Brazil's FOB Paranagua soybean oil price reaches record high

The Brazilian FOB Paranagua soybean oil outright price surged Feb. 3 to its highest on record, driven by soaring Chicago Board of Trade futures amid a supportive tone over global edible oils.

S&P Global Platts assessed FOB Paranagua soybean oil Feb. 3 at $1,442.93/mt for March loading, its highest level since assessments began in March 2020. This price has rallied 40% since this time last year.

Global edible oils have been supported by several bullish fundamentals, with the CBOT March (H) soybean oil hovering around contract highs at 65 cents/lb, also up by more than 40% on year.

In late January, Indonesia issued a mandate for palm oil producers to allocate 20% of their crude palm oil shipments for local buyers, in a measure aimed at curbing rising domestic cooking oil prices. The decision sent palm oil futures on the Bursa Malaysia Derivatives exchange to historical highs, since Indonesia is the global top producer and exporter of the commodity.

To further support vegetable oil prices worldwide, escalating tensions between Russia and Ukraine have been clouding sunflower oil supply prospects from the Black Sea region, sources said.

Drought conditions have also led to cuts on Brazil's 2021-22 soybean crop potential, supporting FOB premium levels even amid no calls for a reduction in crushing.

January vegetable oil imports by India -- the world's largest importer -- were expected to increase by 6% on month, with soft oils -- soybean and sunflower-- gaining market share from palm oil for the third straight month, according to shipping data seen by Platts Feb. 1.

Recent trades for South American FOB markets were linked to such an Indian demand.

"In general, we have been exporting more soybean oil. India has greatly increased the volume of soybean oil purchased compared to palm oil, so there is, in fact, more oil going for export," a Brazilian trader said.

Brazil is expected to ship overseas 1.55 million mt of soybean oil in the current 2021-22 season (October-September), up by 46% on year, according to the latest estimate released by the US Department of Agriculture.

Availability of Brazilian soybean oil for export has been considered higher this year after the government cut the mandatory mixture of biodiesel into diesel in late 2021 for the whole year of 2022. This biofuel has soybean oil as its main feedstock, and a lower mandate could mean more oil available for external sales.