Arg-Brazil soybean spread falls on protein: broker

The price differential between Argentinian and Brazilian soybeans on a delivered basis into China has halved in the past week as the so-called protein premium that Brazilian beans can attract over Argentinian beans has dwindled.

On June 26, the best offer for Argentinian beans for August shipment was at a 155-c/bu premium over July futures versus a 202-c/bu premium for Brazil.

On Thursday, Argentinian beans were offered at 164 c/bu over July futures versus 185 c/bu for Brazilian beans.

"Brazil's soybean protein content is not very good, so the differential is narrowing," said soybean brokerage Overseas China Investment Ltd in a note to clients.

A second source confirmed that the differential was narrowing, but said it was more to do with an improvement in Argentinian protein rather than an issue with Brazilian beans.

“Brazil protein is above 34.5% for all ports,” the second source said.

Meanwhile, some believe the narrower price differential is triggered by supply and demand dynamic in the market.

"The market has accepted that Brazil protein level is lower this year. I think it is supply and demand caused Argentinian price to rise and Brazil price to fall," said one China-based trader at an international trading house.

However, the offers show Brazilian prices are coming down rather than Argentinian premiums creeping up.

According to Agricensus calculations, replacement costs for Argentinian soybeans using the domestic exchange price is around $328/mt on an FOB basis after export tax – around $12/mt lower than where the traded value is.