The deal had been under negotiation for 25 years, and the announcement that a final agreement had been reached was made by European Commission president Ursula von der Leyen and by the presidents of Brazil, Luiz Inácio Lula da Silva, Argentina, Javier Milei, Uruguay, Luis Lacalle Pou, and Paraguay, Santiago Peña, during a Mercosur meeting in Montevideo.

Venezuela has been suspended from the bloc since 2016, and Bolivia is in the process of adhesion, so neither country is included in the agreement.

Most market participants heard by Fastmarkets believe the near-term effect of the agreement for South America’s agriculture and biofuel feedstock exports to Europe will be limited.

“I have not gone through the details of the agreement yet, but in principle I do not believe there will be a great increase in Brazil’s agriculture exports to Europe taking into account the resistance of Europeans to Brazilian products,” Daniele Siqueira, analyst at Brazilian consultancy Agrural, told Fastmarkets.

Siqueira said Brazil has serious problems with its global image, particularly in the environmental sphere, and added that the lack of competitiveness of European agriculture tends to push the region toward protectionist measures.

Several Argentinian sources, including analysts and brokers, said the final text of the agreement needs to be analyzed in detail but that it is still early to evaluate potential impacts and when those should be expected to kick in.

Independent analyst Javier Preciado Patiño said he is skeptical about the benefits the agreement could bring to Argentine agricultural exports, both because Europe is not the main market for most of Argentina’s products and because Europe could still use other protectionist means to block imports from South America.

Near-term impacts expected to be limited

Even considering the potential benefits the agreement can bring to Mercosur’s agricultural exports, near-term impacts are expected to be limited.

“The [agreement’s] timetable is divided into four stages unfolding in 10-years’ time. Vegoils will be included in year 7 and biodiesel in year 10, so there are no immediate impacts [in those markets],” Argentina’s oil industry chamber CIARA-CEC president Gustavo Idigoras told Fastmarkets.

The exceptions, according to Idigoras, are the soybean meal and corn markets. Soybean meal could see a zero import tariff implemented, and Mercosur will have a corn import quota of 1 million tonnes per year.

In 2023, the EU imported 3.8 million tonnes of corn from Brazil and just over 230,000 tonnes from Argentina.

The Brazilian Association of Vegetable Oil Industries (ABIOVE) said in a statement that the agreement promotes new opportunities for the domestic agroindustry and highlighted the importance of “rapid ratification” by the countries involved, so that the agreed trade preferences “can come into force as soon as possible, generating concrete benefits for production chains and expanding commercial relations between the blocs.”

Market participants in Argentina and Brazil, the main exporters of soybean meal, were still skeptical about the implementation and were waiting to see how importers would react.

Animal feed products, such as soybean meal, are already one of the main items exported by Mercosur to the EU.

Brazil and Argentina are the EU’s two main sources of soybean meal imports, having shipped a combined 13.3 million tonnes to the bloc in 2023 – 60% of EU’s total imports.

“The [Brazilian] market has not yet shown any reaction. The spot market is completely empty,” one market source in Brazil said, adding that for 2025 negotiations sellers are waiting for an increase in prices.

“There are still some bureaucratic steps left for [the free-trade deal] to be operational,” an Argentine broker said.

Brazil’s grain exporters association Anec told Fastmarkets that the trade agreement is “good news for the international export segment in general,” but for agricultural products Brazil will probably experience “more demands in the environmental area.”

In its Agriculture Fact Sheet about the agreement, the European Commission stressed that from the end of 2025, only deforestation-free products will be allowed to enter the EU market.

“This rule will also apply to imports under the EU-Mercosur partnership agreement, ensuring that products imported under this deal have not contributed to deforestation in Mercosur countries,” the Commission said.

The 1-million-tonne quota for corn and sorghum exports will mean zero tariffs once it comes into effect, but market participants are skeptical about big impacts on corn trade for Brazil and Argentina, the main producers and exporters of Mercosur.

“It’s unlikely that there will be an increase in European purchases from Brazil in the short term,” Daniele Siqueira told Fastmarkets.

In the case of Brazil, corn also has the aggravating factor of the country being less competitive in the international market.

