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High demand boosts soy oil prices in Brazil

 

Cepea, November 3, 2021 – Soy oil prices set new nominal records in the series of Cepea (since July 1998) in October. In real terms (monthly average deflated by the IGP-DI from Sept/21), the average in October was the highest in 12 months.

 

Soy oil prices have been on the rise in Brazil since 2020, more recently underpinned by higher demand, oil valuations and increases in the export premiums from Brazil. It is important to mention that the willingness of agents from the industry to pay higher prices for soybean depends on the revenue from sales of by-products, majorly soy oil and meal.

 

Although the share of biodiesel in diesel oil has fluctuated this year, the consumption of soy oil by the industrial segment surpassed consumption by the feed industry. According to the ANP, soy oil is the raw material used in around 70% of the biodiesel produced in Brazil.

 

Data from Cepea show that, in São Paulo city, the monthly average price for soy oil (with 12% ICMS) closed at BRL 8,221.87/ton in October, 9.7% up from that in September and the highest since Oct/20, in real terms. The monthly average in October was constrained by the 1.2% price drop in the last week of the month.

 

At the port of Paranaguá (PR), the export premium for soy oil (for shipment in December/21), increased from 2.5 cents of dollar per pound on Oct. 1st to 3 cents of dollar/pound on Oct. 28.

 

SOYBEAN – The increase in the demand for soy oil limited soybean devaluations in Brazil. In general, price drops reflected higher domestic surplus and expectations for a record harvest in the 2021/22 world season. In the last week of October, Brazilian soybean farmers made higher volumes available in the spot market, boosting liquidity.

 

Between Sept. 30 and Oct. 29, the ESALQ/BM&FBovespa Index Paranaguá dropped by 2.5%, to BRL 171.13 (USD 30.30)/60-kilo bag on Oct. 29. Considering the averages in September and in October, this Index has decreased by 0.9%. However, in the annual comparison, the Index has increased by a staggering 7.2%, in nominal terms.

 

CROPS – Sowing stepped up in many Brazilian regions in October, favored by rainfall. On the other hand, in southern Brazil, activities were hampered by high moisture. In Paraná, sowing had reached 38% of the total state area until October 18, according to Deral/Seab.

 

In Mato Grosso, high rainfall and optimistic forecasts favored sowing. On the average of the state, 45.06% of the 2021/22 crop has been sown, which is ahead of that in the same period of the last 10 years. According to Imea, 96.26% of the 2020/21 crops have been sold already, and 40.40% of the output estimated for 2021/22 has been traded too. In Mato Grosso do Sul, according to Famasul, 25% of the area allocated to soybean has been sown.

 

On the average of Brazil, Conab (Brazil’s National Company for Food Supply) indicates that 23.7% of the estimated area had been sown until Oct. 16, up from the 7.7% in the same period last year. In São Paulo and in Goiás, activities have reached 30% of the respective areas. In Maranhão, 1% of the soybean area has been sown; in Tocantins, 8%; and in Bahia, 3%. According to agents consulted by Cepea, activities started to step up in the region of Matopiba, favored by higher soil moisture.

 

(Cepea-Brazil)

 

 

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