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Crushing margins for sunflower oil and meal producers in the Black Sea have been impacted by falling prices for processed products in the past month, with margins for some crushers at the bare minimum in some regions, trade sources told AgriCensus.

Prices for sunflower oil had fallen by 7% over the period, while sunflower meal prices had dropped by 24% due to ongoing decreased demand from main export markets, leaving processing margins in some regions tight as sunflower prices remained at high levels, the 23 February report said.

Traders were quoted as saying they expected a drop in production levels, particularly in Ukraine as Russia was targeting excess flows into the Turkish market.

In the month prior to the report, sunflower oil prices had decreased by an average of US$60-US$70/tonne – or 7% – depending on the country of origin – and were reportedly at US$835-US$840/tonne CIF Mersin for spot delivery, against buyers’ expectations of US$825-US$830/tonne CIF Mersin.

Trade sources told AgriCensus they expected the market had almost reached its minimum but did not rule out further adjustments in the short term, stating March would be a key month.

Prices for sunflower meal fell by 24% in Ukrainian ports to US$155-US$165/tonne CPT port and were down by 17.5%-18% to US$225-US$235/tonne CIF Marmara, according to buying levels for March delivery.

Meanwhile, demand from major export destinations such as India, China, and European Union (EU) countries remained sluggish and product supply in the Black Sea region was more than sufficient, given the presence of two major sunflower oil exporters in the region, AgriCensus wrote.

In addition, India, which had significantly reduced imports of Ukrainian sunflower oil due to the risks associated with the ongoing war, had turned instead to sunflower oil of Russian and Argentine origin.

With rising risks and costs with shipments through the Red Sea due to Houthi attacks on vessels, India was now more reliant on purchases of Argentine sunflower oil, AgriCensus wrote.

Russian sunflower oil traders were trying to expand their presence in the Turkish market and had been reducing prices sharply to reach levels that were on average US$5/tonne lower than Ukrainian volumes at the time of the report.

Although traders had been expecting demand to pick up from Chinese after the Lunar New Year break, no active buying had begun to date, AgriCensus wrote.

According to trade sources, prices for sunflower oil of Black Sea origin were relatively low – at US$840/tonne CIF China for March-April delivery – while sunflower meal prices were reportedly at US$280-US$295/tonne CIF China on average, depending on quality.

Against this background, crushing margins of some Ukrainian crushers had reached minimum levels, the report said.

Trade sources at crushing companies in the central and western parts of Ukraine had reported a reduction in margins to a minimum level with purchase prices for sunflower at the level of UAH14,000/tonne (US$363/tonne) CPT crush plant, but in some cases margins had dropped to zero, once increased costs for logistics were factored in.

Crushers had not ruled out a reduction in crushing or its suspension if current trends continued, the report said.

However, some crushers in southern regions had reported sufficient processing margins of about US$50/tonne at current price levels for both raw materials and processed products, which was likely to be due to minimal logistics costs due to proximity to ports.

Despite this, due to the decline in prices and sluggish demand in February for sunflower oil and sunflower meal, traders expected a possible 7%-13% decrease in sunflower crushing in February from the 1.5M tonnes forecast at the beginning of the month to 1.3M-1.4M tonnes, AgriCensus wrote.