Latin American soybean oil sees volatile month amid Black Sea conflict

South American soybean oil prices have completed a month of intense volatility following Russia's invasion of Ukraine, with cash values in Argentina and Brazil surging to historical highs earlier in March before entering a downward trajectory.

The conflict boosted crude oil prices to multi-year highs and blocked sunflower oil shipments from the Black Sea region, which accounts for nearly two-thirds of the world's production of sunflower oil. As a result, global edible oil prices also soared.

Both the Argentinian FOB Up River and Brazilian FOB Paranaguá soybean oil outright prices hit record-high levels March 8 at $1,835.35/mt and $1,826.53/mt, respectively, according to data from S&P Global Commodity Insights. Such values were further spurred on by soybean crop losses in Argentina and Brazil, as well as by firm FOB premium levels as Indian buyers moved their demand towards South American soybean oil instead of Black Sea-origin product amid the Russia-Ukraine conflict. India is the global top importer of vegetable oils.

FOB-basis levels for Argentina and Brazil surpassed plus 700 points to the Chicago Board of Trade futures March 8, compared to prices that stood at discounts to CBOT seen at the same time in 2021, according to S&P Global data.

However, the market has been weakening since March 8 due to a mix of factors, including that Indian demand partially moved to the sidelines after South American soybean oil prices crossed $1,800/mt.

"India has decreased demand over here and resorted to palm oil, which has become more interesting than soybean oil," a Brazilian trader said March 11.

Indeed, Indian buyers were recently seen active in the Asian palm oil market, with purchased volumes heard between 30,000 mt-60,000 mt March 22.

Elsewhere, a slow biodiesel market in Brazil has also contributed to a more offered-on export front, while there were talks of lower mixtures of biofuel into diesel in the country.

"The demand for biodiesel and food [consumption] has been weaker, so [soybean oil] traders are resorting to exports," a trader said March 17.

Platts assessed the FOB Up River soybean oil outright price at $1,692.49/mt March 23, 8% lower from its high March 8. The FOB Paranaguá price decreased 7.5% in the same period to $1,690.29/mt. Both prices, however, remained nearly 35% higher on the year.

Argentina was expected to produce 7.90 million mt of soybean oil and export 5.90 million in the 2021-2022 season (October-September), according to the latest data from the US Department of Agriculture. Brazil, in turn, was on track to produce 8.90 million mt of soybean oil and ship 1.70 million mt overseas in the cycle.

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