleep a little better at night during the growing season,” remarks Lance Hourigan, NSA president and Lemmon, S.D., producer. “It removes that all-important factor of ‘price risk’ in these very volatile times.”
New-Crop Prices Are Out at The Crush Plants
As of this early November writing, crushers in the Northern Plains are offering both 2023 cash and Act of God (AOG) contracts for NuSun and high-oleic sunflower. Cash NuSun contracts are at $25.75 and AOG contracts at $25.00-$25.25. High-oleic cash contracts are at $26.75-$27.00 with AOG contracts at $26.25. In the High Plains, high-oleic AOG contracts are at $26.50.
Something else to consider is the oil premium that crush plants pay on sunflower. Sunflower is the only oilseed that pays premiums for oil content above 40%. Considering oil premiums that are offered at the crush plants on oil content above 40% at a rate of 2% price premium for each 1% of oil above 40%, this pushes a contract with 45% oil content gross return 10% higher per cwt. The AOG $25.00 contract increases to $27.50, and the cash $27.00 contract moves up close to $30.00.
If you haven’t considered growing sunflower for a few years, take another look — and you’ll be surprised how this crop’s genetics have changed. As you prepare your crop budgets for this coming year, seriously consider sunflower. You may just be looking at your most profitable crop in 2023.
To talk to confection and oil sunflower buyers about contracting opportunities – and/or to keep up with price movement — take time to visit the National Sunflower Association’s website: www.sunflowernsa.com.
* John Sandbakken is executive director of the National Sunflower Association.