Fundamentals for the sunflower market remain bullish for the near term, according to John Sandbakken, executive director of the National Sunflower Association, Mandan, N.D.
This week’s private industry supply/demand estimates issued before Thursday’s Supply/Demand updates from USDA will be closely monitored by traders. Traders will also be position-squaring ahead of the reports to avoid going through the reports exposed either short or long. This could lead to some volatile up and down days in the markets this week.
“Old and new crop sunflower prices are closely tracking CBoT (Chicago Board of Trade) soyoil values. In the second half of this marketing year vegetable oil supply is expected to get tighter due to lower soybean crush coupled with reduced palm oil production,” Sandbakken said.
“The forecast reduction in supply is good news for sunflower and should be supportive to seed prices,” he explained. “Also boosting sunflower prices are vegetable oil prices which are trading at historically high levels and only slightly below recent highs.”
New crop oils were at $26.10-$26.75 at the crushing plants at the end of April. Producers should note that oils also receive a 2 percent price premium for each 1 percent of oil content that is over 40 percent.
“At current new crop prices that can add significantly to the final price when delivered,” Sandbakken said.
On May 8 NuSun prices for May and June delivery ranged from $26.45 to $26.85. New crop prices were $25.90 or $24.90/cash with an Act of God clause.
Another factor providing additional support to oilseed prices has been the declining oilseed production totals in South America. Dry conditions there continue to reduce production estimates.
USDA confirmed the lower production forecasts for South American soybean production, reducing Brazil’s crop 2.5 million tons from last month to 66 million tons at present. USDA also lowered Argentina’s estimate by 1.5 million tons, to 45 million tons.
USDA’s reports were considered neutral to price friendly by traders. However, Sandbakken said, “the Euro-crisis and new doubts about China’s economy turned back the upside potential of the USDA reports.”
He added that outside market news from European elections and financial concerns will also affect the markets near term.
Closer to home, although there was some scattered showers over much of the state in early May, dry conditions were expected in the Northern Plains over the next few weeks. Sandbakken said the dry soil conditions along with USDA’s weekly crop progress and crop condition reports will be watched closely by the market.
“Traders will continue to focus on outside markets that affect the world economy, planting progress and the outlook for new crop production,” he said.