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LECITHIN NEWS - H1 2022

The market outlook of the non-GMO lecithin has changed substantially in the aftermath of Russia’s invasion of Ukraine.  We will try to shed some light on the situation in this new edition of the lecithin news. 

MARKET OVERVIEW

The market outlook of the non-GMO lecithin has changed substantially in the aftermath of Russia’s invasion of Ukraine. As a result of the war, sunflower lecithin production in Ukraine has dropped approximately 50%, which represents a reduction of 25% of the Global non-GMO lecithin market.

This setback has sharply increased the non-GMO IP soy lecithin demand, which is considered the only real natural alternative to sunflower lecithin. We believe that a third alternative, such as rapeseed lecithin production is insufficient to represent a robust alternative to those above.

Even though rice and oat lecithin are often mentioned as possible substitutes in terms of quality and production volumes, they fall short and cannot play a significant role for the time being. Synthetic emulsifiers such as Ammonium Phosphatides and Citric Acid Ester could be an option for chocolate application, but the installed capacity worldwide is saturated due to the strong demand. On the other hand, in the eyes of the consumers, the perception of non-natural alternatives is negative compared to lecithin.

In such a condition, the global non-GMO lecithin market is unbalanced, which puts pressure on the supply chain and has triggered unprecedented price levels for all lecithin products.

Uncertainty and volatility are the keywords, but some positive signals can be found in these challenging market conditions. Lasenor strives to secure additional volumes of raw materials and encourage crushers to install additional drying capacity.

NON-GMO SOYA LECITHIN - IDENTITY PRESERVED

India

In the current economic recession, the Indian Government has been battling rising inflation for over one year. To fight against this and to protect the domestic feed market, the government authorized Autumn 2021 the importation of soya meals to encourage the farmers to release soybeans at a lower price level.

The effect of this measure has been counterproductive as it led to uncompetitive Indian production for the soy complex, thus contributing to reduced domestic crushing and ultimately no price decrease from the farmers. 

To keep fighting against high prices of locally produced edible oils, India has cut import duties on crude soya and sunflower oil for the next two years since the 24th of May. The annual volume of imported oil is estimated at 2 million Ton for each of these two oils. This represents 50-55% of soya oil imports in India.

This measure supports imports of soya oil from Russia and Argentina. It seems to positively impact soyabean oil and sunflower oil prices for the domestic wholesale market. It now remains to be seen if the lifting of import duties will force the farmers to sell the beans of both remaining 2021 crop volumes and the coming 2022 crop in September – October at a more affordable price for the crushers or if it will continue to worsen competitiveness of the local crushing. 

Regarding the monsoon, conditions are currently favourable, and sowing acreage may increase, supported by the high prices of the beans. Nevertheless, planting is slow at this moment. To be continued, as it is still too early to make any projection.

Brazil

Brazilian soya bean crop is estimated at 126 Mn T in the current year, compared to 138.15 Mn T in 2021. China is not actively acquiring soybeans to be processed locally as the Chinese economy has slowed down. Thus, Brazilian exports are estimated to drop to 9.4 Mn T. In this scenario crushing ratio will be higher compared to 2021´s. The total amount available for crushing is projected at 114 Mn T (other uses than crushing are usually around 2.5-2.6 Mn T).

An estimated 2% of the Brazilian crop is non-GMO nowadays; this means 2.280.000 tons of soybeans for 2022´s harvest. It is considering that Lecithin content in soybean is approx. 0.55% of the potential production of non-GMO lecithin is 12.500 tons for 2022.

Pressure to get Brazilian non-GMO lecithin is exceptionally high due to the situation in India and supply disruption of sunflower lecithin due to the war in Ukraine. This creates additional tensions regarding availability and pricing.

SUNFLOWER LECITHIN

Ukraine

Most of Ukraine’s crushing plants are in the south-eastern part of the country, where heavy fighting with Russian forces occurs. A limited number of crushing plants are operating in the western region, leading to a steep decline in Ukrainian exports of sunflower oil, meal, and lecithin.

Even if seaports are closed, Ukrainian sunflower seeds are being exported by truck or railway and delivered to Romania, Hungary, France, Spain, and Bulgaria. Export figures exceeded expectations in May, so trade continues, although limited, despite the conflict.

Regarding sowings, the war has prevented planting in many areas of Ukraine, and the total acreage should be reduced by 27-28% compared to 2021´s crop. In addition to this, treatment of crops will not be possible in many regions due to a lack of fertilizers and insecticides, so productivity is expected to be lower than average. We are uncertain about future availability and crushing activity in Ukraine for this year’s crop. We will monitor the situation closely in the coming months.

Russia

Sowings are expected to decline this year, and existing seed stocks are relatively high. Crushing and subsequent availability of Lecithin will depend on the farmers’ willingness to release the seeds and on the Russian government’s export tax policy. 

Export taxes on edible oils have been in place for several months already, which has curbed returns for Russian sunflower oil processors and led to a slowdown in crushing. Taxes are expected to be lifted shortly in August this year, potentially boosting sunflower oil crushing and subsequent lecithin production and availability. 

Sanctions from the EU against Russia will play a significant role in the coming months. If Sunflower complex imports are banned or restricted, it will negatively impact sunflower processing.

European Union

Amid availability concerns, the planting surface has increased in Spain, France, Bulgaria, and Romania, and it is estimated that sunflower oil production will increase by 6.5% this year. Unfortunately, the projected extra volumes are not big enough to significantly increase lecithin production, which should remain at the current level.

PALM OIL: A KEY DRIVER FOR LECITHIN PRICING IN 2023?

Being the most efficient source of vegetable oil globally, Palm is considered a significant driver of the oils global market. Despite not being directly linked to Lecithin, as it is not extracted from palm fruit, the price split between palm and sunflower or soy production may have a bearing effect on future Lecithin prices.

The past week’s downtrend in Palm oil prices is due to the release of Indonesian oil to the market after the ban on palm oil exports in May. After a three-week ban imposed by the government to reduce the domestic price for cooking oil, restrictions were lifted as local storage capacity was exceeded, and quality issues were becoming a concern due to late processing.

Concerning production in Malaysia, the labour shortage seems to be on the right track to be solved by 2023. This sends a positive message for 2022 and 2023. Consequently, palm oil prices are expected to ease further. The demand for less expensive palm oil will rise at the expense of price-prohibitive soyabean oil and sunflower oil. It stands to reason that both will follow the downtrend of palm oil.

Driven by this downtrend and given the dramatic price hike on lecithin that happened in Q2/Q3 2022 that may curb lecithin demand, it is possible that lecithin prices can ease during the second half of 2023.

For a better understanding of the lecithin market evolution, have a look over our previous edition of the Lecithin News ( Lecithin News Q4 – 2021)