South American soybean oil hits more than 3-year lows amid sluggish demand, lower futures

South American soybean oil spot prices slid below $800/mt for the first time since September 2020, under pressure from falling Chicago Board of Trade futures contracts and sluggish demand in key destinations.

Platts, part of S&P Global Commodity Insights, assessed the Argentinian FOB Up River outright price for March dates at $792.12/mt on Feb. 2, down 6.7% since the start of 2024 — a level not seen for a front-month loading shipment since Sept. 11, 2020.

A similar trend was seen for the Brazilian FOB Paranaguá market, where the price for March shipments reached $798.94/mt on Feb. 2, or 8.4% lower so far in 2024, and the lowest for a spot value since Sept. 1, 2020.

Both assessments have dropped more than $1,000/mt from a $1,900/mt peak seen in April 2022, when the global vegetable oils market was being supported by the initial impacts of the Russia-Ukraine war and the Indonesian palm oil export restrictions.

FOB spot prices for soybean oil in South America are currently tracking the continuous drops seen in CBOT futures. The front-month March (H) contract on the CBOT has fallen by 7% year-to-date as of Feb. 2.

“Soybean oil is down on CBOT as a function of demand deficit for biofuel blending, with competing feedstock prices consistently cheaper,” Anil Kumar Bagani, commodity research head at edible oil brokerage Sunvin Group, said. He pointed out that a “drastic fall” in US D4 RIN prices had reduced the subsidy for soybean oil as a biofuel feedstock.

The port differentials for soybean oil, calculated as basis points against CBOT futures contracts, have also dropped amid bumper crop expectations in Argentina and Brazil this year — which has put further pressure on the FOB cash prices.

On Feb. 2 Platts assessed the March basis for FOB Up River and FOB Paranaguá at minus 880 points and minus 850 points to the CBOT H contract, respectively. That compares with minus 150 points and minus 100 points, for FOB Up River and FOB Paranaguá, respectively assessed at the same time last year.

The main reason for the weaker basis levels this year was due to a firm recovery in the South American soybean crop, mainly in Argentina — the world’s largest exporter of soybean oil and meal, sources said.

S&P Global expects Argentina’s soybean harvest will total 53 million mt in the 2023-24 season, more than double from the last cycle, when unfavorable weather conditions hit local plantations.

Brazil, on the other hand, is likely to produce 153 million mt of the oilseed this campaign, below the more than 160 million mt initially expected, but still the second largest crop on record, according to S&P Global estimates.

Demand at destination countries has also not improved as expected, despite South American soybean oil prices dropping below competing crude palm oil prices in Indonesia and almost matching prices for sunflower oil from the Black Sea, according to Platts data.

“Key buyers India and China have large vegetable oil inventories, and local vegoil prices remained consistently cheaper, resulting in negative import margins,” Bagani said.

S&P Global expects Argentina and Brazil to export 5.20 million mt and 1.85 million mt of soybean oil in 2023-24, respectively.

Tags: vegetable oils, soybean oil, South America, shipments, futures, spot prices, Market, biofuel