“This year we’ve seen the EU increasing its purchases in the US, which is unusual, and reducing its purchases from Brazil. Given the increase in the domestic demand, Brazil will have to produce much more corn in the 2024/25 crop if the country wants to increase corn exports, whether to the EU or to other destinations,” Siqueira added.

Brazil’s food agency Conab pegged the country’s corn crop output at 119.8 million tonnes, up by 3.6% year on year. Meanwhile, exports are forecast at 36 million tonnes.

Domestic demand is forecast at 87 million tonnes in 2024, compared with last year’s 84.2 million tonnes.

The perception is the same in Argentina. “I really don’t think there will be a significant impact for corn. In Argentina, the focus is to start exporting to China,” Javier Preciado Patiño told Fastmarkets.

“We also have to look at the details of the agreement and see how the Europeans’ passion for imposing para-tariff rules, such as free deforestation, may play out,” the analyst said.

Animal protein

The EU-Mercosur agreement establishes a new quota for chicken meat exports of 180,000 carcass-equivalent tonnes, with zero tariffs for shipments to the EU.

This quota will be shared among Mercosur member countries over six years. After this period, the annual quota will be 180,000 tonnes.

The agreement also establishes a quota for pork of 25,000 tonnes, following the same gradual system as chicken meat over six years, with a tariff of €83 per tonne.

The agreement allows 99,000 tonnes of Mercosur beef to enter the EU market with a 7.5% tax. 55% of the quota consists of fresh or chilled meat and 45% of lower-value frozen meat.

The Mercosur agreement quota represents about 0.7% of Mercosur production, a tiny fraction of the region’s exports, according to European Commission data.

The Brazilian Animal Protein Association (ABPA) said the agreement opens up new opportunities for shipments to the European market under more favorable conditions than the existing quotas for Brazilian exports to the EU.

“The current quotas will remain in place, and the new ones established by the agreement are expected to be filled, particularly by Brazilian exports,” ABPA president Ricardo Santin said in a statement sent to Fastmarkets.

Insper Agro Global professor and coordinator Marcos Jank said the agreement is relevant for Brazil to access a very qualified market, but not in terms of volumes, since Europe represents only 15% of all Brazilian exports.

As for French farmers’ resistance to the deal, Jank said that although it includes preferential quotas for beef from Mercosur, the volumes would represent only 1.5% of the European consumer market. “Combined with other restrictions and high subsidies after ratification, it invalidates the argument of a potential ‘market flooding’ from South American meat.”

The agreement could also facilitate shipments of some Argentine agri-food products to the EU, although details of the deal should be carefully analyzed first, Javier Preciado Patiño told Fastmarkets.

“At first glance, it seems like good news for Argentine beef. However, the Argentine agri-food sector would need significant gains in competitiveness to match Brazil’s, which is better positioned,” Patiño added.

The Brazilian Agribusiness Association (ABAG) said in a statement that Brazil will contribute to meet the EU’s need for partnerships with “decarbonized and sustainable” production chains, essential to achieving emissions reduction targets.

“We will have new common agendas in the areas of new fuels and industrial process technologies, cooperating more than competing,” ABAG vice-president Ingo Plöger said in the statement.

The approval of the agreement, however, generated criticism across Europe, from biofuel producers and farmers to environmental agencies.

The post EU-Mercosur free-trade deal agreed but effects on agricultural goods uncertain appeared first on Fastmarkets.

Crush Margin Argentina Soy: November 13, 2024

M1 $11.75 per tonne
M2 $15.25 per tonne
M3 $11.75 per tonne
M4 $7.25 per tonne
M5 $9.00 per tonne
M6 $15.00 per tonne

These have been replaced by:
M1 $10.50 per tonne
M2 $13.75 per tonne
M3 $11.00 per tonne
M4 $6.75 per tonne
M5 $8.00 per tonne
M6 $13.00 per tonne

Fastmarkets’ pricing database has been updated to reflect this change.

This price is part of the Fastmarkets Ags Grains and Feedstocks Prices packages.

For more information or to provide feedback on this correction notice or if you would like to provide price information by becoming a data submitter to Crush Margin Argentina Soy, please contact Eduardo Tinti by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Eduardo Tinti, re: Crush Margin Argentina Soy.“

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets pricing methodology and specification documents, go to https://www.fastmarkets.com/methodology.

The post Correction to Crush Margin Argentina Soy on November 13, 2024 appeared first on Fastmarkets.

