Highlights

Bulgarian farmers are expanding the planted areas under oilseed crops in the new season MY2017/18 led by sunflower seeds. Following mixed results from oilseeds in MY2016/17 with excellent rapeseeds production, a lower than expected sunflower crop, and disappointing soybean crop, most producers expect a recovery in sunflower and soybean yields and a decline from the record high rapeseeds yields this year. Total oilseed area is forecast to increase by 2% - 3% and provided that the weather cooperates, to lead to 4% - 5% or higher growth in production to 2.4 MMT.

There have been new dynamics on the local market in MY2016/17. Traditionally high sunflower seeds exports slowed down in the first half of the season at the expense of local processing for crush and for de-hulling while imports skyrocketed. The rapeseed crop was quickly and almost fully exported soon after harvest, at the same time the demand for crush later in the season stimulated higher imports. Soybean imports remained stable to slightly higher to meet local crush demand at a time of a very short local crop. Due to increasing total feed consumption, soybean and rapeseed meals use is estimated to grow.

Overview

FAS/Sofia’s first forecast for MY2017/18 is for growth in planted area under soybeans and sunflower. Planted area under rapeseeds also increased, however, due to winter losses and re-seeding, the final harvested area is estimated to be the same or possibly lower than in MY2016/17.

Despite disappointing results for soybeans in terms of average yields, a relatively good domestic market prospects for crush and protein crops subsidies are estimated to lead to a recovery in the planted area from record low levels in MY2016/17. Fall planting of winter rapeseeds has progressed well due to favorable weather and excellent ex-farm prices. MY2016/17 crop’s high profit margins led to higher planted area. Planting was reported on 173,000 HA, 3% more than in 2015. Dry and warm fall weather, especially in Southern Bulgaria, however, did not allow good preparation of the fields for the winter which came with record low temperatures and heavy snow in January. As a result, many farmers are re-seeding their rapeseed fields in the spring, mainly with sunflower. Harvested areas are estimated to decline to 155,000 HA-160,000 HA or below that in MY2016/17.

Sunflower, although negatively affected by the summer drought in 2016, has enjoyed better pricing and positive production margins. As a result, farmers indicate an interest to exceed the area from the last season. Planting seed traders indicated higher sales and the Ministry of Agriculture (MinAg) reported earlier planting and a growth in planted areas of 242% as of March 30, 2017. Derogation for the use of 3 neonicotinoid chemicals was obtained from the EC and issued in late March with a validity of 60 days. The derogation introduces limitations by crops (sunflower and corn), areas and regions of use. Rapeseed is not subject to the derogation.

Weather

The summer weather in 2016 was unusually hot and dry for July and August. Despite very good soil moisture reserves until mid/end June, the scorching temperatures had a negative impact on soybean and sunflower yields. It also affected sunflower quality (oil content and the size of seeds).

Timely rains and moderate temperatures in early fall stimulated optimal planting of the MY2017/18 rapeseed crop in September. The weather remained dry and warm in southern parts of the country. The winter came in January with very low temperatures reaching -25 C, making the month the coldest in the last 40 years. Despite heavy snow cover, the underdeveloped rapeseed fields (due to fall drought) suffered from the low temperatures and winterkill was reported.

Soil moisture levels are currently favorable for spring planting of sunflower and soybeans. Despite warmer and dried weather in February, rainfall in March helped to secure the necessary soil moisture for an optimistic start of the planting.

Oilseeds Production and Supply

Forecast MY2017/18

Soybeans

Soybean area is forecast to recover compared to MY2016/17 to 20-25,000 HA due to relatively stable, although small, local crush demand and attractive protein subsidies. Planting began earlier due to favorable spring weather and as of the end of March, MinAg reported 61% higher planted areas than for the same period a year ago. Provided that the weather cooperates, soybean yields can improve so production may increase to 30,000 MT. Estimates for both areas and production vary widely with most optimistic ones reaching 53,000 MT.

