USDA surprised the sunflower industry on March 31 when projected a decrease in oil type sunflower acres for 2016.
Most guesses had oil acres increasing by 10% from 2015. USDA pegged the area intended for oil type varieties, at 1.44 million acres, which is down 7% from 2015. The area intended for non-oil varieties was estimated at 249,400 acres, down 19% from last year. This number was about in line with industry expectations. If realized this would put total sunflower acres at 1.69 million in 2016, down 9% from last year.
USDA estimated U.S. 2016 corn acres higher than expected, wheat lower and soybean slightly lower.
The March report gives farmers a benchmark to see what others are thinking of planting in 2016. It also gives them the chance to change their minds and make planting adjustments to take advantage of market opportunities. Given the potential of a drier or perhaps drought year some farmers might hedge against this by planting sunflowers.
As of this writing crushing plants are still offering new crop contracts that have Act of God (AOG) production clauses. AOG clauses basically mean the producer doesn’t have a production risk. Should drought, hail, insects, disease, etc., result in a yield loss and you don’t have enough production per acre to cover your sale, the AOG clause kicks in. You are only obligated to deliver what you produced not what you contracted. Keep in mind oils also receive a 2% price premium for each 1% of oil content that is over 40%. At current new crop prices that can add significantly to the final price when delivered. New crop contracts for confections are also available.
Something else that you will see in 2016 is the continued push toward converting the oil crop from NuSun to high oleic sunflower. There is a good market for both oils at this time. However, trends change and products need to adapt to consumer preferences. The market wants oils to have zero trans fat and saturated fat levels at or below 7%. In addition, food processors want oils to be very stable for extended shelf life and fry life coupled with a neutral taste profile. High oleic sunflower oil fits the bill on all counts. While NuSun was a positive move for the sunflower industry in the late 1990’s, the increasing market demand for high oleic oils has convinced oil crushers that the industry needs to adjust again.
Will the industry convert all oil sunflower acres overnight? No there will be a gradual change from NuSun® to high oleic as hybrid seed companies need to ramp up hybrid seed production and more customers commit to buying high oleic sunflower oil. The process will likely take two to three more years before high oleic becomes the dominant sun oil.
e months ahead, variables that will affect the markets in addition to supply and demand factors will likely include strength of the U.S. dollar and uncertainty in demand from China. To keep tabs on sunflower prices, go to www.sunflowernsa.com
For more market updates, see www.sunflowernsa.com.
Sandbakken is executive director of the National Sunflower Association.