Fastmarkets last assessed soybean oil premiums in Up River ports in Argentina for December loading at 4.75 cents per pound, versus a premium of 4 cents per pound in the US Gulf.

“There is no farmer selling; farmers are holding their beans, waiting for a devaluation or any [beneficial] tax changes,” an Argentine broker said.

Argentine farmers sold 59% of their 2023-24 soybean crop and 2% of the expected 2024-25 crop up to the second week of October according to data from the country’s agriculture, livestock and fishing secretariat SAGyP.

This compares with old and new crop sales of 70% and 7% respectively in the previous five-year average.

Another factor possibly related to the surge in Argentine soybean oil premiums is the covering of short positions at ports related to export commitments to Asia.

“I think [rising Argentine premiums are related to] the short covering of what India and Nepal bought after the duty hike,” Mukesh Goyal, director at the Indian brokerage Oyal Makler, told Fastmarkets.

On September 13, India’s government raised import duties on crude palm oil, crude soybean oil and crude sunflower oil to 27.50% from 5.50%, while refined palm oils, soybean oil and sunflower oil import taxes were raised to 35.75% from 13.75%.

The steep increase in premiums, which have been on a consistent uptrend since July, came despite higher-than-expected crush volumes in Argentina in September, which should have contributed to easing a tight supply and demand balance.

Argentina crushed 4.11 million tonnes of beans in September, the highest volume on record for the month and above trade expectations.

That said, the global outlook remains somewhat supportive of veg oils prices, with lower production of rapeseed oil in Europe and sunflower oil in the Black Sea and Indonesia’s reaffirmed intention to raise its mandatory blending of palm-based biodiesel into diesel to a mixture of 50% supporting prices across complex.

This has been contributing to keep firm export prices in Argentina, Brazilian brokerage Agrinvest said in a daily comment.

Anilkumar Bagani, head of research at Mumbai-based veg oils broker Sunvin Group, mentioned the supply concerns in Europe, Black Sea and Indonesia, as well as the historically low draft levels in the Paraguayan River as an additional supportive factor for premiums.

“The strong demand for soybean oil for biofuel making at Brazilian local markets, and also the lower month-on-month soybean oil inventories in the US market, have added further support,” Bagani said.

With Argentinian premiums now higher than their US counterparts, market participants suggested US export sales for last week, which should be reported by the USDA on Thursday October 24, might have been “substantial.”

On October 18, the USDA announced under its 24-hour reporting system that 21,000 tonnes of US soybean oil had been sold to Mexico, the largest oil flash sale in the season so far.

Brazil

Brazilian soybean oil premiums have also been on the rise, but steeper gains were seen in Argentine soybean oil premiums.

Fastmarkets heard low activity levels on Monday October 21, with only November offers disclosed.

Brazilian brokers and biodiesel producers told Fastmarkets the soybean oil market had low liquidity domestically this week because prices have risen “a lot and fast,” which kept biodiesel plants on the sidelines, waiting for price opportunities to close deals.

“With this surge in basis in Argentina, premiums should strengthen even further in Brazil, but we have not yet seen this happen,” one biodiesel producer told Fastmarkets.

So far, Brazilian line-up data shows one vessel to sail on Tuesday October 22 and two to sail in the following days, with the remaining cargoes projected for the month having already sailed, mostly bound to India.

Exports of Brazilian vegetable oils and fats – mostly comprised of soybean oil – totaled 92,442 tonnes in the first three weeks of October, approaching the volumes sent abroad in October last year, with average shipped volume per working day at 6,603 tonnes so far this month, up by 36.3% from 4,845 tonnes last October.

View our veg oils and meals prices

The post Argentine soybean oil premiums surge and surpass US bases appeared first on Fastmarkets.

This has been corrected to $410.50 per tonne.

The Soybean FOB US PNW $/mt Oct 2024 M2 was published incorrectly at $410.50 per tonne.

This has been corrected to $410.75 per tonne.

Fastmarkets’ pricing database has been updated to reflect this change.

This price is part of the Ags Grain Prices and Ags Oils, Fats and Biofuels Prices packages.

For more information, or to provide feedback on this correction notice, or if you would like to provide price information by becoming a data submitter to this price, please contact Eduardo Tinti by email at: pricing.ags@fastmarkets.com. Please add the subject heading “FAO: Eduardo Tinti re: Soybean FOB US PNW.”

