Банкеръ Weekly



Will there be a leap in the prices of vegetable oil? This will become clear after the export of the main input for it - sunflower seed - begins. The upward price trend on international markets results in the traders' increased interest towards the opportunities for export. Moreover, a good crop is expected this autumn and there will be a real surplus of some 300,000 tons in Bulgaria. The inputFor a third year in succession the areas under sunflower and respectively the crops have been considerably increasing. The 2003 autumn yield is expected to be 56% higher than the 2001 crop. The reason lies both in the high purchase prices (and hence, the good profits) and in the low purchase prices of wheat, which made more farmers grow sunflower instead of grain. In addition, the climatic conditions in Bulgaria over the last few years proved quite favourable for that crop. In 2002, for example, the yield reached 137 kg/dca. That is why the areas under sunflower are 10% more now, and the regions destroyed by drought and frost are not more than 1.3 per cent.The exportAs a result of the good prices and high yields, the export of Bulgarian sunflower seed has increased recently. 188,000 tons were exported by May 2003, and the quantity may reach 200,000 tons by end-August. The EU countries and Turkey are the main destinations of Bulgarian sunflower seed. According to experts, at least 300,000 tons of the expected output of 680,000 tons will be exported. A little over 300,000 tons are necessary for the domestic market, and the remaining quantity will be used for the production of fodder. Until now Turkey was accepting a duty free quota up to 25,000 tons, but this quantity will be increased and the exports to that destination might exceed 45,000 tons. For the time being it is difficult to predict how much sunflower will go to the EU countries, but it will certainly be in the range of 180,000-220,000 tons.The prices The price of sunflower seed is usually formed in the first months after gathering the crop (September-November). According to the System for Agricultural and Market Information (SAPI), prices have been ranging within a narrow margin (BGN360-404/ton). The higher levels are for individual quantities, purchased after the New Year when most oil-processing enterprisesсе had already insured the necessary input. The price of sunflower seed reached its highest level in March 2003 when sales at BGN404/kg were registered. However, the price remained lower than in 2002. Prices will remain unchanged this autumn, experts say. This means that the level of BGN360-380/ton seem acceptable to both producers and dealers. They are similar to those in Ukraine and lower than in the USA. Bulgarian sunflower seed is exported to Turkey at USD228/ton, and at USD232/ton to the EU countries. The vegetable oilDomestic consumers prefer sunflower-seed oil. Consumption of soy-bean and rapeseed oil remains low in Bulgaria. Therefore, the imported quantities of these kinds of cooking oil are not offered in their pure variety on the market, and are usually blended with sunflower-seed oil. Supply of sunflower-seed oil has been going up over the last few years. In 2003 the increase reached 49% as compared to 2001. The import of vegetable oil in 2002 and the first six months of 2003 dropped more than twice as compared to 2001. However, the export of Bulgarian sunflower-seed oil went up. Some 21,000 tons have been exported since the autumn of 2002, up 7,000 tons from 2001-2002. Raw sunflower-seed oil is presently exported at USD540/ton, and the export price of refined oil is USD630/ton. The domestic marketData for the last ten years show that the price of cooking oil in Bulgaria has been periodically going up and down. The reasons are not always connected with the production of sunflower seed and oil. The price increase is more often due to profiteering practices in the wholesale and retail trade in that commodity. Dealers know in advance when the planned annual repairs of refineries begin and prior that stockpile bigger quantities. After that they decrease their oil supplies to the trade establishments and articicially heighten the tension. The commodity gets more expensive for about a month or two and things return to normal when the refineries begin to produce oil from the new sunflower crop. Such a phenomenon was registered in the last week of July when retail prices in the country rose by 1-7%, and wholesale prices went up by 1-3 per cent. The wholesale prices of broached oil have been stable (BGN1,540-1,700/ton) since last autumn. The last high levels were registered in September 2002. Retail prices are in the range of BGN2.00/litre, and in certain periods broached oil could be had at BGN1.60-1.70/litre. In July 2003 the average retail price of the commodity was BGN1.96/litre.The expectationsThe good crop and the high yields will favourably influence the price of sunflower seed in the autumn. There are no reasons to expect a price hike of the oil, produced from the new sunflower crop, unless export exceeds forecasts. Wholesale prices of broached oil are expected at the level of BGN1,600-1,650/ton, which would hardly result in an increase of retail prices. However, it should not be ruled out that dealers might try to take advantage of the higher demand for cooking oil in September-October and hike retail prices to BGN2.00-2.10/liter.

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