Brazil's Jan-Aug soybean oil imports surge to more than 20-year high

Brazil's soybean oil imports from January to August have soared to a more than 20-year high amid rising domestic prices, a cut in production and a local regulation allowing imported feedstocks for biodiesel output.

In the year through Aug. 31, Brazil imported 86,130 mt of the vegetable oil, the highest volume for the period since 110,530 mt in 1999, according to data from the Ministry of Agriculture. As a comparison, by this time in 2020 Brazil had imported only 22,119 mt.

So far in 2021, Argentina has been the top soybean oil supplier to Brazil, accounting for 55% of all Brazilian purchases, followed by Paraguay, with a share of 42%. The three countries are part of the Mercosur trade bloc.

On Sept. 14, sources said a Brazilian biodiesel producer had finalized the import of 15,000 mt of Argentinian soybean oil for shipment in September, with no further details such as prices disclosed.

According to participants, such imports follow rising domestic prices of soybean oil, above export parity in certain cases. S&P Global Platts on Sept. 14 assessed the Brazilian FOB Paranagua soybean oil price for October loading at $1,317.04/mt, up by more than 50% on the year.

"Biodiesel producers have been paying attention to that, so when Argentinian soybean oil is cheaper [than the domestic one], they import," a Brazilian trader said. Soybean oil is the main raw material for biodiesel production in Brazil.

In late 2020, the country's oil and biofuel regulator ANP authorized the use of imported feedstocks for biofuel production amid a similar moment of high domestic prices of the vegetable oil.

The decision ended up paving the way for the surge in soybean oil imports this year, sources said. Most of the purchases took place in the first quarter, following the new regulation. After that, the country's soybean harvest sped up, increasing the oilseed supply for soybean oil production.

Also, Brazilian soybean oil output is expected to be lower this year amid setbacks in the local biodiesel mandate. The mandatory mixture into diesel begun 2021 at 12%, was raised to 13% in March and was due to remain so until March 2022.

But fearing the impact of high biodiesel prices on inflation, the government cut the blend to 10% from May to August, raised it to 12% in September-October and will reduce it again to 10% in November-December.

Lower biodiesel requirements have a direct effect on soybean oil production as crushers might be discouraged to run operations and, subsequently, produce soybean oil and soybean meal.

The Brazilian oilseeds crushers association Abiove sees Brazil producing 9.40 million mt of soybean oil this year, compared with 9.56 million mt in 2020. Soybean crushing is pegged at 46.50 million mt, versus 46.85 million mt in the prior year, even with soybean production 7.7% higher at 137.90 million mt.

Abiove's figures are likely to be adjusted in the coming weeks as they still do not reflect the cut in the biodiesel mandate for November-December, the association said.