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Latin American soybean oil prices fall 9% from record highs

By on May 24, 2022 0
Strong points

Lack of new demand pressures markets in Argentina and Brazil

Increased Soybean Grind Supply, Reduced Biodiesel Mandate

South American soybean oil prices have fallen nearly 9% since the April 28 record as sluggish demand from destinations and increased supply from Argentina and Brazil have had a impact on market sentiment.

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Argentine FOB Up River and Brazilian FOB Paranagua firm prices for the first month were valued at $1,745.40/mt on May 23, down 8.6% and 8.3%, respectively, from record highs reached on April 28, according to Platts’ assessments of S&P Global Commodity Insights. .

The drop in prices was partly due to a lack of new demand from key importers such as China and India.

Chinese demand waned as coronavirus-related lockdowns in recent weeks impacted buying appetite while India, the world’s biggest buyer of edible oils, looked well covered for needs nearby as domestic supply increased, mainly due to rapeseed oil production, market sources told S&P. Global.

In addition, importers in general have taken a more conservative stance due to continued uncertainties regarding palm oil supplies from Indonesia, the world’s largest producer and exporter of the raw material.

On May 23, Indonesia lifted an export ban in late April on palm oil and some by-products, but maintained a 10 million tonne domestic market requirement for cooking oil, even if there were any doubts about the issuance of export licenses.

The Platts FOB Up River base level was priced on May 23 at minus 130 points from the Chicago Board of Trade’s July (N) contract, down 130 points from April 28, when prices in Argentina and Brazil hit all-time highs above $1,900/mt, S&P Global data showed. During the same period, the FOB Paranagua base also fell from 100 points to minus 130 points compared to the CBOT N.

CBOT futures, meanwhile, fell about 7% between April 28 and May 23.

Growing supply

Increased soybean crushing in Argentina and Brazil, followed by higher production of soybean oil and meal, has also put pressure on premiums and local FOB prices, sources told Reuters. S&P Global.

“The soybean harvest in Argentina is progressing well, increasing the supply of soybeans to processors and crushing capacity utilization there has also recovered,” said Anil Kumar Bagani, head of raw materials research at the broker Sunvin Group.

Argentina, the world’s largest exporter of soybean oil and meal, ground 3.92 million tonnes of soybeans in April, up 34% on the month, according to the latest data from the Ministry of Agriculture. As a result, local soybean oil production jumped 35.5% over the same period to 781,122 tonnes.

In Brazil, there is greater availability of soybean oil following this year’s recent harvest amid positive crushing margins and lower needs from the biodiesel industry, which uses it as a primary feedstock. .

Brazil’s biodiesel blend in diesel was to be 13% in January-February and 14% from March, but at the end of 2021 the government set a 10% mandate for the whole year amid fears of higher inflation rates, disappointing the country’s biodiesel sector. Consequently, higher volumes of soybean oil became available for potential exports.

Brazil’s oilseed crushers’ association, or Abiove, predicts the country will export 1.80 million tonnes of soybean oil in 2022, up 9% on the year and the highest volume since 2008.