Brazil to export more soymeal on B10 rules and Argentine drought

Brazil is expected to export more soymeal in 2018 as crushing rates are forecast to rise on demand for soybean oil as a fuel as well as a drought that is slashing the size of the Argentine crop, analysts have said this week.

Brazil will raise its mandatory blend of biodiesel in commercial fuels to 10% on March 1, up from the current 8% figure, which will require an increase of 25% in annual production of biofuel to 5.4 billion litres from 4.2 billion litres in 2017, according to the biodiesel association Ubrabio.

Soy oil accounted for 70% of all biodiesel feedstock in 2017 and soy’s share of biodiesel feedstock may increase as a result.

That's because Brazil’s soybean crushing industry – comprised of big international grain merchants such as ADM, Bunge, Cargill and Louis Dreyfus – is the only sector equipped to meet the abrupt increase in demand for renewable oils in March.

To meet demand for soy oil from the biodiesel industry, the crushing industry will have to process 17 million mt of whole beans, Ubrabio estimates, which is roughly 15% of the country’s total soybean crop.

According to Brazil’s vegetable oils industry association Abiove’s latest forecast, biodiesel will account for 40% of Brazil’s total soy crush in 2018, which will reach 43 million mt, up from 41.5 million mt in 2017.

With the additional meal produced in the production of oil, Brazil is expected to export 16.2 million mt of soy meal in 2018, up from 15 million mt in 2017, Abiove said.

The association said it plans to release its February projection for 2018 soybean crushing next week.

Drought over Argentina’s soy belt is also expected to feed into Brazil’s soy meal exports this year.

International soy meal prices have already surged on the news.

The US Department of Agriculture lowered its outlook for Argentine soybean output on 8 February to 54 million mt from 56 million mt in January.

The Buenos Aires Grain Exchange is projecting 50 million mt and some analysts are even more pessimistic.

As the world’s largest exporter of soy meal, Argentina is likely to lose international market share in the important animal feeds ingredient to Brazil and the United States, considering the smaller projected crop.

Front-month soy meal futures in Chicago have risen 22% since 12 January to $378/mt.