Soybean oil prices in South America fell to a 2-year low

According to Platts, part of S&P Global Commodity Insights, soybean oil prices for May delivery fell to $988.55/t both FOB Up River (Argentina) and FOB Paranaguá (Brazil) on March 22, which is the lowest level since January 27, 2021.

Against the backdrop of a drop in soybean oil prices on FOB in both countries by almost 20%, futures also fell by 15% on SWOT.

Despite a significant decline in Argentina’s soybean harvest, traders are focused on a record crop in Brazil, falling energy markets, macroeconomic fluctuations and weak demand from major buyers, including China and India.

In March, India took advantage of the duty-free import of soybean oil and significantly replenished stocks, so it will reduce purchases from April.

Against this background, the urgency premium in South America was low, and the May contracts on FOB Up River and FOB Paranaguá on March 22 were 980 points cheaper than at WTO. Last year in this period, they were more expensive by 90 points and 70 points, respectively.

Brazil’s decision to reduce oil refining into biodiesel is also related to current price pressures. The country’s authorities increased the mandatory diesel fuel additive from the current 10% to 12% starting in April, with a gradual increase to 15% by 2026. This partially undermined the production of biofuel, which was proposed to use 15% (B15) oil.

After the change in the biodiesel mandate, the Brazilian association of oilseed producers Abiove said that in 2022 the domestic consumption of soybean oil will amount to 8.95 million tons, although it was previously estimated at 9.15 million tons. As a result, export deliveries will increase, which already amounted to 2 .15 million tons compared to the previous forecast of 1.75 million tons.

We will remind that soybean oil is the main raw material for the production of biodiesel fuel in Brazil.