The Brazilian government has now raised its biodiesel mandate from 10% to 12%, effective from 1st April 2023, in an official statement released by the Ministry of Mines and Energy on 17th March. The biodiesel mandate is set to rise in subsequent years – up to 13% in April 2024; 14% in April 2025 and onwards. The Ministry has noted it also plans to reconsider the pace of the increase, as determined by supply and demand fundamentals in addition to economic conditions. Mintec sources, however, think the increase keeps the market in its bearish state, as the initial proposal was for an increase to B15 this month, and due to the large domestic crop (+18% y-o-y to 153 million metric tonnes) expected this season.
The record Brazilian crop has continued to pressure soybean oil prices. The Mintec Benchmark Prices (MBP) for Soybean Oil FCA Netherlands was assessed at €1,025/mt, down 0.5% week-on-week (w-o-w) and by 6.8% month-on-month (m-o-m), on 21st March. High stock levels of alternative oils (sunflower oil and rapeseed oil) in the EU have also contributed to this decline. Similarly, the CBOT soybean oil futures price (Mar-23) settled at USc 56.35/lb, down by 0.1% w-o-w and down by 10.4% m-o-m, on the same day. Meanwhile, following the Buenos Aires Grain Exchange (BAGE) latest cut to the Argentinian crop to 25 million metric tonnes, driven by the ongoing drought conditions, the MBP for Soybean Oil FOB Argentina has continued an upward trend. Thus, on 21st March, the MBP was up by 2.2% w-o-w, to $1,081/MT. According to the Argentine Edible Oil Association (CIARA), many crushing plants have stopped operations as they turn to Paraguay and Brazil for soybean imports to meet domestic needs. The association also reported that 4.12 million metric tonnes of this season's soybean harvest have been sold so far to the domestic market, a decline of 52% compared to the 8.6 million metric tonnes sold at the same time last year, as farmers are reluctant to sell as they anticipate further losses. The USDA now estimates the Brazilian and Paraguayan soybean exports to rise by 17% y-o-y and 182% y-o-y, to 92.7 million metric tonnes and 6.4 million metric tonnes, this season. Demand direction from China will continue to be a watch-point for prices.
According to the China National Grain and Oils Information Center (CNGOIC), China’s soybean processing declined by 1% w-o-w to 1.45 million tonnes, as of 16th March. This also represents a decline of 30% compared to the same period in February. While bean stocks in China are reportedly low, high meal inventory and a lack of recovery in the hog industry have resulted in weakened bean demand. Additionally, the Ministry of Agriculture of China on Thursday 16th March released a statement expressing its plans to boost domestic purchase of soybean, as reported by Mintec here. The Ministry’s plan to boost domestic crop purchases, coupled with weakened demand from the hog industry, will be a major determinant of its demand direction, as reduced demand could continue to pressure global soybean prices amid the record Brazilian crop.
