1. Weekly News

Argentina and Paraguay

Paraguay's Crucial Role in Sustaining Argentina's Soybean Oil Industry Amid Harvest Recovery and Continued Import Growth

In the 2022/23 cycle, Paraguay played a crucial role in sustaining Argentina's soybean oil industry by supplying over 10 million metric tons (mmt) of soybeans, compensating for Argentina's harvest failure due to drought. In the early months of the 2023/24 cycle, despite a recovery in the Argentine soybean harvest, Paraguay continued to export significant volumes to Argentina, aiding in the processing of 11.76 mmt of soybeans, a 25% increase from the previous year. This growth was supported by the import of 2.24 mmt of soybeans, primarily from Paraguay, representing 19% of Argentina's grinding volume. With an expected harvest of 49 mmt, Argentina's soybean imports for 2023/24 are projected at 4 mmt, though actual imports may exceed this. These imports are processed under a regime that facilitates industrial improvement for export, reintroduced in 2016 to boost foreign currency generation.

Brazil

Rising Demand Drives Increase in Brazilian Soybean Oil Prices and Premiums

Brazilian soybean oil export prices and premiums increased last week, driven by solid demand, particularly from domestic biodiesel industries. This heightened demand will likely absorb a portion of the national production, reducing the exportable surplus. According to the Center for Advanced Studies on Applied Economics (Cepea), soybean oil prices in São Paulo reached USD 1075.92 per metric ton (BRL 6,063.57/mt), the highest nominal value since Mar-23. The United States Department of Agriculture (USDA) forecasts record soybean oil production for Brazil, with 10.8 mmt expected in both the 2023/24 and 2024/25 seasons.

Rising Soybean Oil Prices in Mato Grosso Amid Increased Biodiesel Demand and Market Dynamics

Soybean oil prices in Mato Grosso rose by 3.12% to USD 910.54/mt (BRL 5,150.00/mt) in W29, driven by increased domestic demand for biodiesel production, according to the Mato Grosso Institute of Agricultural Economics (Imea), contrasting with declining soybean meal prices on the Chicago Stock Exchange (CHX), which fell by 8.62% to USD 337.73/mt, influenced by reduced US soybean stock forecasts. Soybean prices in Mato Grosso also saw an annual increase of 5.22%, attributed to a 14.38% rise in the dollar exchange rate and favorable port premiums. Soybeans are forecasted to contribute significantly to the region's agricultural output, comprising 55.52% of the projected USD 23.29 billion (BRL 131.75 billion) Gross Value of Agricultural Production (GVA) for the year.

United States

USDA Reports Strong Soybean Oil Export Sales for W29, Despite Declines in Soybean Exports

For W29, the USDA reported notable export sales for United States (US) soybeans and soybean oil. Soybean oil sales rose to 6.9 thousand mt, a 46% increase from the four-week average, with Venezuela and Canada being essential buyers. Cumulative soybean oil exports have reached 208.5 thousand mt, up from 125.8 thousand mt the previous year. Soybean export sales for the same week were 88.6 thousand mt, a 63% decrease from the four-week average. The reduction in soybean exports was offset by a significant rise in soybean meal sales, up 49% from the four-week average. Despite declining wheat, corn, and sorghum exports, soybean oil and meal showed strong performance in global markets.

India

India’s Vegetable Oil Imports Hit Record 1.92 mmt in Jul-24, Led by Surging Soybean Oil Purchases

India imported a record 1.92 mmt of vegetable oils in Jul-24, a 26% month-on-month (MoM) increase, driven by a surge in palm and soybean oil purchases due to favorable prices and anticipated import duty hikes. Soybean oil imports increased by 45% to 400 thousand mt, the highest in 13 months, while sunflower oil imports fell to 380 thousand mt. Palm oil imports rose 45% to 1.14 mmt, the highest in 20 months, benefiting from a price discount of over USD 100/mt compared to soybean oil. India sources palm oil from Indonesia, Malaysia, and Thailand, with soybean and sunflower oils from Argentina, Brazil, Russia, and Ukraine.

