A flood of cheap sunflower oil from Russia and Ukraine is putting downward pressure on palm oil prices as the two top producers take advantage of currency depreciation to grab a larger share of the edible oils market.
Last year, palm oil prices soared after Russia's invasion of Ukraine disrupted sunflower oil supplies from the Black Sea region.
Now, sunflower oil, which typically commands a hefty premium, is cheaper than soyoil and holding a negligible premium over palm oil, said Vipin Gupta, chief executive officer of Dubai-based trader Glentech Group.
"Aggressive selling of sunoil from Black Sea region is putting pressure on palm oil and other edible oils," he said.
Crude sunflower oil is offered at $895 a metric tonne including cost, insurance and freight (CIF) to India for October shipments, compared with $850 for crude palm oil, dealers said.
A year ago, sunflower oil held a premium of over $400 per tonne over palm oil, compared to $45 now.
Russia has been harvesting a record sunflower seed crop of more than 17 million tonnes and farmers are aggressively selling seeds, said a leading Russian edible oil refiner who declined to be identified.
Since crushing has gained momentum, sunflower oil exports are likely to rise this year to 4.5 million tonnes from last year's 3.7 million tonnes, the refiner said.
In dollar terms, prices have come down in the last three months but Russian farmers are still getting decent returns because of the rouble's depreciation, he added.
The Russian currency has lost more than 38% against the US dollar this year.
Ukraine, which was struggling to ship sunflower oil after Russia withdrew from the Black Sea grain deal, has also been aggressively selling sunflower seeds, said a Ukrainian exporter.
"Ukraine neighbours are processing imported seeds and exporting oil," he said.
Ukraine's central bank devalued the hryvnia currency by 25% against the US dollar in July 2022.
The United States Department of Agriculture (USDA) predicts Ukraine's sunflower seed crop will reach 14 million tonnes, up from 12.2 million a year earlier but below the 17.5 million tonnes harvested in the 2021/22 season.
The European Union's production could rise to 10.6 million tonnes from 9.2 million tonnes, the USDA estimated.
Indonesia and Malaysia lead in palm oil exports, with Argentina, Brazil, and the United States the top soyoil sellers.
India, the biggest importer of both palm oil and sunoil, could import a record 3.2 million tonnes of sunflower oil in the new marketing year starting from Nov. 1 but its palm oil imports could fall 8% to 9 million tonnes, said Nirav Desai, managing partner at GGN Research, an edible oil trader and broker.
Usually India imports around 200,000 tonnes of sunflower oil per month, but in the last few months it is making purchases of more than 300,000 tonnes, he said.
Unlike palm oil, sunflower oil availability is limited, with stocks expected to be depleted in the December quarter due to aggressive selling, said a Singapore-based dealer with a global trading house, adding that could push its premium above $150 per ton in January.
Palm oil prices this week fell to their lowest level in 3-1/2 months as stocks in Malaysia hit an 11-month high at the end of September.
"In the short term, sunoil will exert pressure on palm oil, particularly when stocks are increasing in the producing countries," the dealer said.