Brazil soybean meal export market higher ahead of EU sustainability rule

Destination demand for Brazilian soybean meal has showed some improvement over the past few days after spot prices dropped to near 4-year lows while traders eye new sustainable regulations to be implemented by the European Union in December.

Cash prices for Brazilian soybean meal have been strengthening, with Platts assessing FOB Paranaguá value Aug. 22 at $367.29/mt. That comes after the assessment was as low as $349.43/mt on Aug. 12, the lowest for a front-month loading since Aug. 27, 2020, with the market pressured by losses in Chicago Board of Trade futures. Spot port differentials have been climbing as well, as the FOB Paranaguá basis was assessed at plus $31/st to the CBOT. Platts is part of S&P Global Commodity Insights.

Market participants linked the most recent upward price movement to greater export interest, especially to Europe, and slow domestic farmer sales. EU buyers were said to be more active amid a favorable foreign exchange rate and in anticipation of the block's Regulation on Deforestation Free Products, or EUDR, which goes into effect Dec. 30.

"It is expected that [foreign buyers] will take whatever they can," a market participant said Aug. 22.

Another source added that shipping lineups have been "strong" and premiums for exports are firm, citing EU demand.

Brazil is the world's third-largest producer of soybean meal and the No. 2 exporter. For the current 2023-24 marketing year (January-December), Commodity Insights forecasts output of 41.50 million, with overseas shipments of 21.20 million mt. Indonesia and Thailand were the main importers of Brazilian soybean meal in 2023, followed by Poland, the Netherlands, Germany, France and Spain.

Brazil's August soybean meal exports are likely to reach 2.39 million mt, up 21.4% year on year, the country's ANEC grains exporters association has predicted, based on shipment schedules. If accurate, the accumulated for January-August would mark 15.46 million mt, up 4% from the year-ago period.

EU feed associations, meanwhile, concerned about what they say is a lack of clarity regarding the EUDR, have urged the European Commission and EU member states to provide clarifications, solutions and guidance on the regulation. FEDIOL, COCERAL and FEFAC, representing the EU vegetable oils and protein meal, the oilseeds and vegetable oils, and the compound feed and premix industries, respectively, have warned that any delays in the preparation of the EUDR by the EC and EU member states will increase the risk of supply chain disruptions to the bloc.

When the regulation is implemented, EU-based importers would be required to produce verifiable information, such as geolocation data, to show that commodities such as cocoa, coffee, palm oil, soybean and rubber were not grown on land deforested after 2020 and were grown in accordance with local laws. Penalties for non-compliance may include up to 4% of company turnover within the EU, temporary exclusion from public procurement/access to public funding and confiscation of goods.

According to research by the World Bank, the EUDR impact on exports of low- and middle-income countries would be significant, with up to 22% of Latin America's exports to the EU, representing 2.3% of its total exports, could be affected.