In October, Russia's total exports of sunoil reached nearly 27,000 tonnes, a record high monthly volume in the beginning of the marketing year.
But in spite of the vigorous start, prospects for Russia's export activity in 2005/06 (October-September) are seen mixed due to a decline in international prices and stiff competition from Ukraine's exporters.
Russia's total oilseed production in 2005 is estimated at an all-time record high of 7.3 million tonnes, compared with 5.7 million tonnes last year. This includes some 6.4 million tonnes of sunseeds compared with 4.7 million in 2004. Sunseeds account for the bulk of Russia's oilseed production.
Ample supplies coupled with a 20-percent duty on oilseed exports have resulted in a serious drop in domestic sunseed prices. They are currently as low as 4,700 roubles (some $163) per tonne against 8,000-8,200 roubles ($280-$287) per tonne EXW at the beginning of last season.
Reduced domestic prices have stimulated an increase in sunseed exports, which reached 35,600 tonnes in October. This volume is too low to support the market.
Low-priced and ample oilseed supplies pushed the country's vegetable oil output in October up to 258,000 tonnes, or to an all-time monthly high. It is very likely that domestic output will keep rising until the end of 2005.
By the middle of December, domestic sunoil prices dropped to 14,200-14,400 roubles ($490-$500) per tonne EXW, or by some 20 percent since early October.
Though Russia increased sunoil, mainly crude sunoil, exports sharply in October, prospects for further growth are rather limited.
Firstly, Russia's exporters are facing strong competition from Ukraine. Current prices for Ukrainian crude sunoil are $490-$500 per tonne FOB. In addition, Ukraine has a more efficient infrastructure for shipping.
Secondly, it is reported that Turkey, which is the major buyer of Russian sunseeds and sunoil, had increased import duties on Russian and Ukrainian deliveries in order to protect domestic producers and crushers.
As a result, Russia's crushers are likely to face a serious and prolonged glut on the domestic vegetable oil market in 2005/06.