2. Weekly Pricing

Weekly Soybean Oil Pricing Important Exporters (USD/kg)

Yearly Change in Soybean Oil Pricing Important Exporters (W30 2023 to W30 2024)

Argentina

Argentina's soybean oil prices decreased to USD 0.93 per kilogram (kg) in W30, marking a 2.11% week-on-week (WoW) decrease from USD 0.95/kg in W29. Furthermore, Argentina's President has pledged to eliminate taxes and currency restrictions affecting the agricultural sector but asked for time to stabilize the economy. At the 136th annual Argentine Rural Society (SRA) exhibition, he highlighted his goal to remove export duties on agricultural products and end exchange rate restrictions limiting access to US dollars. Despite initial promises, the President raised taxes on soy oil and flour exports from 31% to 33% after taking office. Argentina, the world's third-largest soybean producer, relies heavily on agro-industrial exports, which accounted for 55% of the country's exports in 2023. These policy changes could impact soybean oil prices by influencing producers' cost structure and profitability.

Brazil

Soybean oil prices in Brazil decreased to USD 0.96/kg in W30 from USD 1/kg in the previous week, marking a 4% WoW drop and an annual decrease of 5.88% from USD 1.02/kg. The USDA's forecast for Brazil's soybean production remains steady at 153 mmt for the 2023/24 season and 169 mmt for 2024/25. This stability suggests limited potential for upward pressure on global soybean prices, as Brazil remains a crucial player in the market. However, the Brazilian soybean oil sector faces increasing costs for pesticides and fertilizers, which could reduce profit margins for oil manufacturers. These rising production costs may lead to higher prices for Brazilian soybean oil, impacting its competitiveness in the global market.

United States

US soybean oil prices slightly dropped to USD 1.01/kg in W30, reflecting a decrease of 0.98% WoW from USD 1.02/kg in W29. Medium-range US forecasts predicting hot and dry weather that could stress crops during the critical development phase in Aug-24. Demand from China continues to favor Brazil over US soybeans. Soybean oil prices decreased, influenced by bear spreading. The USDA's next supply and demand update, expected on August 12, will provide further market insights.

Netherlands

The Netherlands soybean oil prices dropped to USD 1.03/kg in W30, a 2.83% WoW decrease from USD 1.06/kg in the previous week. Soybean prices in the Netherlands may experience fluctuations due to recent developments in the US soybean market. While US soybean prices rose on short covering and technical buying, old crop sales to the Netherlands were bearish. However, strong new crop sales, including a significant purchase of 264 thousand mt, could impact future supply and demand dynamics. If the hot and dry weather forecast persists, it could stress US soybean crops during their critical development phase in Aug-24, potentially leading to reduced yields and tighter supply. This situation may significantly increase soybean oil prices in the Netherlands if the global supply from key exporters like the US and Brazil is affected.

Spain

Spain's soybean oil prices dropped to USD 1.16/kg, reflecting a 7.94% WoW and an 11.45% YoY decrease. Recent Easter rains have positively impacted harvest in Spain, leading to an anticipated increase in oil production. Despite this improvement, yields are forecasted to remain below pre-drought levels. This partial recovery could stabilize or lower soybean oil prices in the Spanish market.

3. Actionable Recommendations

Monitor Production Costs

Brazilian soybean oil producers should address rising pesticide and fertilizer costs by optimizing input use and investing in cost-effective technologies, such as Variable Rate Technology (VRT), applying inputs like fertilizers and pesticides based on precise field data. This will help manage profit margins and prevent significant price increases.

Diversify Import Sources

To mitigate potential supply disruptions, Argentina and other vital markets should explore additional sources for soybean oil imports beyond traditional suppliers, such as Ukraine, Russia and India. This approach can reduce dependency on single sources and maintain price stability.

Strengthen Supply Chain Partnerships

Argentina should enhance its collaboration with Paraguay to secure a steady soybean supply. Implementing long-term contracts and improving logistics can ensure consistent import levels and stabilize processing volumes.

Sources: Tridge, De Frente al Campo, O Presente Rural, Portal DBO, Noticias Agricolas,