Argentina soybean meal basis turns negative after nearly two years

Soybean meal export prices in Argentina dropped to a discount to Chicago Board of Trade futures for the first time in nearly two years amid a local soybean crop, crush recovery and certain slowness in buying demand.

Platts assessed the FOB Up River basis for August dates at minus $2/st to the CBOT August (Q) contract June 27, a discount not seen for a front-month loading since Sep. 6, 2022, when it marked minus $5/st.

The Argentine cargo market has been pressured by some weakness in export demand after months of high price levels compared with its neighboring competitor Brazil.

Brazilian suppliers have been increasing their presence in the market at lower prices, amid a loss of value of the local currency. The Brazilian Real quoted at Real 5.5023 to $1 on June 27 at 4:30pm Brazil time, up by 5.2% from Real 5.2322 to $1 on June 3.

Platts assessed the FOB Paranaguá basis for August dates also at minus $2/st to the CBOT Q. The Brazilian basis is at a discount to the CBOT futures for the second time this month, considering a spot loading, as it was at minus $2.50/st June 14, 2024.

Crushing rates improve

Argentina has been benefited by a sharp recovery in its soybean crop this year, with subsequent effect in crushing rates. By this time last year, for example, the FOB Up River spot basis was at plus $13/st.

With harvesting activities virtually complete, S&P Global Commodity Insights estimates that Argentina will produce 50.50 million mt of soybeans in the current 2023-24 marketing year (April-March), more than doubling from the previous cycle, which was badly impacted by unfavorable weather conditions.

As for crushed volumes, S&P Global expects a 40.50 million mt output in MY 2023-24, up nearly 40% on the year.

"We forecast that will see a peak in crush and [soybean] meal production in June, reaching levels well above last year's constrained crop," analysts with S&P Global said after official data showed a crush of 4 million mt in May.

"If materialized, we should see greater price pressure on soybean meal," the analysts added.

Argentina is among the top largest global soybean meal and oil exporters. In the current MY 2023-24, the country is expected to ship 28.50 million mt of soybean meal, a key feedstock for animal feed given its protein levels.

If confirmed, Argentine soybean meal exports are due to increase nearly 50% from MY 2022-23.