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FEATURE: Latin American soybean meal premiums surge to record

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FEATURE: Latin American soybean meal premiums surge to record

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Indian demand supports Argentinian basis levels

Slower soybean farmer selling seen in Argentina, Brazil

South American FOB soybean meal basis levels have soared to record levels amid firm Indian demand and Hurricane Ida's effects on the US Gulf Coast's export facilities, according to sources.

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The Argentinian FOB Up River basis was assessed at plus $35/st to Chicago Board of Trade futures Sept. 14-15 and Sept. 17-20, the highest level for a front-month loading S&P Global Platts soybean meal assessment.

In Brazil, the FOB Paranagua basis reached plus $49/st to CBOT Sept. 15. It was also the highest S&P Global Platts assessment for a front-month soybean meal shipment.

The firmness in South American FOB soybean meal basis levels throughout September was the result of a combination of supportive factors, participants said.

Stronger Indian demand

In late August, India said it was seeking overseas 1.2 million mt of genetically modified soybean meal for animal feed use amid rising costs of the feedstock. Argentina and the US were seen as the main suppliers for that demand.

Since then, the Asian nation has announced some flexibility for external purchases, also contributing to support FOB premiums levels in originating countries. First, it allowed imports via three more ports (Mumbai, Tuticorin and Visakhapatnam), in a measure likely to favor the logistical flow toward Indian ports. Also, India extended the shipment window for such imports until Jan. 31, from Oct. 31 previously.

Hurricane Ida's impacts

The demand for South American soybean meal, especially from Argentina, rose in early September because of Hurricane Ida's impacts on the US Gulf Coast, with multiple export facilities affected and some still not fully operational.

The situation forced international buyers to shift their purchases from the US to other origins, with Argentina, the global top exporter of soybean meal, coming up as a natural source. According to participants, there were indeed trades in the FOB Up River cargo market related to the Indian demand, but details could not be confirmed.

Slow farmer selling, other factors

In the meantime, the pace of soybean sales by farmers has been lower this marketing year compared with last in Argentina and Brazil, with possible impacts on crush operations and soybean meal production ahead, sources said.

As of Sept. 15, Argentinian farmers had sold 30.05 million mt of soybeans for the 2020-21 marketing year (April-March), compared with 31.62 million mt in the prior year.

In Brazil, around 86% of this year's nearly 140 million mt record harvest had been traded by farmers by the beginning of September, according to data from specialized consultancy Safras & Mercado. That is compared with almost 98% by this time last season and 88.5% for the five-year average.

FOB premiums have weakened recently in Argentina and Brazil as the US soybean harvest proceeds, pressuring the whole soybean complex, according to analysts. On Sept. 22, the Argentinian FOB Up River basis for November loading was assessed at plus $31/st to the CBOT December (Z) contract, still well above plus $23/st by this time last year.

S&P Global Platts on Sept. 22 assessed the Brazilian FOB Paranagua basis for the same month at plus $41/st to CBOT, from plus $22/st in the prior year.