Latin America soybean oil prices retreat 9% from record highs

Soybean oil prices in South America have lost nearly 9% since the April 28 record high, as sluggish demand from destinations and increasing supplies from Argentina and Brazil impacted market sentiment.

Both Argentinian FOB Up River and Brazilian FOB Paranagua front-month outright prices were assessed at $1,745.40/mt on May 23, down 8.6% and 8.3%, respectively from the record highs reached on April 28, according to Platts assessments from S&P Global Commodity Insights.

The drop in prices was partially due to a lack of fresh demand from key importers such as China and India.

Chinese demand ebbed as the coronavirus-related lockdowns in the last few weeks impacted buying appetite while India, the world’s largest buyer of edible oils, looked well covered for nearby needs as domestic supply increased, mainly due to rapeseed oil production, market sources told S&P Global.

Besides, importers in general have been adopting a more conservative stance due to the lingering uncertainties regarding palm oil supplies from Indonesia, the global top producer and exporter of the commodity.

Indonesia on May 23 lifted a late-April export ban on palm oil and some sub-products, but kept a 10-million-mt domestic market obligation for cooking oil even as doubts remained over export license issuance.

Platts FOB Up River basis level was assessed May 23 at minus 130 points to the Chicago Board of Trade July (N) contract, down 130 points from April 28, when prices in Argentina and Brazil reached all-time highs of above $1,900/mt, S&P Global data showed. During the same period, the FOB Paranagua basis declined 100 points to minus 130 points to the CBOT N as well.

CBOT futures, meanwhile, fell around 7% during April 28-May 23.

Increasing soybean crush in Argentina and Brazil followed by an uptick in soybean oil and meal production also pressured local FOB premiums and prices, sources told S&P Global.
“Argentina’s soybean harvest is progressing nicely, increasing the supply of soybeans to the processors and the crush capacity utilization has also been recovering there,” said Anil Kumar Bagani, commodity research head at brokerage Sunvin Group.
Argentina, the world’s largest exporter of soybean oil and meal, crushed 3.92 million mt of soybeans in April, up 34% on the month, latest data from the agriculture ministry showed. As a result, local soybean oil production jumped 35.5% during the same period to 781,122 mt.

In Brazil, there is higher availability of soybean oil following the recent harvest this year amid positive crush margins and lower requirements from the biodiesel industry, which uses it as a main feedstock.

Brazil’s biodiesel mixture in diesel was expected to be 13% in January-February and 14% from March, but in late 2021, the government fixed a 10% mandate for the whole year amid fears of higher inflation rates, disappointing the country’s biodiesel sector. Consequently, higher soybean oil volumes became available for potential exports.

Brazil’s oilseeds crushers association, or Abiove, sees the country exporting 1.80 million mt of soybean oil in 2022, up 9% on the year and the highest volume since 2008.

Tags: South America, ban, China, edible oils, export, rapeseed oil, soybean oil, Market, Indonesia, Argentina, Brazil, demand, prices, importers, Production, record high, India, palm oil