Brazilian soybean oil export values firm further

Soybean oil export values in the Brazilian market have strengthened to nearly two-year highs amid a combination of supportive factors, from improving destination demand to concerns over crop losses from floods in the southern state of Rio Grande do Sul.

Platts assessed the soybean oil FOB Paranaguá basis for June dates at minus 300 points to the Chicago Board of Trade July (N) contract, the highest for a front-month loading since July 27, 2022, when marked at minus 280 points.

Brazilian cash basis levels have been increasing since they hit an all-time low August 2023, with gains accelerating over the past week.

According to market sources, China bought 3-4 cargoes of South American soybean oil recently, with shipments for July and August. Such renewed demand contributed to support local port differentials.

Apart from that, concerns mount over the soybean crop and crushing operations and logistics in Rio Grande do Sul as heavy rains, with subsequent floods, have been disrupting flows from the state, a key one in terms of soybean production and processing.

It is "reasonable" to estimate a potential damage of 2 million-3 million mt of soybeans in Rio Grande do Sul, according to analysts from S&P Global Commodity Insights.

"The weather forecasts more rain over the next seven days, particularly May 12-15, which could further delay recovery efforts and inflict additional harm on the soybean crops," Commodity Insights analysts said.

In the meantime, declines in Chicago Board of Trade futures have also been sending certain support to FOB Paranaguá basis levels as drops in international price references usually force traders to adjust export values higher. So far in 2024, CBOT references have decreased 11.5%.

Commodity Insights forecasts that Brazil will export 1.70 million mt of soybean oil in the current 2023-24 marketing year (January-December), from more than 2.30 million mt in MY 2022-23, amid a higher biodiesel mandate that has been draining more of the edible oil production toward the domestic market.