Latam soybean oil prices skyrocket above historical $1,900/mt

Soybean oil prices in South America surged to historical highs, above the $1,900/mt mark for the first time amid tight supply of edible oils, while market participants expect further increases.

FOB prices in Argentina and Brazil have been on a rising trend since late February, when the Russia's invasion of Ukraine disrupted the sunflower oil supplies from the Black Sea and pushed global edible oil prices sharply up amid already tight stocks.

The latest push on this upward movement came from Indonesia as the Asian nation, the world's largest producer and exporter of palm oil, banned April 28 the shipments of crude and refined palm oil products to curb rising domestic cooking oil prices.

The Argentinian FOB Up River soybean oil outright price was assessed April 28 at $1,909.20/mt for June loading, 57.3% higher on the year and a record level, according to historical data from S&P Global Commodity Insights.

Similar oscillation also seen in the Brazilian FOB Paranagua price, which was assessed April 28 at $1,902.59/mt for June loading, 56.7% up on the year and an all-time high.

Such gains follow soaring international price references from the Chicago Board of Trade, with nearby futures hovering historical 90 cents/lb after Indonesia's announcement on palm oil exports.

"Soybean oil is the only oil with relatively larger availability footprints after palm oil, especially in the absence of Black Sea sunflower oil supply due to the [Russia-Ukraine] war," Anilkumar Bagani, commodity research head at edible oil brokerage Sunvin Group, said April 22.

According to him, the current scenario of disruptions in competing regions is supportive for South American soybean oil port differentials.

The FOB Up River basis level for June shipment was assessed April 28 at parity to the CBOT July (N) contract, while the FOB Paranagua for the same month at minus 30 points. Both were at minus 610 points by the same time in 2021.

Further gains

After reaching historical highs, South American soybean oil prices might still have room for further increases given tight world vegetable oil stocks, market sources told S&P Global.

"I thought that with the war in Ukraine we had already reached a price ceiling," an Argentinian participants said, adding that the Indonesia's ban on palm oil exports sent further support for South American soybean oil prices.

A potential larger soybean crop in the US this year might contribute to cool this upward trend on global prices, but not at the point of pre-war levels, according to sources. "And [world's] demand should not cool," a Brazilian participant said.

The US Department of Agriculture expects the 2021-22 global vegetable oil ending stocks to reach the lowest volume since 2017-18, but analysts do not rule out even lower inventories due to restrictions on Black Sea's sunflower oil and Indonesia's palm oil to reach the market.

Argentina, the world's largest exporter of soybean oil, is expected to produce 7.90 million mt in the current season, the USDA predicts. Brazil's production, in turn, is projected at 9.09 million mt, as per USDA data.