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets’ pricing methodology and specification documents, go to: https://www.fastmarkets.com/methodology/ 

The post Correction to Soybean FOB PNW $/mt on August 21 appeared first on Fastmarkets.

For more information or to provide feedback on the publication of these assessments, or if you would like to provide price information by becoming a data submitter to these assessments, please contact Eduardo Tinti by email at: pricing.ags@ fastmarkets.com. Please add the subject heading “FAO: Eduardo Tinti, re: Europe and Black Sea agricultural products price assessments.”

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets’ pricing methodology and specification documents, go to: https://www.fastmarkets.com/methodology.

The post Pause in publication of European, Black Sea agricultural products price assessments appeared first on Fastmarkets.

This has been corrected to 160 cents per bushel.

Fastmarkets’ pricing database has been updated to reflect this change.

This price is part of the Ags Grain Prices and Ags Oils, Fats and Biofuels Prices packages.

For more information, or to provide feedback on this correction notice, or if you would like to provide price information by becoming a data submitter to this price, please contact Eduardo Tinti by email at: pricing.ags@fastmarkets.com. Please add the subject heading “FAO: Eduardo Tinti re: Soybean crush margins.”

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets’ pricing methodology and specification documents, go to: https://www.fastmarkets.com/methodology/

The post Correction to soybean crush margins on August 12 appeared first on Fastmarkets.

A surplus of vessels in the Atlantic basin, coupled with somewhat quiet demand in South America, pushed Panamax freight rates lower in the week.

Excess tonnage and lower rates were also noted in Europe and the US.

Falling crude oil prices contributed to the downswing, with WTI and Brent contracts down by 6.0-6.5% over the past week.

Crude price drop partly due to supply cut

The drop in crude prices is partly linked to a decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to gradually reduce the supply cut of 2.2 million barrels per day currently in place, starting to reintroduce those volumes into the market in the fourth quarter.

Capesize rates in the Atlantic were broadly stable on large tonnage availability, but rates picked up in the Pacific basin due to good demand for coal and iron ore shipments.

Demand for Handysize vessels picked up both in the Atlantic and the Pacific, while the container market continued to face headwinds – freight rates were up because diversions from the Red Sea increase voyage times, disrupt shipping schedules and create bottlenecks both in Europe and Asia.

Freight rates for vessels carrying palm oil cargoes from Southeast Asia to key destination markets have inched up marginally from last week, with a steady volume of vessel inquiries for June shipment.

Rates for 18,000-to-20,000-tonne vessels carrying palm oil from Southeast Asia to the west coast of India increased to $48 per tonne from $47 per tonne in the previous week, while freight rates for 10,000-to-12,000-tonne vessels moving palm oil to the east coast of India and Chittagong were $37.50 per tonne, up from $37 per tonne a week earlier.

For shipments to China, freight rates for 12,000-to-15,000-tonne vessels were $37-47 per tonne, up from $36-45 per tonne in the previous week.

Freight rates fall in black sea region

Freight rates in the Black Sea region declined in the week to Wednesday, with less cargoes available for loading amid the end of the marketing year.

The Panamax freight rate out of Russia’s Novorossiysk port to Egypt went down slightly, with current ideas indicated at $16-18 per tonne.

The Handysize freight rate from the Ukrainian Black Sea to the Spanish Mediterranean fell by almost $4 per tonne, with ideas indicated at $19 per tonne for spot loading.

Meanwhile, the Handysize rate from the Constanta port to the same destination declined by around $2 per tonne to $14-15 per tonne.

There were no fresh indications for Asian destinations from the Black Sea region, leaving rates for loading in Ukraine to China nominally around $53-55 per tonne.

In the shallow water market, rates from Ukrainian Danube ports into Marmara were heard steady at $16-17 per tonne for Coaster-sized vessels.

Meanwhile, rates in Azov dropped significantly to $23-25 per tonne from $31-32 per tonne amid a lack of cargoes available because a limited number of trade companies have quotas available, and because of incoming Turkish national holidays.

This report has been updated to include information on freight rates in the Black Sea region in paragraphs 12-18.

The post Dry bulk freight rates drop further on surplus tonnage in Atlantic, with sluggish demand appeared first on Fastmarkets.

