Crude oil rout pressures South American soybean oil prices

South American soybean oil FOB prices declined Nov. 4 as a sharp selloff in crude oil weighed on Chicago Board of Trade soybean oil futures, pulling outright export values lower in Argentina and Brazil.

NYMEX December West Texas Intermediate crude futures fell $7.97, or 8.3%, to settle at $88.12/b on Nov. 4, while ICE January Brent declined $8.98, or 8.7%, to $94.62/b.

A Brazil-based soybean oil trader attributed the crude selloff partly to the outcome of the US midterm elections, saying market participants considered the possibility that Democratic control of Congress could constrain US military action and encourage negotiations aimed at ending the conflict with Iran.

Lower petroleum prices reduced support for vegetable oils used as biodiesel and renewable diesel feedstocks, transmitting weakness from the energy complex into soybean oil futures.

The CBOT December soybean oil contract settled at 63.53 cents/lb Nov. 4, down 1.75 cents, or 2.7%, from 65.28 cents/lb Nov. 3. The futures decline was equivalent to approximately $38.58/mt, placing substantial downward pressure on South American soybean oil flat prices.

Export basis levels strengthened in both Argentina and Brazil, partially absorbing the decline in the underlying futures market.

Platts, part of S&P Global Energy, assessed Argentine soybean oil FOB Up River for December loading at $1,188.95/mt Nov. 4, down $14.33/mt from Nov. 3. The basis for December loading in the Up River paper market was assessed 110 points higher at minus 960 points to the CBOT December futures contract.

The 110-point basis increase provided approximately $24.25/mt of support, offsetting a substantial portion of the futures-driven decline and limiting the reduction in Argentina's outright FOB assessment.

In Brazil, Platts assessed soybean oil FOB Paranaguá for December loading at $1,193.36/mt Nov. 4, down $20.95/mt from Nov. 3. The December basis strengthened 80 points to minus 940 points against CBOT December futures.

The Brazilian basis increase added approximately $17.64/mt to the assessment, partially cushioning the $38.58/mt decline generated by the underlying futures contract.

Brazilian December soybean oil was assessed at a $4.41/mt premium to Argentine FOB Up River, narrowing from $11.03/mt Nov. 3. Brazil's basis advantage over Argentina similarly narrowed to 20 points from 50 points, as the Argentine differential strengthened more sharply during the session.

For January loading, Platts assessed Brazilian soybean oil FOB Paranaguá at $1,180.36/mt Nov. 4, down $20.28/mt from Nov. 3. The January basis was assessed 80 points higher at minus 1,020 points to the CBOT January futures contract, also partially offsetting losses in the futures component.

Brazil's December-January FOB Paranaguá structure remained inverted, with December loading assessed at a $13/mt premium to January.

The Nov. 4 movements highlighted the transmission of energy-market weakness into South American soybean oil pricing. Although the crude oil rout pressured CBOT futures and pulled regional flat prices lower, stronger export basis levels acted as a partial shock absorber as physical-market differentials adjusted against the weaker futures market.