Ukraine sunflower seed prices rise amid harvest delay

Ukraine sunflower seed prices have risen by up to 11% since the beginning of September due to delays in the harvest and reluctance from farmers to sell.

Local seed prices have climbed from around $370-$380/mt at the start of September to $410/mt currently, a market source said, as farmers anticipate further increases against a backdrop of shrinking supply.

A second source said that the pace of harvest has been hit by rains, with summer and autumn showers occurring through most regions in Ukraine. The harvest season typically begins in September and ends around October.

As of the third week of September, farmers had harvested 14% of the sunflower seed area, with production volume reaching 1.295 million mt, data from the Ministry of Agrarian Policy and Food showed. The expected total harvest volume for the 2022/23 season (September-August) is 10.5 million mt, down 40% compared to 17.5 million mt in the year ago period, according to data from the US Department of Agriculture.

The delayed harvest had led to tightening of old crop stocks, with a third source reporting that "small and medium crushers are out of seeds, and small farmers are out of seeds". Thinner supply has resulted in price increases for sunflower seeds.

Despite the price increase, farmers are not interested in selling sunflower seeds as they anticipate a further rise in prices going ahead. "The [seed] market is very technical and hectic," a trader said.

Higher prices will reduce crush margins, which are already squeezed due to uncertainty over energy supplies. "Pressers consume a lot of electricity," a fourth source said, "if Russia is striking infrastructure, including electric grids or pipelines, it would be a big problem for crushers."

Recently, Ukraine's Zaporizhzhia nuclear plant was offline due to damage caused by shelling in the area, though power has since been restored. The Zaporizhzhia nuclear power plant is the biggest in Europe and supports one fifth of the total electric power generated in Ukraine.

Moreover, conservative selling from farmers is likely to slow trade in sunflower oil market as producers prefer to sell when there is a stable supply of seeds to support production, the fourth source said.

Platts, part of S&P Global Commodity Insights, assessed FOB Black Sea Sunflower oil at $1,070.50/mt Sept. 28, down 11.16% on the month.

Black-market preferred

A wider trend that has featured in the Ukraine sunflower seed market through the year is that the rates for selling in the black market are preferred over the normal market, making less volume of seeds go through official channels.

"The normal price for seeds was around Hryvnia 14,000/mt [$380/mt] via bank payment, while the black market had prices closer to Hryvnia 13,000/mt [$353/mt] in cash," said a fifth source. Suppliers must pay a VAT rate for import and supply of 14% on normal prices, making cash transactions more profitable.

The source also confirmed that going through official channels gives an exchange rate of roughly Hryvnia 36.5/dollar, while the exchange rate in cash is closer to Hryvnia 42.4/dollar. Trading for sunflower oil takes place in dollars, which favors the cash exchange rate.

Seeds sold on the black market tend to make their way to both crushers and exporters, though not usually within the EU due to the difficulties in producing EUR.1 certificates of origin.