In this article, we will look at the main factors affecting the price of sunflower oil, analyzing them in the context of the global market. We will discuss economic, climatic, and political factors affecting sunflower prices as a raw material. Awareness of these issues will help businesses and consumers make informed decisions and quickly adapt to changes in the global market.
Level of yield
The production of sunflower oil depends on the yield of the sunflower. If the harvest was large, the excess of supply over demand can make prices lower and vice versa:
- 2012: drought and heat in EU countries led to a reduction in sunflower production and oil prices jumped;
2014: higher yields with unchanged demand led to lower oil prices;
- 2017: the decrease in yields in Spain due to drought has led to higher prices.
Sunflower oil price in EU countries depends mostly on the yield in Ukraine, Russia, Spain, and Turkey.
The volume of sunflower seed production in the main producing countries in 2022/2023 (in millions of metric tons) Source: www.statista.com
Level of demand and supply
Changes in supply and demand on the world market significantly affect prices. For example, an increase in demand for sunflower oil increases the price, especially if production does not meet the required volumes.
In the same year of 2017, when the yield decreased, the demand for sunflower oil increased in the countries of Central Europe, and the price for it increased accordingly.
If the demand remains at a stable level, the increase in the volume of exports of raw materials can lead to a decrease in prices. This is exactly what happened in 2015 when the EU increased supplies of sunflower oil to the world market. According to INSEE, in March 2014 the cost of raw materials averaged $970 per metric ton, and in March 2015 it was already $800.
Changes in the price of sunflower oil during 2014-2015 according to INSEE data
The general economic situation and market conditions also affect the dynamics of sunflower oil prices.
In periods of increased consumer activity, the demand and the cost of sunflower oil increase. Economic growth contributes to the development of the food industry, where sunflower oil is a key component of many product productions (bakery, confectionery, margarine, snacks, etc.).
In addition, during the growth of the economy, the population has a higher purchasing power, so they buy more products and visit catering establishments more often, which also contributes to the increase in the demand for sunflower oil.
Accordingly, during periods of economic decline, levels of food production and purchasing power decline, and vegetable oil prices become lower.
Changes in exchange rates also affect world prices. If the currency of the exporting country depreciates, then the profit for the exporter may be increased because the export brings in a larger amount in local currency.
On the other hand, this leads to higher sunflower oil prices for importers, as they are forced to pay more of their currency for the same amount of raw material.
In 2014 the Russian ruble depreciated due to sanctions and falling oil prices. As a result, Russian exporters began to receive more rubles for each barrel, but importing countries felt the price increase because they had to pay more currency for the same volume.
The Russian Federation's war against Ukraine as a key factor in price changes in 2022-2023
In recent years Ukraine has made a significant contribution to the world's supply of sunflower oil, producing a third of the world's volume, which is about half of the world's exports.
Sunflower oil export volume worldwide from 2016/17 to 2022/23 by country (in 1,000 metric tons) Source: www.statista.com
At the beginning of the military invasion, there was a sharp increase in vegetable oil prices, including sunflower oil. That is because consumers were looking for an alternative to Ukrainian raw materials. A year later the EU's shock level from the Ukrainian-Russian conflict decreased. But the level of exported Ukrainian oil has not yet recovered: 347,000 tons of sunflower oil were exported in January 2023 against last year's 612,000 tons for the same period.
Sunflower oil prices began to fall after the successful launch of the grain corridor from Ukraine to the EU, but the situation in Europe is still not stable. It is expected that the cost and availability of resources will continue to complicate the situation in Ukrainian agriculture. It is difficult to predict how much sunflower oil will cost in the coming months and years because the situation in the food market has not been sufficiently stabilized yet. It will depend on the establishment of port operations, supply chains, and the state of energy supply.
If you need up-to-date information on price trends in the edible oil market, contact Impulse Commodity Trading. We specialize in supplying sunflower oil to international markets, including EU countries. So we will answer all of your questions.