How Did Argentina’s Sunflower Oil Benefit From the 2022 War in Ukraine?
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Argentina Increases Sunflower Production to Meet Domestic Consumption in 2023
Argentina’s Sunflower production averages 3.52 Mmt yearly. While domestic consumption is 3.4 Mmt, of which 3.14 Mmt (~92%) is crushed to produce 1.35 Mmt of Sunflower Oil and Sunflower Meal each. In MY 2021/2022, Sunflower Production decreased by 0.1 Mmt YoY, as the harvested area decreased by 70 kha. However, domestic consumption increased by 0.2 Mmt YoY and was 0.3 Mmt higher than production. Therefore, Argentina increased the Sunflower harvested area by 400 kha in 2022 YoY, and the USDA estimates that production will increase by 0.58 Mmt YoY and exceed domestic consumption by 0.5 Mmt in MY 2022/2023. Consequently, crushed Sunflower seeds will increase by 0.1 Mmt YoY. Will Argentina take advantage of the increased production and limited Russian/Ukrainian supply of Sunflower Oil in 2023?
Figure 1: Argentina Sunflower Production and Domestic Consumption (MY 2018/2019 -2022/2023)
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Argentina Sunflower Oil Demand Increases Due to Limited Russia and Ukraine Supply
Argentina crushes an average of 3.17 Mmt of Sunflower seeds, including 1.35 Mmt of Sunflower Meal and Sunflower Oil each. Since the start of the war in Ukraine in late February 2022, Russia and Ukraine – The world’s leading exporters of Sunflower Oil in MY 2021/2022 – have limited their exports through quotas in 2022. Thus, Argentina’s Sunflower Seed crush in Mar increased by 0.1 Mmt YoY despite Sunflower production decreasing by 0.1 Mmt YoY in MY 2021/2022. As a result, Sunflower Oil exports increased by 0.17 Mmt YoY to reach 0.82 Mmt in Mar-Nov 2022. With the Sunflower Oil supply being tight in 2022, Which markets benefited most from Argentina’s Sunflower Oil exports?
Figure 2: Argentina Sunflower Oil Exports (MY 2019/2020 – Mar-Nov 2022)
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Argentina Doubled Its Sunflower Oil Exports to India in 2022
India is the leading destination for Argentina’s Sunflower Oil exports in MY 2021/2022, with 250 kmt of exports, followed by Iran with 198 kmt and Mexico with 39 kmt. In Mar – Nov 2022, India remained the leading Argentina Sunflower importer, increasing by 243 kmt (+108%) YoY, followed by Mexico, which increased imports by 72 kmt YoY (+185%) and ranked as the second destination. Meanwhile, Iran completely stopped Sunflower Oil imports from Argentina in Oct 2021 following the political tensions in Aug 2021. India increased imports from Argentina in 2022 as Russia raised restrictions on Sunflower exports after the war in Ukraine began in Mar 2022. As a result, Argentina has made up for export losses to Iran.
Figure 3:Top 5 Argentina Sunflower Oil Destinations (MY 2021/2022 & Mar – Nov 2022)
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Read also: Ukraine to Lower Sunseeds Output by 42%
Sunflower Oil Prices in Argentina Rose Due to Inflation and the War in Ukraine
Argentina’s FOB prices were below USD 1000 /mt before Nov 2021. Due to high inflation , food prices surged in Argentina in 2021. Sunflower Oil FOB prices peaked at USD 1843/mt in Mar and averaged USD 657 /mt higher YoY. Later, prices declined to a low of USD 1072 /mt in June but averaged USD 492 /mt higher YoY. In 2020, prices increased due to the war in Ukraine, and FOB Sunflower Oil prices in Argentina reached a high of USD 2350 /mt in Mar, averaging USD 631/mt higher YoY. Afterwards, prices gradually declined to USD 1183 /mt in Sep, USD 5 /mt lower YoY. As the USDA estimates that Argentina will increase Sunflower crush in 2023, will prices continue to decline next year?
Figure 4: Argentina’s Sunflower FOB Prices Sep 2019 – Nov 2022
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In a Nutshell
Argentina’s production of Sunflower derivatives increased in 2021/2022 despite a decrease of 0.1 Mmt of Sunflower seeds production. Much like Soybean, Argentina’s production of Sunflower Oil and Meal represents 92% of Sunseeds, as it has more value added.
In 2021, inflation peaked in Argentina and reached its highest rates, resulting in higher food prices, including Sunflower Oil. This led Sunflower Oil FOB prices to reach USD 1843/mt. In 2022, demand for Sunflower Oil was higher, especially since Russia cut its exports through quotas, which led Argentina to increase production and pushed prices up to 2350 USD/mt.
Argentina has taken advantage of the reduction in Russian exports to double Sunflower Oil export volumes to India and Mexico, offsetting the drop in exports to Iran. Meanwhile, Iran suffered in 2022 from the lack of Sunflower Oil in its domestic market, as it could not count on the Black Sea market to provide its supply.
Argentina’s Sunflower Oil production has great potential for high-value exports, so the country has increased its harvested area for MY 2022/2023, raising the question of whether Argentina can become a competitive Sunseed Oil supplier against Russia and Ukraine, the leading Sunflower Oil exporters.
