South American soybean oil FOB (free on board) prices fell on Nov. 4 as a sharp selloff in crude oil dragged down Chicago Board of Trade (CBOT) soybean oil futures, pulling outright export values lower in Argentina and Brazil, according to Platts, part of S&P Global Energy.

NYMEX December West Texas Intermediate (WTI) crude futures dropped $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 part of the crude selloff to the outcome of the US midterm elections, saying market participants weighed 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 weakened the support vegetable oils draw from their use 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 on Nov. 4, down 1.75 cents, or 2.7%, from 65.28 cents/lb on Nov. 3. The futures decline was equivalent to approximately $38.58/mt, exerting substantial downward pressure on South American soybean oil flat prices.

Export basis levels — the differentials at which physical FOB cargoes trade against the futures benchmark, quoted in points where one point equals 0.01 cent/lb, or roughly $0.22/mt — strengthened in both Argentina and Brazil, partially absorbing the drop in the underlying futures market.

Platts assessed Argentine soybean oil FOB Up River, the Paraná River export terminals, for December loading at $1,188.95/mt on Nov. 4, down $14.33/mt from Nov. 3. The December-loading basis in the Up River paper market, where the differential trades in derivatives form, was assessed 110 points higher at minus 960 points against the CBOT December futures contract. That 110-point 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 on Nov. 4, down $20.95/mt from Nov. 3. The December basis strengthened 80 points to minus 940 points against CBOT December futures, adding approximately $17.64/mt to the assessment and 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 on 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 on Nov. 4, down $20.28/mt from Nov. 3. The January basis was assessed 80 points higher at minus 1,020 points against 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, meaning nearer-dated cargoes carried higher values than later-loading positions.

The Nov. 4 moves underscored the transmission of energy-market weakness into South American soybean oil pricing. While 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. Subsequent Platts assessments will indicate how far the strengthened basis differentials hold against the weaker futures backdrop.

Source: Platts, part of S&P Global Energy.