The US Department of Agriculture (USDA) expected a similar soybean output at 50 million tonnes, with Argentina to increase its share in global soy meal exports to 34.8% in 2023-2024 from 30.8% in the previous crop year.

Brazil became the largest soy meal exporter in 2022-2023 amid production losses in Argentina, but this year, its share is expected to decrease to 29.4% from 31.7%, returning to second place, while the US market share is anticipated to increase to 20.5% from 19.8%, according to the USDA.

Argentina’s soybean crush industry intended to at least return to historical soybean crush levels of around 36 million tonnes in 2023-2024, leaving behind “one of the worst agricultural campaigns” in its history, Gustavo Idigoras, president of oil industry chamber Ciara-CEC, said in a recent webinar.

“The annual rate we used to have on soybean crush was around 36 million tonnes per year, and we, as an industry, are trying to work on that level for this year,” Idigoras said.

In 2022-2023, after losing 30 million tonnes of soybeans due to a drought, Argentina’s soybean crush levels fell to 27 million tonnes, down by 30% year on year.

Higher soybean crush volumes anticipated

Local analysts expected even higher crush volumes in 2023-2024.

Rosario Grains Exchange (BCR)’s latest estimate was 39.6 million tonnes, considering that soybean supply is higher and demand for Argentina’s soy meal “continues to be strong,” Guido D’Angelo, analyst at BCR, told Fastmarkets.

“We had a campaign last year [that should be] forgotten, so the international market is waiting for Argentina’s return,” D’Angelo said.

Export prices of Argentinian soy meal in Up River ports remained 1.3% higher than their Brazilian counterpart in the Port of Paranaguá for May loading and 0.5% higher for June loading, according to Fastmarkets’ latest assessment.

Argentinian soy meal prices were higher than in Brazil because of harvest delays due to excess rain in Argentina, according to D’Angelo.

Market sources said farmer selling has also been slower in Argentina compared with Brazil, where a recent devaluation of the Real led to increased soybean sales amid strong crushing demand for biodiesel blending.

That said, sources expected Argentinian soy meal prices to become more competitive once local harvest and sales pick up.

“Argentinian soy meal prices should come down versus Brazil,” one Argentina-based source said.

Independent market analyst Javier Preciado Patiño said he is also “more optimistic” than the local industry, estimating soybean crush around 40 million tonnes, but in a more competitive environment for soy meal exports.

“Everything suggests that it will be a complicated campaign, with supply putting downward pressure on prices, so there will be competition among the three origins in the international markets based on industrialization costs and the domestic soybean price,” Patiño told Fastmarkets.

“We are confident that the Rosario crushing hub is extremely competitive and the industry based in Argentina will be able to export without difficulty, despite competition from Brazil and the US,” Patiño said.

Argentina is expected to export 28.0 million tonnes of soy meal, up by 51% from the previous campaign and by 10% from the previous five-year average, according to BCR.

The figure is similar to Ciara-CEC’s estimates of 27-28 million tonnes for Argentinian soy meal exports.

“We will see if we can recover our position as the first [global] supplier, but that will depend a lot on US and Brazilian offers,” Idigoras said.

Soy meal supply to increase

The global oilseed crushing industry is growing due to increased demand for oils in the biofuel sector; Brazil and the US are competing for a larger share in typical import markets for Argentina’s soy meal, such as Vietnam, Indonesia and Malaysia.

One of Argentina’s strategies to differentiate itself from competitors is the Argentinian Gran Chaco Sectoral Vision (VISEC) program to certify that soybeans and soybean products come from areas that have been deforestation-free since December 2020, the cut-off date in new regulation from the European Union – the second-largest global soy meal importer region after Southeast Asia – set to enter into force on December 30, 2024.

The main threat for Argentinian soy meal is that, in Brazil and the US, domestic demand has not been growing as fast as crushing levels, leaving more soy meal to be exported instead, BCR said in a recent report.

Between the 2013-2014 and 2023-2024 campaigns, Brazil and the US increased their soybean meal production by just over 12 million tonnes per marketing campaign, according to BCR.

In Brazil, 50% of this soy meal production increase was destined for export; in the US, it was around 30%.

