Brazil's FOB soybean meal premiums seen lower than Argentina's

Brazil's FOB Paranagua soybean meal basis has weakened and unusually dropped to below Argentina's FOB Up River levels for the first time since early March amid pressure from soybean sales by local farmers.

On Oct. 21, S&P Global Platts assessed the Brazilian FOB Paranagua basis for December shipment at plus $21/st to the corresponding Chicago Board of Trade contract, while the Argentinian FOB Up River premium for the same month was assessed at plus $25/st.

Brazil's FOB soybean meal basis levels have been lower since then. It is the first occasion FOB Paranagua premiums remain below FOB Up River ones since March 8, still according to S&P Global Platts.

Brazilian port differentials are used to being higher compared to those in Argentina given the country's geographical location, closer to key destinations, and logistical attractiveness as most of its agricultural exports occur via sea-based ports. Argentina, on the other hand, relies on the Parana River to drain most of its agricultural products, with subsequent reduction in vessels' loading capacity – a topic further deteriorated this year amid a historical shallowness on that key waterway.

According to sources, the atypical pressure over FOB Paranagua basis levels tracked heavy soybean sales by Brazilian farmers in recent days, boosting the supply for crushers to run operations, producing more either soybean meal or soybean oil.

Farmer selling, in turn, was inducted by an appreciated US dollar against the Brazilian real, which increases farmer's revenue in local currency, stimulating sales of the oilseed. Amid uncertainties regarding the country's fiscal debit situation due to a government's aid program announcement, the US dollar has recently risen to above Real 5.70, the highest level since April.

Brazil is expected to export 17 million mt of soybean meal in the current 2021-22 marketing year (October-September), according to the US Department of Agriculture. Argentina, the world's largest exporter of the commodity, is poised to ship overseas 29.30 million mt of the soybean sub-product, USDA predicts.