Destination demand snaps Brazilian soybean oil as Argentina’s supply tightens

As crushing volumes in Argentina continue to decline, Brazilian soy oil exports keep rising

A flurry of trades for Brazilian soybean oil was heard yesterday as destination buyers sought to cover demand against a backdrop of continued tight supply from Argentina, market sources told Fastmarkets Agriculture.

Fastmarkets last assessed Brazilian soy oil basis premiums for December shipment at a 12.5 cents per pound discount to CME December soy oil futures at 17:00 GMT on Monday, which is some 350 points down from the October 13 assessment.

The decline in soybean oil basis in the world’s second-largest exporting country led to bargain buying from destinations, with several trades reported late on Monday, October 24th.

At least 13,000 tonnes of Brazilian soy oil changed hands for December loading, 6,000 tonnes of which were heard to have traded at a 12.4 cents per pound discount to December futures. Reportedly, further parcels changed hands at a 12.3 cents per pound discount to December futures, also for December loading.

“The exceptionally slower Argentinian soy oil export performance during October so far has forced destination buyers to switch to the Brazilian soy oil,” Anilkumar Bagani, research head at Mumbai-based vegetable oil broker Sunvin Group, told Fastmarkets.

“This has happened due to lower Argentinian soybean crush [levels] in September and the low draft at Parana River,” Bagani added.

“Strong destination demand is behind the latest trades due to supply uncertainty in Argentina,” a local trade source told us.

Brazil has managed to take advantage of the lower availability in Argentina, with the latest trade data from Global Trade Tracker (GTT) showing that a total of around 1.7 million tonnes of soybean oil has been exported for the year to August, 62% up on the same period last year.

Brazilian soy oil shipments to India and Bangladesh have taken the lion’s share of the trade, rising by over 200% in the first eight months of the year.

Argentina’s woes

The sharp increase in Brazilian exports comes as Argentina – the world’s largest soybean oil exporter – is facing tight availability of soy oil, with crushing levels last month falling sharply.

The latest bean processing data from Argentina’s Agriculture Secretariat shows that September crush levels totaled 2.87 million tonnes, sharply down 9% on the month, which is well below the five-year average for the month.

In September, the ‘soy dollar’ led to a surge in soybean farmer sales, thus showing that volumes sent for processing did not increase as much as expected.

Meanwhile, this month, farmer sales have dropped sharply as soybean producers resort to withholding beans as the country faces a deep financial crisis.

Soybean sales in the first two weeks of October came to 431,000 tonnes, which is more than half the sales recorded in the same period of last year, the Agriculture Secretariat data showed.

Argentina’s soy oil exports in the first eight months of the year have dropped to 3.25 million tonnes, down 26% on the same period a year ago, with shipments to India – the world’s largest veg oil importer - dropping 20%, according to GTT data.

Argentina is poised to export 5.7 million tonnes in the 2022-23 season, according to the latest US Department of Agriculture (USDA) data, while Brazil’s exports are pegged at 2.1 million tonnes for the same season.

Click here to access our data analysis and gain better insights into soybean crushing trends and margins.

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