Thin demand keeps Latam soybean oil at more than two-year lows

Cash prices for South American FOB soybean oil cargoes have been hovering at more than two-year lows, with overseas demand still not picking up as competing edible oils have been posting an attractive discount, market sources told S&P Global Commodity Insights.

On May 24, Platts assessed the Argentinian FOB Up River and the Brazilian FOB Paranaguá prices for July dates at $881.85/mt, nearing lows not seen since October 2020 for a front-month loading. Both price assessments have dropped by more $1,000/mt since historical highs reached in April 2022.

"Soybean oil is unable to attract much fresh buying as Black Sea sunflower oil prices are at a considerable discount and have a strong supply – Russia – at the moment," said Anilkumar Bagani,

commodity research head at edible oil brokerage Sunvin Group.

Indeed, FOB Black Sea sunflower outright prices on May 24 were at a $150/mt discount to the South American FOB soybean oil values, Platts data showed. The product from Argentina and Brazil was also around $50/mt more expensive compared with FOB Indonesia crude palm oil supplies.

"China and India vegetable oil inventories have eased a bit, but the Russian, European and UAE origin rapeseed oil is cheaper and so does the Black Sea sunflower oil," Bagani commented. "Rapeseed oil imports by China are surging from these origins, while India is now flooded with sunflower oil arrivals."

In this context, cash basis levels for South American FOB soybean oil have still been at an expressive discount to Chicago Board of Trade futures, even with reference future contracts recently dropping to two-year lows.

The FOB Up River and FOB Paranaguá basis for July loading was assessed May 24 at minus 800 points to the CBOT July (N) contract. At this time a year ago, both were at near flat to CBOT futures, Platts data showed.

In this scenario of increasing Russian supply, not even severe crop losses in Argentina, which is usually the world's largest soybean oil exporter, have been enough to stop the international downward price movement in the vegetable oils' chain.

The Buenos Aires Grain Exchange pegs Argentinian soybean output at 21 million mt, down from nearly 50 million mt expected in the begging of the 2023-24 crop year (April-March).

In Brazil, 2023 soybean oil exports are likely to drop to 2.15 million mt, from 2.59 million mt in 2022, showed the latest data from the Oilseeds Crushers Association, Abiove. That occurs even amid a record harvest of 155 million mt and a record of 53 million mt in crushing.