Romania. Oilseeds and Products. Annual Outlook April 25, 2017
Oilseed planted area is forecast to climb by 9 percent in Marketing Year (MY) 2017/18. All types of oilseeds are forecast to expand, but the largest share in the increase belongs to rapeseed crop. Overall Romanian oilseed production is forecast to surge by 4.6 percent in MY 2017/18 mainly due to an increase in area and to a lesser extent to yield improvement. Ample oilseed supply will exceed domestic needs allowing for an increase of 4 percent in exports.
Total oilseed area and production
Romania is the leading EU member state in sunflower area and production. Among the oilseeds, the sunflower crop is the most important crop in Romania, followed by rapeseed and soybean. Total oilseed area is forecast to reach almost 1.8 million hectares (HA) this year, which is a boost of 9 percent as compared to the previous year. Total oilseed output is projected to rise to almost 4 million MT, 4.6 percent more than the previous season. Oilseed meal production will also expand by an estimated 3.3 percent. Among the three types of oil meals, soybean meal will cover almost 70 percent of demand, followed by sunflower meal with 29 percent and rape meal with less than 1 percent. Total oil production is anticipated to reach 550,000 MT, of which sun oil production leads with 3338,000 MT.
Sunflower area is expected to marginally increase in MY 2017/18, even with the significant boost in rapeseed area. Rainfall and snow over the winter alleviated dryness and improved soil moisture throughout the country, creating conditions for a good plant emergence and development in the spring. Based on the slightly higher area and relatively constant average yield, total sunflower seed production is forecast to reach 1.95 million MT.
The interest for high-oleic (HO) sunflower seeds faded. The premium paid for HO seeds currently paid by the industry is around U.S. $20/MT and this premium level does not offset the lower yields. Therefore, it is likely this year farmers will reduce HO covered areas. The area covered with high-oleic hybrids is anticipated to drop from 130,000 – 140,000 HA in MY 2016/17 to below 100,000 HA. Crush volume is projected to continue rising in MY 2017/18. The ample seed supply will contribute to an export figure close to 1.2 million MT, a similar level to the previous year. Sunflower seed utilization for snacks and food industry is expected to continue the upward trend, due to rising consumption of snacks and bakery products containing sunflower seeds.
The estimate for sunflower seeds production for MY 2016/17 was revised slightly down due to lack of water and high temperatures in the summer. Despite existing ample supplies, crush volume is not in line with crushing capacities. Depressed prices due to strong competition from the Black Sea region and rising demand from large crushers in northern Europe, pulled a higher than estimated volume of sunflower seeds from Romania reducing the domestic crush. The domestic crush is estimated currently at 770,000 MT in MY 2017/18, which is lower than the previous estimate of 940,000 MT, but 10 percent higher than the previous season.
Sunflower seed exports are likely to increase by 7 percent as compared to the previous year due to the rational explained above. In terms of destinations, there is a clear preference for EU countries, such as France (128,000 MT), the Netherlands (90,000 MT), Spain (65,000 MT) and Portugal (30,000 MT). The major buyer outside the European Union was Pakistan (29,500 MT). In general sunflower seed imports are negligible compared to exports. Moldova Republic and Bulgaria are the major suppliers. United States supplies Romania with sunflower seeds both for sowing and for the snack industry, ranking fourth among foreign suppliers, after Moldova, Bulgaria and Hungary.
Sunflower Meal and oil
Sunflower meal production is foreseen to rise by 4 percent in MY 2017/18 in response to a higher crush. Domestic utilization is projected to slightly increase as compared to the previous year due to sunflower meal’s increasing competitiveness and positive prospects for livestock production. Romania’s output is larger than the demand, so the surplus of 50 percent of sunflower meal is exported equally to EU and non-EU countries. Total sunflower meal exports are projected to stagnate at 210,000 MT in MY 2017/18. In MY 2015/16 sunflower meal exports dropped from 308,000 MT to 181,601 MT. Saudi Arabia (25,590 MT), Israel (32,251 MT), Morocco (21,143 MT) and Turkey (9,500 MT) were the major buyers outside the European Union. Among EU member states, France (30,000 MT), Hungary (19,000 MT) and Spain (10,000 MT) were the notable sunflower meal buyers in Romania.
Sunflower oil remains the preferred type of oil used for food purposes with over a 90 percent market share. Similar to sunflower meal, half of sunflower oil production is used for domestic consumption, while the other half is exported. In MY 2017/18 sunflower oil output is expected to increase slightly reaching 338,000 MT. During MY 2016/17 very low or even negative crush margins made sun oil production less profitable due to market competition from Black sea countries, hence seeds were exported instead of being crushed domestically. In response to these market conditions, sun oil export estimate was revised down being now estimated at 125,000 MT. During MY 2015/16 Romanian sun oil exports fell by 51 percent, after a record figure of 220,000 MT in the previous year. Spain (17,000 MT), South Africa (18,000 MT), Italy (11,500 MT) and France (6,500 MT) were the notable buyers.
Rapeseed crop is gaining popularity every year among farmers. The price level supported by the high demand, the relatively stable yields, and the temporary authorization for neonicotinoides utilization encourage Romanian farmers to plant more rapeseed.
