Brazil buys Argentine soybean oil as tightness persists

Brazilian importers have clocked up multiple purchases of Argentine soyoil cargoes over the past few weeks marking the first time in two years that the world’s largest soybean producer and exporter has had to buy in bulk from its neighbour, five trade sources have confirmed to Agricensus Thursday.

The move comes after Brazil ran dry of beans, causing a lack of domestic oil supply with around 60,000-70,000 mt of Argentine soyoil bought by Brazilian importers over the past two weeks.

The first cargo is thought to have left Argentina’s Up River complex earlier this week.

“It is not unusual that Brazil buys Argentine soybean oil - this happens normally in February but for very small volumes, maybe 10,000 mt or so. What is unusual this time is the size of these volumes and the timing of them,” an Argentina-based broker told Agricensus.

“Brazil doesn’t have much oil around,” the broker said.

Spot Brazilian soyoil prices have surged to $874.25/mt FOB Paranagua, up over $300/mt since the March lows, while Argentine volumes are changing hands at $835.25/mt FOB Up River, up around $250/mt over the same period, according to Agricensus data.

Despite Brazil harvesting a record soybean crop earlier this year, a record soybean export programme to China has left the country short of the oilseed, with tight supply expected to persist until its next harvest in February.

At the same time, road diesel demand has remained firm this year – despite Covid-19 lockdown measures – boosting local soyoil demand for Brazil’s expanding biodiesel sector.

The bulk of the Argentine soyoil volumes will head for the Brazilian port of Suape, with smaller volumes headed for the ports of Fortaleza, Paranagua and São Francisco do Sul, as “it would be too much for Suape alone,” a Brazilian broker said.

While some parcels have already left, most of the volume will be shipped in October and November, trade sources said.

The last time Brazil imported soyoil from Argentina was in February 2018 when it bought 7,000 mt, while 14,000 mt was imported in 2017 and 31,000 mt was imported in 2016, customs data showed.

The imported soyoil will most likely be absorbed by Brazil’s food sector as its biodiesel regulation mandates that only soyoil made from domestic feedstock can be used.