Argentina’s soyoil plummets on bumper farmer bean sales

Soyoil basis premiums in Argentina dropped sharply Tuesday on a bumper volume sold by soybean farmers as a result of the government's implementation of the improved 'soy dollar' scheme September 5.

October basis premiums for Argentine soyoil were assessed at a 8.5 cts/lb discount to October futures as of 1800 BST (1700 GMT) Tuesday, sharply down by 335 basis points from the previous assessment made on September 2.

A plummeting premium and a lower underlying futures contract in Chicago resulted in soyoil cash prices falling to $1,257/mt FOB Up River, the lowest levels in over six weeks.

Soyoil premiums were under pressure Tuesday as approximately one million mt of soybeans were sold by farmers on the prior day – the highest daily trade volume since early 2017 according to the Rosario Grain Exchange (BCR).

The boost in sales was due to the implementation of an improved soy dollar which sets an exchange rate of 200 pesos to the dollar, a jump of 37% from the previous measure, applicable from September 5 until September 30.

And there are market expectations that soybean sales will continue, as the new measure has improved the value of soybeans, incentivizing producers to sell stock they were withholding.

As a reference, the Argentine government is seeking to collect $5 billion of dollars, which would be the equivalent of 10 million mt of soybeans sold by farmers.

“Despite the weaker CBOT soyoil underlying futures, we expect the South American CDSBO [soyoil] basis to stay under pressure going forward,” Anilkumar Bagani, research head at Mumbai-based vegetable oil broker Sunvin Group told Agricensus.

It is estimated that a total of 13.3 million mt of soybeans are yet to be sold for the 2021/22 campaign according to the BCR.