South American soyoil basis firms amid falling futures, low availability
The plunge in soyoil CME futures from early September has sparked a phase of price rises for soyoil FOB premiums across Brazil and Argentina.
This collectively accounts for about 60% of total global exports but is seasonally at odds with the main Chicago-based price indicator.
"Chicago futures have been going down and Argentina has scarce to no availability of soybeans," an Argentina-based broker told Fastmarkets.
The front-month CME soyoil futures contract has tumbled by nearly 4 c/lb over the past two weeks and has plummeted over 13 c/lb since the start of September.
Argentina has been struggling this year with extremely low domestic soybean supplies due to a historical crop loss, which is hampering farmer selling.
Poor crush margins are adding to the mix, disincentivizing soybean imports from neighboring countries that could help bolster Argentine crush activity - a dynamic that is likely to stretch into the new year.
"There are no beans here and importing it is too expensive - we are in a critical situation at least until March," another Argentina-based broker told Fastmarkets.
A fall in the volume of soybeans on offer in Argentina led to a drop in crush volumes to 1.9 million mt in September - the lowest on record for that month - from 2.1 million mt in August, the country’s oil industry chamber, Ciara-CEC, said in its monthly bulletin Friday.
“The lower crush rates led to a drop in production of soybean oil and soybean meal,” the bulletin said.
Spot soyoil availability for the export market has also been tight in Brazil because operations at several soybean crush plants were suspended for scheduled maintenance work during September and while demand from the domestic biodiesel industry has been robust.
“Biodiesel demand is good and supply is not increasing,” the lead analyst at Brazilian brokerage and consultancy Agrinvest, Eduardo Vanin, told Agricensus.
According to Vanin, aggressive bids from the domestic industry are removing volumes from the export market and adding further support to the FOB basis in Brazil.
The expectation of an increase in biofuel mandates is also supporting the soyoil basis in Brazil, Anilkumar Bagani, head of research at Mumbai-based vegetable oil broker Sunvin Group, said.
Fastmarkets assessed front-month soyoil premiums at discounts of 8.25 c/lb in Argentina and 8.65 c/lb in Brazil Friday, both to December CME futures.
This is 4.5-5.0 c/lb above the level two weeks ago and represents an increase of about 14 c/bu from early-September levels.
South American soyoil has been trading consistently at large discounts to CME futures since August 2022 despite the massive crop loss in Argentina that has severely curtailed activity in the country’s crush industry in the current marketing year.
Besides trading at large discounts to CME futures, outright soyoil prices in South America have been more stable, with the recent tight availability contributing to support the local basis and leaving flat prices broadly unchanged since September despite the steep backdrop in futures.
