Premiums in the world’s main soybean oil exporter are now higher than their counterpart in the US on an FOB basis, which has not happened since 2022 and might attract export demand for US soybean oil, while Brazilian soybean oil premiums remain firmer than both due to domestic biodiesel demand.
Fastmarkets last assessed soybean oil premiums in Up River ports in Argentina for December loading at 4.75 cents per pound, versus a premium of 4 cents per pound in the US Gulf.
“There is no farmer selling; farmers are holding their beans, waiting for a devaluation or any [beneficial] tax changes,” an Argentine broker said.
Argentine farmers sold 59% of their 2023-24 soybean crop and 2% of the expected 2024-25 crop up to the second week of October according to data from the country’s agriculture, livestock and fishing secretariat SAGyP.
This compares with old and new crop sales of 70% and 7% respectively in the previous five-year average.
Another factor possibly related to the surge in Argentine soybean oil premiums is the covering of short positions at ports related to export commitments to Asia.
“I think [rising Argentine premiums are related to] the short covering of what India and Nepal bought after the duty hike,” Mukesh Goyal, director at the Indian brokerage Oyal Makler, told Fastmarkets.
On September 13, India’s government raised import duties on crude palm oil, crude soybean oil and crude sunflower oil to 27.50% from 5.50%, while refined palm oils, soybean oil and sunflower oil import taxes were raised to 35.75% from 13.75%.
The steep increase in premiums, which have been on a consistent uptrend since July, came despite higher-than-expected crush volumes in Argentina in September, which should have contributed to easing a tight supply and demand balance.
Argentina crushed 4.11 million tonnes of beans in September, the highest volume on record for the month and above trade expectations.
That said, the global outlook remains somewhat supportive of veg oils prices, with lower production of rapeseed oil in Europe and sunflower oil in the Black Sea and Indonesia’s reaffirmed intention to raise its mandatory blending of palm-based biodiesel into diesel to a mixture of 50% supporting prices across complex.
This has been contributing to keep firm export prices in Argentina, Brazilian brokerage Agrinvest said in a daily comment.
Anilkumar Bagani, head of research at Mumbai-based veg oils broker Sunvin Group, mentioned the supply concerns in Europe, Black Sea and Indonesia, as well as the historically low draft levels in the Paraguayan River as an additional supportive factor for premiums.
“The strong demand for soybean oil for biofuel making at Brazilian local markets, and also the lower month-on-month soybean oil inventories in the US market, have added further support,” Bagani said.
With Argentinian premiums now higher than their US counterparts, market participants suggested US export sales for last week, which should be reported by the USDA on Thursday October 24, might have been “substantial.”
On October 18, the USDA announced under its 24-hour reporting system that 21,000 tonnes of US soybean oil had been sold to Mexico, the largest oil flash sale in the season so far.
Brazil
Brazilian soybean oil premiums have also been on the rise, but steeper gains were seen in Argentine soybean oil premiums.
Fastmarkets heard low activity levels on Monday October 21, with only November offers disclosed.
Brazilian brokers and biodiesel producers told Fastmarkets the soybean oil market had low liquidity domestically this week because prices have risen “a lot and fast,” which kept biodiesel plants on the sidelines, waiting for price opportunities to close deals.
“With this surge in basis in Argentina, premiums should strengthen even further in Brazil, but we have not yet seen this happen,” one biodiesel producer told Fastmarkets.
So far, Brazilian line-up data shows one vessel to sail on Tuesday October 22 and two to sail in the following days, with the remaining cargoes projected for the month having already sailed, mostly bound to India.
Exports of Brazilian vegetable oils and fats – mostly comprised of soybean oil – totaled 92,442 tonnes in the first three weeks of October, approaching the volumes sent abroad in October last year, with average shipped volume per working day at 6,603 tonnes so far this month, up by 36.3% from 4,845 tonnes last October.
