South American soybean oil FOB basis drops to record low

Soybean oil port differentials in South American markets have plunged to historic lows amid quiet demand from destinations and soaring Chicago Board of Trade futures.

On June 30, Platts assessed the Brazilian FOB Paranaguá basis for August loading at minus 1,850 points to the CBOT August (Q) contract. The Argentinian FOB Up River value for the same period, in turn, was at minus 1,800 points.
Both marked record lows in the Platts series, which started in March 2020 for Brazil and March 2019 for Argentina. As a comparison, the basis was at minus 230 points for FOB Paranaguá and minus 300 points for FOB Up River by this time in 2022.

According to sources, pressure has been following cheaper rival edible oils for key buyers, namely India and China, the world’s largest importers of vegetable oil.

“There are some saying that is the lack of demand, saying that soybean oil is too expensive compared with [Black Sea] sunflower [oil]” a Brazil-based trader said.

Indeed, sunflower oil FOB Black Sea outright prices have been around $200/mt below South American soybean oil supplies, Platts data showed. The price of crude palm oil FOB Indonesia was also more than $50 cheaper than FOB Paranaguá and FOB Up River June 30, when they were assessed at $952.40/mt and $963.42/mt, respectively.

Besides, a recent surge in CBOT futures has further weighed on cash basis levels as the jump in international references usually forces traders to adjust offer and bid indications lower.

The CBOT Q contract settled June 30 at 61.30 cents/lb, on highs not seen since early March.

Futures were fueled June 30 by bullish Acreage and Quarterly Grain Stocks reports, released on that day by the US Department of Agriculture, analysts said. USDA’s estimates for this year’s soybean planted area and inventories as of June 1 came both below traders’ expectations, further supporting a market already worried about dry conditions across the US Midwest.

Tags: soybean oil, Brazil, prices, USA, Argentina