“With prospects that both countries will continue to increase their blending of biofuels and demand more soybean oil, it is feasible that soybean crush will continue to grow and competition will increase to place surplus soy meal on the international market,” the report said.

Argentina will face tougher soy meal export competition this year already, Scott Gerlt, chief economist for the American Soybean Association, told Fastmarkets.

With domestic soybean crush capacity expanding in the US, Gerlt expected increased exports out of the country.

“While the domestic market can absorb some more meal, much of it will likely be exported. We have seen upgrades to export terminals in the Pacific Northwest to be able to handle the additional meal,” Gerlt said.

But in the short term, US soybean meal stocks have been getting tighter amid seasonal downtime, and Argentina’s soy meal was expected “to undercut” US shipments until Argentinian supplies for export start to slow, Terry Reilly, senior agricultural strategist for Marex, told Fastmarkets.

“US soybean meal exports will not stop as long as crush plants run at high daily rates, but Argentina should become the number one exporter during the remainder of spring and summer months [of the Northern Hemisphere],” Reilly added.

Strong performance from the Brazilian market

In Brazil, soybean crush is expected to hit 54.5 million tonnes in 2023-2024, up year on year from 54.2 million tonnes, but soy meal exports are expected to decrease to 21.6 million tonnes from 22.5 million tonnes in the previous crop year, according to the Brazilian Association of Vegetable Oil Industries (Abiove).

“The decrease is mainly due to increased competition with Argentina, which is expected to grow its share of soy meal exports compared with the previous year,” Daniel Furlan Amaral, director of economics and regulatory affairs at Abiove, told Fastmarkets.

Nonetheless, Brazil started the year at a strong export pace, having shipped 5.4 million tonnes of soy meal abroad in the first quarter, up by 15% year on year from 4.7 million tonnes, and the country is diversifying its export destinations.

“The Middle East is a destination that has been growing significantly in purchasing Brazilian soy meal,” Amaral said.

Shipments to Middle Eastern countries increased by 138% year on year in January-March, although Southeast Asia and the EU remained the main importers for Brazilian soy meal.

A strong dip in Brazil’s soy meal shipments is unlikely, considering that foreign consumption is expected to grow, Francisco Queiroz, analyst at Itaú BBA’s Agribusiness Consulting, told Fastmarkets.

“The outlook is for global meal production to increase, and the growth in soy meal supply should keep prices very competitive on the international market, favoring increased demand,” Queiroz added.

Global soy meal production is expected to grow mainly because of a strong economic outlook for Southeast Asia – the largest soy meal importer region – with rising meat production and consumption leading to higher soy meal imports, BCR’s Guido D’Angelo said.

The USDA forecast global soy meal imports at 67.41 million tonnes in 2023-2024, up by 7.1% year on year, with Southeast Asian countries expected to show a 6.2% increase in imports.

The post Argentina expected to regain first place in soy meal exports despite fierce competition appeared first on Fastmarkets.

Local demand for biodiesel is leading internal buyers in Brazil to outbid the export market for soybean oil, which represented 69% of the Brazilian biodiesel feedstock in 2023.

“The demand for biodiesel is strong, and the internal market is paying well above [export parity levels],” Eduardo Vanin, lead analyst at Agrinvest, told Fastmarkets.

“Fuel distributors have to secure at least 80% of the biofuel mandate for the May-June window,” the analyst added in an Agrinvest report.

Brazil raised its mandatory biodiesel blending mandate in the diesel mixture from 12% (B12) to 14% (B14) in March.

Also, a bill that draws a horizon for biodiesel mandates in the following years – starting from 15% in 2025 and rising by 1 percentage point per year until reaching 20% in 2030 – was approved in Brazil’s Chamber of Deputies in March and sent to the Senate for appreciation.

On Wednesday, a Brazilian soybean oil cargo of 20,000 tonnes traded at a 6 cent per lb discount to underlying futures out of the Rio Grande port.

No incentive to originate soybean oil from Brazil

But this deal is understood to have been a contract-based obligation, since there is little incentive both from buyers and sellers to originate soybean oil from Brazil at the moment, market sources said.

Brazilian Paranaguá export premiums for May loading were assessed at a discount of 6 cents per lb to the Chicago Mercantile Exchange (CME)’s May futures on Thursday April 4.

