W2 Soybean Oil Update: Red Sea Crisis Spurs 5% Price Hike in India's Soybean Oil Due to Shipment Delays

Brazil's Rising Biodiesel Demand and Argentina's Supply Concerns Impact the Soybean Oil Market

Soybean supplies from top producers Argentina and Brazil are anticipated to decrease in 2024. Brazil's plan to raise its biodiesel blending rate to 13% in Apr-24, coupled with approved biodiesel imports, are expected to drive demand for soybean oil for regional biodiesel production, potentially limiting exports to the European Union (EU). Moreover, Brazil's 2023/24 soybean oil production is estimated to reach a potential record of 11.26 million metric tons (mmt), a portion of which is likely to be used for biodiesel production, showing a 14% year-on-year (YoY) increase. Meanwhile, political uncertainties in Argentina, including temporary export restrictions, contribute to supply concerns.

Argentina Leads Global Soybean Oil Exports in 2023

Argentina stood out as the primary exporter of soybean oil and bagasse in 2023, accounting for approximately 40% of the global market share in both categories, representing a significant increase of 2.3 times. Despite facing a historic drought in the 2022/23 marketing year (MY), Argentina secured the top position in export volume for soy by-products, with an average annual soybean oil export of 5.2 mmt. Argentina's dominance in soybean oil exports is evident, with the country tripling the volume exported by the second-largest supplier, Brazil.

Argentina's Proposed Law on Soybean Oil Sparks Concerns Over Food Imports in Peru

Peru may face disruptions in food imports due to the proposed "Law of Bases and starting points for the freedom of Argentines" by the Argentinian President. The Foreign Trade Research and Development Institute of the Lima Chamber of Commerce (Idexcam) warns that this initiative, which includes an increase in the tax rate for products like yellow corn and soybean oil, could negatively impact the final prices of foods in the Peruvian market. Argentina, a significant supplier, accounted for 72% of Peru's imported raw soybean oil between Jan-23 and Nov-23.

5% Surge in India's Soybean Oil Prices Amid Shipment Delays

India's soybean oil prices experienced a 5% increase within the last fortnight due to shipment delays attributed to the ongoing Red Sea crisis. The frozen Black Sea, a crucial route for sunflower oil shipments from Ukraine and Russia, is causing delays and raising costs. Ports operating at reduced capacity in the Black Sea contributed to the delay in oil arrivals. Trade insiders anticipate that the shipping issues, persisting since the previous month, may lead to further price increases, and an immediate price drop is not expected.