Brazil discount to Argentina soyoil set to stay on slow Up River crush
Brazilian FOB soyoil prices are likely to remain in an unusual discount to South American rival Argentina’s FOB Up River complex as the sluggish pace of crushing in the country tightens up soyoil availability, trade sources have told Agricensus.
Usually, soyoil cash prices for Brazil trade at a higher price than Argentina, based on production levels, freight advantages and other factors, but the slow pace of crush in the world’s largest soyoil exporter has supported the Argentina’s FOB values and driven them above those of Brazil.
“Usually, Argentina soybean oil trades with a 20 ct/lb discount versus Brazilian levels… now we have seen Brazil cheaper than its peer,” HedgePoint Global’s senior risk manager Victor Martins told Agricensus.
The price differential between the two origins has been widening steadily in August, with market participants expecting that trend to continue.
Brazilian soyoil basis values were last assessed at a 6.5 ct/lb discount under the October future on August 22, resulting in flat prices of $1,324/mt at Monday's close.
On the other hand, Argentine soyoil basis values were at 5.5 ct/lb under the October futures as tighter soyoil availability resulted in a firmer basis versus Brazil, resulting in flat prices of $1,346/mt.
Brazil has been operating at a premium versus Argentina for most of 2022, but has shown signs of trending below Argentine values from August 2.
Crush
Argentina is reporting a slowdown in soybean crushing due to a sharp decline in soybean farmer sales this season.
The latest update from Argentina’s agriculture secretariat showed that 3.47 million mt of soybeans were sent to the crush in July, down 11% on the previous month and 10% down on the same point of last year.
As a result, the output of soyoil and soymeal has fallen by 12% for each product in July, thus tightening availability in Argentina.
“Argentina’s availability is expected to continue to be tight owing to poor crush margins and subdued farmer selling… while in Brazil the crush margins are improving so higher availability of soyoil is expected,” an Argentine trade source told Agricensus.
“As a result, Brazilian soyoil may continue to gain competitiveness against Argentine soyoil,” the source added.
Earlier this month the Brazilian Association of Vegetable Oil Industries (Abiove) raised its 2022 soybean crushing estimates to 48.6 million mt, up from its previous estimate of 48.3 million mt.
“As crushing margins turn positive in Brazil, we expect industries to lift soybeans from the domestic market, then lock up positive crush margins by selling downstream FOB paper premiums, for both oil and meal,” Martins added.
According to the USDA, Argentina is poised to export 5.8 million mt of soybean oil in 2022/23, up 8% on the prior season, meanwhile Brazil’s soyoil exports have been revised up 7% from earlier estimates to come in at 2.13 million mt in 2022/23.