LECITHIN NEWS - Q4 2021
After reaching the lowest prices ever by the end of 2020 for both soya and sunflower lecithin, last year has been marked by continuous increases, first in freight prices, the growth in demand, and several political decisions.
MARKET RETROSPECTIVE
On one hand, sunflower seed crop during 2020, in the Black Sea region, decreased approximately a 20%, compared to an average year, reaching 14,1 million t in Ukraine and 13,27 million t in Russia. On the other hand, the Soyabean crops in India were up to 10,45 million t. Despite these figures, prices of both IP soy and sunflower lecithin reached their historical lowest levels in December 2020 – January 2021 because of decreased demand due to COVID lockdown and new players entering the marketplace.
In February 2021, the sunflower lecithin price starts its current trend. Following this pattern, non-GMO IP soy lecithin started its increase in May.
During 2021 the oceanic freight prices have risen dramatically, playing a key role in market dynamics with acute lack of vessels & containers. In addition to the soaring price of fuel, the shortage of vessel crews for COVID- 19 incidence has resulted in skyrocketing prices and shipment delays. Sea transportation has then put severe pressure on international trade.
FORECAST 2022
Current Situation for IP soy lecithin in India:
The soybean crop in 2021 raised to 11,9 million t which stands for a 18% increase compared to 2020. Nevertheless, farmers are stocking beans to keep high prices of soy complex. The domestic soy meal prices skyrocketed in 2021 affecting greatly to the Indian poultry sector. Subsequently, soybean processing is exceptionally low with reduced crushing activity and so an acute drop of lecithin.
Table 1: Indian soybean crop production evolution. Source USDA December 9, 2021
Currently, crude lecithin is in high demand. Therefore, securing raw materials is a continuous fight for every available load, which is pushing prices steadily up.
Our prediction is that this trend will be kept, at least, until new crop in September / October.
Current Situation for sunflower in the Black Sea:
Russian sunflower seed crop in 2021 recorded a 15,5 million t that is a 23% increase versus 2020 that was a particularly bad crop due to weather conditions.
Table 2: Russian sunflower crop production evolution. Source USDA December 9, 2021
Ukrainian sunflower seeds crop in 2021 also recorded an increase of 18% compared to 2020 with a total output of 17,5 million t.
Table 3: Ukrainian sunflower crop production evolution. Source USDA December 9, 2021
Despite the good output, seed crushing in the Black Sea region has plummeted since the harvest is done, following export taxes applied by Russian government for vegetable oils to protect domestic prices. Extra tax burden does not allow local crushers to be competitive in sunflower oil export markets. Due to the shortage of rapeseed oil because of bad crops in Canada and EU, the milling activity has diverted to the momentarily more profitable rapeseed that is in big demand.
Price projection
Prices in Europe for both IP soy and sunflower lecithin are expected to rise at maximum historical highs. In our views, market will remain bullish in H1, and probably H2 2022 until Brazilian (April-May) and Indian (October) crops are available.
Key factors to affect price in H2 2022 will be the Brazilian crop, oceanic freights and sunflower in the Black Sea.
If sea freight rates are still in the current elevated level during 2022 and sunflower seed crushing stays at the normal rate, on H2 2022 we foresee the following scenarios:
Option 1: Good Brazilian crop / high sea freight rates.
This will have a positive impact on GM lecithin which EXW price will drop, but still quite high CFR price.
Non-GMO IP lecithin would benefit from the price downtrend, but impact will be reduced as non-GMO crop in Brazil is limited.
In this scenario H2 2022 prices for both sunflower and non-GMO IP soyabean lecithin may decline.
Option 2: Poor Brazilian crop / high sea freight rates.
Prices will remain extremely high for Indian IP non-GMO soybean with maximum historical level for Q2/Q3 CFR shipments to European Ports.
In this case, supply pressure on sunflower lecithin as an alternative to soy, will increase, even if crushing activity comes back to normal level. Prices for sunflower will then moderately decrease in Europe.
For a better understanding of the lecithin market evolution, have a look over our previous edition of the Lecithin News ( Lecithin News Q3 – 2021)