Rapeseed

Rapeseed planting was reported higher than last year by 3% (173,353 HA planted in the fall, per the MinAg). Farmers made efforts to plant rapeseed earlier due to plans to expand areas. Harvested rapeseed area, however, will likely go down to 155,000 HA - 160,000 HA due to winterkill and re-seeding. Expectations for production are for average yields) and below the record of 2.93 MT/HA achieved in MY2016/17. Industry sources expectations vary widely from 400,000 MT to 480,000 MT due to uncertainty in harvested areas and uneven development of the crop between Northern and Southern regions. The FAS Sofia forecast is for 450,000 MT with an average yield of 2.8 MT/HA.

Sunflower seeds

Planted area is likely to increase to above 800,000 HA and close to 840,000 HA (FAS Sofia estimate). This is driven by good profitability of the crop, relatively good summer resilience to drought and heat, favorable demand both on the local market and for exports; and further diversification in the types of grown sunflower which secures better marketing of the crop.

The demand for U.S. planting seeds has grown. In MY2017/18 local farmers intend to plant regular oil bearing, high-oleic, and confectionary sunflower. To date, early intentions are for higher area for both confectionary and high-oleic sunflower.

Farmers started planting earlier due to a favorable spring and as of March 30 planted areas have grown by 242% when compared to last year (source: MinAg weekly bulletins). Provided that the weather is favorable, yields are likely to improve and lead to 5%-6% higher production, close to 1.9 MMT.

MY2016/17

Total Oilseeds

In MY2016/17 total oilseed area declined by 1.2% compared to MY2015/16. Soybean area had a sharp decline of 60%. Rapeseed area was slightly lower by 1.2% and sunflower area increased by 1.2%.

Rapeseed average yields were record high at 2.93 MT/HA, due to favorable weather, and production grew by 17%. A hot and dry summer, however, resulted in lower than initially expected yields for soybeans and sunflower, but still better than in the previous season. As a result, the sunflower crop is estimated 2.4% higher. Total oilseed production increased by 6.5% compared to MY2015/16.

Soybeans

The most interesting development trends in this sector in MY2016/17 are:

• Sharp decrease in planted areas due to disappointing results from the previous season;

• Increased demand for crush resulting in stable imports;

• Projected higher use (and imports) of soybean meal due to improving feed consumption;

• Stable use of soybean oil for biodiesel at higher level than in the past.

Production:Due to lower yields and challenging marketing issues, farmers sharply decreased their area under soybeans. The official estimate for planted area is at 14,000 HA, only 40% of the area in the previous season. The hot and dry summer negatively affected the crop and average yields turned low to 1.36 MT/HA although still better than 1.18 MT/HA in MY2015/16. FAS/Sofia estimate for production is currently at 19,000 MT, in line with the official and industry estimates and 53% lower than in the previous season.

Crush:A few full fat extruders and crushers crushed the local crop. Due to lower production, imports tend to increase, mainly from Romania, Serbia and Ukraine. FAS/Sofia estimates for crush use are at 35,000 MT, about 30% less than in the previous season. About 4,000 MT are estimated to be used for full-fat extrusion. Soybean meal is used locally and small quantities are being exported and soybean oil is used mainly for biodiesel.

Trade: Soybean imports in the first quarter of MY2016/17 are at 3,400 MT almost all imported from Romania. Exports are at 4,400 MT to Greece. Continued imports from Serbia and Romania.

Imports of soybean meal are reported at 26,300 MT in the first quarter of the marketing year, mainly from Romania (usually imported U.S. or Latin American soybean meal delivered to the port of Constantsa). The industry indicates that starting from MY2015/16, the local consumption of soybean meal will grow. This is related to stabilization of the dairy sector, expansion of poultry production, and improving swine inventory. Total domestic feed consumption was estimated to increase by 5% in 2016 as compared to 2015. In addition, the local soybean crush has contributed to higher use. It is projected that soybean meal consumption exceeds the traditional level of 130,000 MT and is approaching 140-150,000 MT. Due to the lower local crush and supply in MY2016/17, it is expected that imports of soybean meal will grow in the current season despite higher incorporation of sunflower meal in feed due to its price attractiveness.