In the fall of 2016 there were favorable sowing conditions throughout the country, except some areas in the east, northeast and southwest. Estimates on planted area vary widely from 550,000 HA to 750,000 HA, the later meaning an increase of 50 percent as compared to the previous year. The boost occurred at the expense of wheat, which disappointed farmers due to the bumper production and low prices last year. Crops planted late because of drought or high soil moisture entered the winter in a vulnerable state with only 2-3 leaves, being strong candidates for crop replacement. Farmers located in the west and central parts of Romania in particular considered replacing rapeseed.
When replanting, farmers prefer to switch to sunflower seeds rather than soybeans, since the hybrids provided by the seed suppliers have the capability to survive dry and hot summer conditions. The rapeseed crop in the western region will most probably be replaced with corn, while soybean and corn will replace rapeseed in the central and northeastern part of Romania. Spring rapeseed is not a common crop for Romania, due to the hot summers. The rapeseed crop in the southern part of Romania looks good and has good potential development. Overall, the replanted area due to winterkill or non-satisfactory emergence is expected to stay below 20 percent. FAS Bucharest projects that rapeseed production will reach 1.75 Million MT in MY 2017/18, which is 3 percent more than the previous year (please see diagram above). Exports will remain the main driver for farmers. Domestic crush is expected to increase to 370,000 MT.
In 2016 favorable weather conditions for both sowing and development lead to higher than expected yields. Total rapeseed production grew by almost 50 percent, with yields expanding from 2.74 MT/HA in the previous year to 3.44 MT/HA in 2016. Foreign demand put high pressure on the crush, which is estimated now at 350,000 MT of seeds. In terms of exports, EU member states are the main recipients of rapeseeds. During the first five months of the MY 2016/17 a volume of 1.3 million MT has been exported. Export to the Netherlands and Belgium during MY 2015/16 accounted for almost 50 percent of total rapeseed exports due their sizeable crushing capacities and the same trend is expected for MY 2016/17. This season third countries such as the United Arab Emirates and Turkey appeared interested in this type of seeds.
Rapeseed meal and oil
Export is the main destination for rape meal as domestic livestock producers use it only in limited quantities. During the first five months of the MY 2016/17 rape meal exports stagnated. Main customers were Israel (56,000 MT), Morocco (18,600 MT), Iran (14,500 MT), Turkey (10,000 MT) and Spain and France, each with 10,000 MT. In the case of rapeseed oil, the main purpose is biodiesel, for which a volume of 120,000 MT is estimated to be utilized. Starting with 2016, the biofuel blending mandate rose to 6.5 percent from 5 percent. The balance of 35,000 – 40,000 MT is exported, mainly to France, Germany and the Netherlands.
Soybean remains a minor crop in Romania despite attractive financial support allocated by the European Union in the form of coupled support. At the EU level protein crop production only covers 30 percent of protein consumed as animal feed in the EU, the remaining 70 percent is imported. Soybean and soybean products cover the majority of protein needs. In order to stimulate an increase in protein crops, the EU Commission gave Member States the opportunity to support protein crop production through coupled support as part of the new Common Agricultural Policy (2014-2020). In Romania the support per hectare reached U.S. $250/MT in MY 2016/17, from U.S. $270/MT the previous year due to a larger cultivated area than scheduled. In order to be eligible for the coupled support, farmers must comply with several requirements: they have to show authorities proof that they own soybean crushing capacity or have signed a contract with a crusher or trader for soybean deliveries. In addition, soybean yields must exceed 1.3 MT/HA. Starting with 2016, only certified seeds can be used for planting in order to be eligible for coupled support.
In general, soybeans are an option for farmers located in areas with favorable growing conditions, considering the crop’s particular sensitivity to drought. In 2017 the area is projected to grow moderately, from 132,000 HA in MY 2016/17 to 140,000 HA. Under assumptions of a normal year, soybean production is anticipated to increase to 285,000 MT, a boost of 10 percent. Considering the fact that Romania produces conventional soybeans, these are exported in general to other EU countries where the livestock requires non-genetically engineered varieties. Germany, Austria, Italy and Hungary are the major markets for Romanian soybeans. Romania crushes in general about 300,000 - 350,000 MT/year from both domestic and import sources. In MY 2015/16 United States (71,000 MT) ranked second after Brazil (74,000 MT) supplying almost 40 percent of the soybean import. Ukraine and Moldova Republic are two other notable soybean suppliers. Based on the assumption that domestic production will be higher in MY 2017/2018, soybean imports are expected to decline slightly.
Soybean meal and oil
Soybean meal remains the favorite meal used in the feed ratio in Romania by the livestock sectors. In MY 2016/17 domestic soybean meal production is expected to remain flat. Soybean meal price competitiveness in MY 2017/18 will be reflected into a higher incorporation in the feed ratio, hence soybean meal utilization is projected to marginally rise.
In terms of soybean meal imports, Latin America countries supply notable volumes to Romania. In MY 2015/16, Brazil exported 182,000 MT, followed by Argentina (108,000 MT), Bolivia (51,000 MT) and Paraguay (21,000 MT). In the same time, Romania exported in total 172,000 MT of soymeal mainly to other EU member states, such as Bulgaria (100,000 MT) and Spain (33,000 MT). Outside European Union, the main destinations for soymeal were Moldova (17,000 MT), Georgia (8,350 MT) and Turkey (8,300 MT).