This is considerably higher than indications from Argentina, where assessments for the same laycan were at discounts of 6.9 cents per lb on Thursday and 7.65 cents per lb on Wednesday April 3, all under May CME futures.

Thus, the current outlook makes Brazilian soybean oil exports unattractive both for buyers, who have a cheaper option in Argentina, and sellers, who can sell at better prices domestically.

The option to ship out of Rio Grande is also related to poor logistics at Paranaguá.

“There is very little space [in Paranaguá] being allocated for soybean oil [with capacity being placed] in favor of oils/fats that require heating, like palm and tallow, or diesel and methanol,” a Brazilian market source said.

Most deals done lately in the Paranaguá paper market – a physically settled financial instrument through which exporters can hedge origination costs – have been to close open short positions and sell domestically instead, sources said.

“There will be a lot of paper trading [in Brazil], but there will not be much shipping,” Vanin said, adding that most exports, expected at a minimum of between 1 million-1.2 million tonnes this year, will likely be concentrated in the second half of the year.

Global soybean oil trade

With Argentina’s harvest starting, the country – which is traditionally the largest global exporter – is set to dominate global soybean oil exports through the coming months.

The South American country is expected to recover from a massive soybean crop loss that hampered its crush activity in the previous season and opened up opportunities for Brazil – the second largest exporter – to increase its market share.

This year, a smaller crop in Brazil coupled with more domestic demand for oil is expected to curtail the country’s soybean oil exports, with Brazil’s vegetable oils association (ABIOVE) projecting yearly shipments at 887,000 tonnes lower than in 2023.

That said, if current crop estimates prove correct, Argentina will be well positioned not only to fill in this gap but also to push South America’s export share higher on the year.

The post Brazilian crushers buy back soybean oil export positions to sell domestically appeared first on Fastmarkets.

“The domestic industry is bidding higher than the export market for January due to higher end-of-year demand and lower crush,” Eduardo Vanin, lead analyst at the Brazilian consulting and brokerage Agrinvest, said.

On Tuesday, soybean oil batches for January loading traded at discounts to underlying CME futures of 9.50 US cents per pound in Argentina and 8.50 and 8.00 US cents per pound in Brazil, a difference that equates to $22-33 per tonne on an outright price basis.

Soybean oil price spread

Soybean oil basis premiums in Brazil and Argentina remained broadly at parity since the start of the calendar year with Brazil slightly more competitive on occasions as a result of the massive soybean crop loss in Argentina that jeopardized the country’s crush activity.

This trend reversed in December, and some sources believe the decoupling – with Brazilian soybean oil significantly more expensive than its Argentine peer – could last up to March.

Other market participants, however, doubt such large spreads can linger for too long as price arbitrage is expected to kick in.

A Brazilian-based broker agreed that high domestic demand for soybean oil to produce biodiesel is behind the gap between Argentinian and Brazilian soybean oil prices.

They added that the delays in soybean planting in Brazil, with the risk of soybeans becoming available for processing later than initially expected, may also be providing support to Brazilian soybean oil prices, even though the country is still set to harvest a “big” crop.

The duration of this gap will depend basically on biodiesel demand in Brazil, one Argentina-based trader told Agricensus.

“Soybean oil demand in Argentina has been pretty much quiet as there is not much soybean oil around”, the trader said.

Robust downstream demand in the biodiesel sector

The biodiesel sector in Brazil is finding support from robust downstream demand as field works related to first crop planting bolster the consumption of diesel in trucks and planting machines.

Biodiesel prices rose 3.3% in the week ended on December 3 to BRL4.61 per liter as per the country’s average calculated by the Brazilian National Agency for Petroleum, Natural Gas and Biofuels (ANP) and were 8.6% above the same period last month.

Brazil’s preliminary export data for December published Monday, which accounts for the first six working days of the month, suggests that the country’s soybean oil exports have indeed lost some momentum.

The country shipped 41,359 tonnes of vegetable fats and oils, mostly composed of soybean oil, at a 6,893 tonnes daily average which is 46% lower than at the same point last year.

Brazil and Argentina are the world’s top soybean oil exporters, accounting for about 60% of global exports in 2022.

View our soybean oil prices and our analysis of soybean oil cost and biofuel profit margins

The post Brazil’s soybean oil premiums firm on domestic biodiesel demand appeared first on Fastmarkets.