Brazilian soybean meal pulls ahead as Argentina faces supply challenges

Brazilian soybean meal spot export prices have firmed up in recent days, distancing themselves from Argentina's values amid mounting uncertainties over immediate supply from the latter country.

Platts assessed the price of Brazilian soybean meal FOB Paranagua at $327.38/mt Feb. 26, compared to $323.53/mt in the Argentine FOB Up River market. Both values are for April shipment.

For comparison, on Feb. 18, the FOB Paranagua price was $320.88/mt, while the FOB Up River was $321.43/mt, according to data from Platts, part of S&P Global Commodity Insights.

Participants say that doubts about Argentina's soybean processing capacity in the short term may be leading traders to cover immediate positions in Brazil.

The Argentine oilseed union SOEA, one of the largest in the country, announced Feb. 25 that it may organize a national strike, disrupting activities at soybean crushing plants due to a wage dispute involving the Vicentin industry.

In a statement, SOEA said that such a conglomerate must pay the salaries for February, after the company based in the Santa Fe province indicated that this might not occur. Vicentin, which currently leases its facilities to third parties, was once one of the main soybean crushers in Argentina, usually the leading country in global exports of soybean meal and oil.

"We warn that if they do not pay the February salaries, we will initiate a struggle plan that will paralyze all oilseed plants in the country," SOEA stated in its announcement released Feb. 25.

According to a Brazilian trader, the export premium market at FOB Up River has been "loose," while business activity has intensified in the paper market at FOB Paranagua.

Indeed, several parcels have changed hands for shipment in April at FOB Paranagua in recent days, with the basis for such shipments moving from a discount of $11/st to one of $5.50/st between Feb. 18-26, according to Platts data. Many of these trades involved pricing domestic contracts, according to sources.

"The [Brazilian domestic] market sees this news [from Argentina] and thinks: 'There will be a shortage of meal, and the premium will rise. Better cover my position,'" a source said. "Then the premium rises."

Soybean meal is one of the main ingredients for animal feed in Brazil, especially for pig and poultry producers.

Other Factors

Beyond the potential Argentine strike, other issues have also contributed to the strengthening of the Brazilian meal market in recent days.

Forecasts indicate rain in Argentina's soybean-producing areas, which should help the development of crops that suffered from hot and dry conditions between December and January. In Brazil, the outlook is for clear weather, which tends to accelerate soybean harvesting, which was 36% complete as of Feb. 19, according to Platts data.

Additionally, the Brazilian government decided to postpone the increase of biodiesel blending into diesel to 15% starting in March, with the current 14% blend remaining in effect until a new evaluation.

A lower mandate requires less soybean oil for biodiesel production, as vegetable oil is the main input for the Brazilian biodiesel industry. Lower demand for soybean oil, in turn, may indicate a reduction in soybean crushing, with subsequent impacts on soybean meal production.

For now, S&P Global Commodity Insights estimates that Brazil will crush 57.50 million mt of soybeans in 2025 and export 23 million mt of soybean meal. In the case of Argentina, projections are for 44 million mt and 30 million mt, respectively.