How The Tight Supply of Bulk Sunflower Oil & Safflower Oil Affects You

Posted by Hannah Broaddus

How The Tight Supply of Bulk Sunflower Oil & Safflower Oil Affects YouThe natural and specialty food markets have taken a turn towards using safflower and sunflower oil as their preferred oil ingredient in their products.  These healthier oils are now being used in place of soybean, canola and other mild, light-colored oils.

Why?  With safflower and sunflower oil, you get close to the same benefits of olive oil, without the color or flavor-- plus it comes at a lower price.

Have you noticed this trend?  Go into Whole Foods and look at the back ingredient label of a few of the chip and popcorn bags.  You're bound to find a whole bunch that use high-oleic safflower oil and sunflower oil that is non-GMO.  Or, even more popular right now-- organic sunflower and safflower oil.

If you happen to be a food manufacturer and you use these ingredients, I bet you've noticed a big trend in the last few weeks/months.  These oils are hard to come by right now, and in high demand!  If you're buying on the spot market outside of a contract right now, you may be hard pressed to find your ingredients.

You're probably wondering why this is happening and what's going on!  Good question.  We'll explain what's going on in the market right now.

Demand Has Exploded For Sunflower and Safflower Oil

In the last couple years, the demand for products that use healthy oils have grown.  Even in the last year alone, we've seen many new healthy food businesses blossom that use these oils.

More importantly, this interest in healthy oils across the board is causing many conventional brands to switch from bulk oil ingredients like soybean and conventional canola to non-GMO, monounsaturated oils like olive oil, safflower oil and sunflower oil.  As a result, demand for these oils is exploding.

The Commodity Market For These Oils Are Connected, Because They're Used Interchangably

You'll notice that many of these ingredient labels will read "Non-GMO Sunflower Oil and/or Safflower Oil".  The oils have very similar properties, and (especially if you're using them to bake or fry) either option is going to work.  

Opening up the possible ingredients to be one or both of a couple options is really ideal for food manufacturers.  It gives you more flexibility if the commodity market on one of those items is very high.  For example, if pests destroyed a bunch of the sunflower crop one year but they didn't affect the safflower crop, this diversification protects your company by giving you an alternative ingredient option.  Pat yourself on the back if you've made this choice for your brand.

The result in a normal market situation, however, is that these commodity markets are very closely tied together.  Demand for sunflower goes up, companies switch to safflower-- and vice versa.  That why you're finding that both of these items are in high demand at the same time.

Supply Of Safflower and Sunflower is Tight

Safflower and sunflower oil are harvested once a year, like most plants.  This harvest and production of the oil happens in the fall.  Right now, it is summer and food companies are using up all that oil that was produced in last years production run.  So supply is tight.

Now, factor in the discussion above.  In the last year, many new companies have switched from using other oils (that they used quite a bit of volume of) to sunflower and safflower oil.  This reduces the available supply even further.

Production Is Trying To Keep Up With Demand

If supply is tight, what has Economics 101 taught us will happen?  Producers will increase what they're supplying, because they know that it is being demanded.

Here's the catch... It takes a while for production to switch over to meet the demand, especially if demand is growing quickly.  Farmers have to clear out old crops and plant new sunflower or safflower oil crops in their place.  At very least, it takes a year for them to match the demand that's in the market place because that's how long it takes for the newly planted crops to grow.

There are many challenges involved though.  For example, they can plan to add more crops, but by the time those crops grow a few months later, demand might have already tripled.  It's an ever moving target, and growers are trying to keep up with the market demand for their seeds.

Is anything unusual going on with the supply chain?

No, nothing out of the ordinary.  Just the increase in demand and the natural supply cycle that's affecting availability right now.

What Are Your Options, If You Need Bulk Sunflower or Safflower Oil Now

Right now, the market is tight and both of these oils are in high demand.  For the moment, you'll need to buy on the spot market if you didn't contract (or if your contract ran out).  Prices may be higher than you hoped.

Importing organic sunflower or safflower oil is another good option.  If you're interested in either of these, feel free to request pricing from Centra Foods.

Looking forward, after the harvest this fall, it will be smart for you to lock in a higher volume contract that matches your predictions for your 2015 usage.

Know a colleague who would like this information?  Share it with them.

Topics: Harvest/Commodity Market, Sunflower/Safflower Oil



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