In the previous and current season, Bulgarian users had access to soybean meal produced from imported U.S. soybeans crushed in Romania. Per industry sources, the quality of this meal was very good and appreciated by local users which helped for a better market presence of the product.

Rapeseed

The most interesting development trends in this sector in MY2016/17 are:

• Stabilization in planted areas – only a slight 1.2% decline;

• Sharp increase in average yields (18%) and in production (17%) due to favorable weather;

• Higher production supported larger and faster exports soon after harvest;

• Unusually higher imports carried out to meet local crush demand;

• Crush had to compete with exports and is estimated to decline slightly;

• Higher imports of rapeseed oil to meet demand for biodiesel.

Production: Rapeseed yields and production were much higher when compared to the average yields for 2015. The official (and FAS Sofia) data is for 493,000 MT and industry estimates are as high as 548,000 MT.

Crush: Despite excellent local production, local crushers had to compete with exports and rely on imports of more price competitive rapeseed from Romania and Moldova. It is currently estimated that this may lead to some reduction in crush (8%-10%) compared to the previous season, and the output of meal and oil will respectively decline. Crush expectations vary widely from 70,000 MT to 110,000 MT (industry sources) compared to estimated 92,000 MT in MY2015/16. The MinAg reported (source: MinAg weekly bulletins) that consumption for crush until the end of March (first 9 months) was at 60,000 MT. FAS/Sofia’s current estimate for crush is for 85,000 MT.

Exports of rapeseed meal and oil are estimated to be stable to higher. It is expected that imports of rapeseed oil will complement lower production to meet biodiesel demand. Similar to the trend with soybean meal, there are industry reports on higher use of rapeseed meal. Rapeseed meal is not traditional for the country and was rarely included in feed ratios in the past. However, with the stabilization of the crush and meal supply in the last three years, and along with improving feed consumption, rapeseed meal use is growing. Current estimates for consumption are at over 20,000 MT, compared to 10-15,000 MT in the past.

Trade: Due to the EU and world rapeseed deficit and attractive prices, the local crop was quickly exported right after harvest. Exports in July and August reached 382,000 MT or 78% of the crop. Exports in the first half of the marketing year reached 490,000 MT or 99% of total production.

MinAg forecasts exports to exceed 500,000 MT, including some of last year’s stocks. At the same time imports have grown to meet local crush demand. Major origins were Romania and Moldova. As of the end of March, imports were reported by the MinAg at 34,000 MT and are estimated to reach over 50,000 MT until the end of the marketing year with some industry estimates going high to 67,000 MT.

Stocks:MinAg estimates beginning stocks at 70,000 MT, compared to industry estimates of 30,000 MT. As of the end of March 2017, available stocks in the country are reported at 47,000 MT. FAS/Sofia projects low ending stocks at less than 5,000 MT (2,000 MT per the MinAg estimate).

Sunflower

The most interesting trends in this sector in MY2016/17 are:

• Small increase in planted areas (1.2%) to 820,000 HA and slightly better yields (2.13 MT/HA compared to 2.11 MT/HA last season) which were lower than initial expectations due to summer drought and heat. Production is estimated to be still higher by 2.4% than in MY2015/16;

• Quality of the crop (oil content and seed size) suffered due to drought;

• Despite an improved local supply, the crush is depressed due to tough regional competition and trade policy issues. Meal and oil output will likely decline, respectively;

• Unusually high imports of sunflower seeds from Romania and Moldova driven by competitive prices and better quality of imported product;

• Depressed exports of seeds and meal due to heated competition in the Black Sea area;

• Continued dynamic non-crush use for de-hulled/shelled sunflower (bakery) and for confectionary type (snacks). Exports of these final products often perform better than that of crushed products;

• Domestic consumption of sunflower meal, especially hi-pro meal is stable to higher;

• Domestic consumption of sunflower oil has a tendency to grow.

Production:Yields and quality were lower than initially expected due to the summer heatwave, producers reported smaller size seeds in some regions, and overall lower oil content.

The FAS/Sofia estimate for the total crop is at 1.75 MMT which includes oil bearing, high oleic and confectionary sunflower seeds. Industry estimates go as high as 1.8 MMT. There is no official data about the supply of various types of sunflower seeds.

