Soybean oil FOB outright prices in South America have been at historical highs, more than doubling over year-ago levels, with the market supported by rising futures at the Chicago Board of Trade and, recently, signs of fresh Asian demand.
Argentina's FOB Up River soybean oil for June loading was assessed $1,364.22/mt May 13, up 140.7% on an annual comparison, according to S&P Global Platts. Brazil's FOB Paranagua for June loading had a similar increase in the period, reaching $1,366.43/mt May 13, or 138.3% higher compared with a year earlier.
That follows an increase in CBOT's soybean oil futures, with the most-active contract, for July (N) delivery, climbing by more than 60% this year through May 13, reaching levels above 66 cents/lb, nearly decade highs. Commodity's global benchmarks have been supported by a combination of firm domestic US values, rising prices across the soybean complex and a tight global stocks scenario, according to analysts.
In its latest World Agricultural Supply and Demand Estimates report, the US Department of Agriculture pegged the world's 2021-22 soybean oil ending stocks at 4.09 million mt, down from 4.46 million mt in 2020-21. Output in 2021-22 was seen at 62.25 million mt, up from 60.49 million mt in the prior cycle.
Basis' recovery
High CBOT soybean oil futures have been contributing to pressure FOB basis down in Argentina and Brazil. The FOB Up River and FOB Paranagua basis reached lows earlier in May but have already partially recovered on signs of demand from key destinations, especially China and India.
On May 13, the Argentinian FOB Up River basis for June loading was assessed at minus 390 points to the July (N) futures at CBOT, still down 370 points year on year, but far higher compared with a minus 820 points low seen May 4, according to S&P Global Platts.
Brazil's FOB Paranagua basis for June loading was reported at minus 380 points to the July (N) futures May 13, compared with plus 10 points a year earlier and a minus 700 points low May 3-4.
Low Parana River level
Not even the recent Parana River's falling level at the Argentinian export hub of Rosario, which could reduce the country's soybean oil attractiveness in the international market, seemed to be pressuring FOB basis. So far, no major impact had been reported in the region when it came to export operations, although some vessels had already been required to reduce loading volumes because of navigation conditions on that key waterway.
Argentina is the world's top exporter of soybean oil, with overseas shipments pegged at 6.25 million mt in the current 2020-21 season and 6.40 million mt in 2021-22, according to the USDA. Brazil is poised to export 1.30 million mt in 2021-22, up from 1.28 million mt in 2020-21.
China and India are the main importers, with international purchases expected to respectively increase by 7.27% and 0.81% in 2021-22 to 1.18 million mt and 3.73 million mt, according to the latest USDA WASDE report. Currently, China has been facing its lowest soybean oil stocks on record.
