Latam soyoil basis strengthens on China, India demand

11 May 2021 | Liliana Minton

Soyoil discounts to CBOT futures for Argentine and Brazilian soyoil have narrowed sharply this week on robust Indian and Chinese demand, while last week’s surge on CBOT indicated that demand for Latin American oil exports may be stronger than previously expected.

Argentine soyoil indications for June shipment were last valued at 3.40 ct/lb under the July CBOT contract, equivalent to $1,328.25/mt FOB Up River. They have held above $1,300/mt for the past two days.

That basis discount is stronger by 4.80 ct/lb ($106/mt) over the past week and resulted in a weekly jump of $112.50/mt in the flat price from when it was last assessed. The underlying CBOT futures touched their highest in nearly 13 years at the end of last week.

“Basis at Argentina rose sharply this week on soyoil shipment pricing from key destinations: India, China, Iran and Egypt,” Anilkumar Bagani, research head at Mumbai-based vegetable oil broker Sunvin Group, told Agricensus.

“A stronger recovery on CBOT forward futures contracts has indicated that demand for Argentina soyoil will be more during US new soybean crop season than previously thought,” Bagani added.

This dynamic is likely to support soyoil premiums in Latin America while global demand for vegoils remains high and supply remains tight.

“Premiums will remain firm because of strong demand,” an Argentine trade source said.

Latam soyoil exports surging

Import demand from India and China - the world’s largest consumers of vegoils - has been robust this year. Soyoil arrivals in the first quarter of this year rose by 7% to 879,000 mt and by 43% respectively to 224,000 mt respectively, the latest GTT trade data shows.

“Chinese soybean imports through the first four months of the year are 17% higher than last year - and this is with poor crushing margins – while edible vegetable oil imports are up a whopping 47.4% year on year,” Charlie Sernatinger of ED&F Man said in a note to his clients.

Strong global soyoil demand is reflected in a surge in Argentine exports this year, with 1.61 million mt exported in previous quarter, up by a sharp 70% on the same quarter of last year.

Looking forward, the Argentinean line-up for May has just over 600,000 mt of soyoil shipments scheduled for the month, of which around 306,000 mt is heading to China and 91,000 mt is destined for India.

Brazil premium moving in tandem

The rise in Argentinean soyoil premiums has spilled over to the Brazilian market, moving the basis discount for June cargoes up to 3.00 ct/lb to July, or $1,337/mt FOB Paranagua, up $84/mt on the week.

“Brazilian premiums have been pushed up on the back of demand for Argentinean soyoil,” a Brazilian broker said. “There has been good demand for June and July shipments but limited offers.”

Brazilian soyoil exports for April jumped by almost 50% on the month, with soyoil shipments to China surging by 300% to 223,000 mt from the previous month, while exports to India by rose 16% to 40,000 mt in the same comparison.