Crush: Crushers have been very active in sourcing sunflower seeds and the competition with exporters has intensified. Crushers also had to compete with non-crushing processors (de-hulling and snack facilities) while farmers made efforts to keep more stocks. As a result, exports to date lagged behind the last season although some acceleration in exports are likely in the second part of the marketing year.

Crushers face strong competition over meal and oil prices and challenging lower and/or negative crushing margins. Some crushers have temporary stoppages and/or are switching from processing to exports of available stocks from March onward. The local crushing industry claims that the export duty on sunflower seeds in Ukraine secures cheaper raw materials than that on the EU market, while exports of Ukrainian meal and oil to the EU are duty free and compete unfairly with EU crushers, especially those in close proximity such as Bulgaria. This trade policy issue is reported to depress the crush, especially in the current season when Ukraine has a record high crop (and crush). MinAg has not estimated annual crush use so far. 480,000 MT of seeds for crush as of March 31 (MinAg weekly bulletins). The current FAS/Sofia estimate for the year is for 850,000 MT, as compared to 900,000 MT in MY2015/16. The lower crush is anticipated to lead to lower production and exports of sunflower meal and oil and/or possible accumulation of ending stocks of oil.

Non-Crush Food Use: Non-crush users (de-hulling of sunflower seeds for bakery purposes, processing of confectionary sunflower seeds for snacks and birdseed use) have increasingly important role on the market. Demand for sunflower seeds for food has continued to be favorable although prices have dropped. The MinAg started to monitor this type of use and reported 300,000 MT of sunflower seeds used for non-crush as of March 31 compared to 482,000 MT used for crush.It is estimated that this industry consumes annually about 450,000 MT of sunflower seeds sufficient for production of about 280-300,000 MT of ready product (shelled seeds). Most of the ready products are exported along with secondary products such as sunflower flour and sunflower pellets from hulls.

Due to higher production of hi-pro sunflower meal (over 85%) made after separation of hulls and de-hulling of bakery/confectionary sunflower, production of pellets from hulls have grown. Hulls are reported to account for 15%-17% of sunflower seeds and usually half of the hulls are used as an energy source at crushing plants and the other half is sold on the market and/or exported.

Trade: The abundant supply of sunflower seeds in the Black Sea region along with much lower prices and good quality stimulated unusually high imports of sunflower seeds. Imports for the first half of the marketing year as of March 31 were at 136,000 MT, 54% more than the annual imports of MY2015/16. Major origins are Romania and Moldova. Most of these imports are oil-bearing sunflower for crush. Exports to date have been sluggish and at 267,000 MT as of the end of March. Most of these exports, 79% or 210,000 MT are de-hulled sunflower under HS#12060091 exported mainly to the EU (160,000 MT).

Exports for the marketing year are currently forecast to exceed 700,000 MT including de-hulled and oil-bearing sunflower. Bulgaria keeps shifting its trade from exports to more domestic processing, and from exports of oil-bearing sunflower seeds to more diversified exports of value-added processed products.

In MY2015/16, exports of de-hulled sunflower under HS#12060091 were stable at 298,000 MT. The major markets were Germany, United Kingdom, Poland and the Netherlands. Export price was 10% higher than in the previous year.

In contrast, oil-bearing sunflower exports under HS#12060099 had a 18% decline for a second year. Thus, total sunflower exports under HS#1206 were 12% lower. If exports of bakery/shelled sunflower seeds are converted in in-shell basis, exports reach 870,000 MT. The average export price of sunflower seeds was U.S. $588/MT, 12% higher than in the previous marketing year. About 80% of sunflower seeds were sold on the EU market with the major destination the Netherlands.

Stocks: The MinAg’s supply and demand balance for sunflower seeds is on a marketing year starting from September 1. For MY2016/17, the MinAg shows high beginning stocks at 340,000 MT. FAS/Sofia estimate for beginning stocks is at 140,000 MT. As of early April available stocks are reported by the authorities at 1.128 MMT.