­­­Argentine soyoil basis hits record low as CBOT surges pass 71 ct/lb

3 Jun 2021 | Rei Geyssens

Poor demand for physical soyoil from the world's biggest exporter has driven a wedge between Argentina's Up River market and the underlying Chicago soyoil futures contract, which reported a surge in value as US stock levels tightened, Agricensus data shows.

Basis premiums for physical soyoil in the Argentina Up River hub have widened to a record low as tight US stocks support values on the exchange while a lack of buying appetite from India and China have pressured physical premiums.

July shipments of soyoil were valued at a 10.30 ct/lb discount to the CBOT futures for July delivery, double the minus 5 ct/lb quoted last week and compared to a 1 ct/lb premium over CBOT assessed this time last year.

“I believe this is the lowest level for Argentine basis ever,” an Argentine broker told Agricensus, while another trading source added: “I haven't seen them this low.” 

The value of Argentine soybean oil has diverged further away from CBOT soyoil futures over the past weeks as oil exports have not been able to find homes, forcing Argentine crushers to discount their offers versus the soaring CBOT futures.

“Argentine basis premiums have been weakening because destinations, such as India and China, are not paying these flat prices,” the broker added.

Explosive CBOT

At the same time, CBOT futures have surged past the 70 ct/lb level for just the fourth time in history and were set to reach a fresh all-time high during intraday trade on Thursday.

The front CBOT soyoil future traded at 71.34 ct/lb ($1,574.77/mt), up 68% since the start of the year, while spot shipments of Argentine soyoil were valued at $1,347.25/mt FOB Up River, up 28% over the same period.

“CBOT is at historic highs and sunoil is going down and palm is also still competitive,” the second trading source said, adding that Argentine soyoil basis towards CBOT needs to adjust lower to remain competitive on the global markets.

The surge on CBOT soyoil futures was fuelled by a cocktail of heated crude oil markets, tightening US soyoil stocks amid a slow down in the crush, and high vegoil demand from the US biodiesel industry.

Meanwhile, US soybean meal demand has been weak, forcing soyoil futures higher to make crush margins work.

“The meal cash market has been weak in the US and hasn't been showing signs of recovery now with the cyberattack to JBS too,” a US-based broker told Agricensus, referencing an attack on one of the world's biggest meat producers.

“Nobody will crush beans just to get the oil. So demand for meal being weak and demand for oil being high that will cause oil to rally every day,” the source said.