Soybean oil is the product with the highest accumulated deflation – 08/13/2023 – Market

Soybean oil is the product of the basket of items surveyed by the IBGE (Brazilian Institute of Geography and Statistics) whose prices have fallen the most in the accumulated 12 months, according to a survey by Sheet.

In one year, the product accumulates a drop of 36.93% and has been in deflation since February this year, according to IBGE data.

In July, the IPCA (Extended Consumer Price Index) recorded inflation of 0.12% in the month, with the Food and Beverages group contributing to smooth the rise. And soy oil was the second product of the group that most retreated in the month (-4.77%).

The fall is followed by inflation peaks in the product in the last three years. In 2020, soy oil closed the year with an accumulated increase in prices of 103.79%.

In the second half of 2021, product inflation cooled significantly, but accelerated again in the first half of 2022, reaching an accumulated high in 12 months of 32%.

According to Daniel Amaral, Director of Economics at Abiove (Brazilian Association of Vegetable Oil Industries), last year’s surge occurred after a loss in palm oil production in Malaysia. This drop in global supply forced countries to turn to other vegetable oils, such as soy oil. With the increase in demand, therefore, the price in the foreign market rose.

As Brazil is a major exporter of soy oil, the country follows the international price parity, which made the product’s prices rise in the domestic market as well.

“If the price goes up or down abroad, in the port the price tends to vary in a similar way. And soy oil is one of the most important in the world”, says Amaral.

Another factor that contributed to the appreciation of the product was the war in Ukraine, which reduced the supply of another important oil, sunflower oil, which also contributed to an increase in demand for soybean oil.

From 2022 to 2023, however, there was a recomposition abroad of total stocks of both palm and sunflower oil. In addition, there was also an increase in soy oil on the market, which reduced the prices of the product in the world and in Brazil.

Allied to this, Amaral highlights an influence of the devaluation of the dollar against the real. As Brazil follows the international parity, the exchange rate depreciation also leads to a decline in prices in the country.

The expert says that this soy oil price movement occurred in wholesale sales, but they also impact prices at refineries and, automatically, for the final consumer.

ARGENTINA EFFECT

Boa Safra’s financial and investor relations director, Felipe Marques, also highlights the effect of the economic crisis in Argentina on soy oil prices.

The country is a major exporter of the product and, with the crisis, there was a decline in the global supply of soy oil by the neighboring country in 2022.

At that time, Boa Safra, which is a major producer of soybean seeds in Brazil, noticed that the crushing industry, which transforms soybeans into bran and oil, was paying a high price for the grain. As a result, gains from soy oil were greater than from soy itself.

Now, however, with the increase in the global supply of soy oil, there has been a decline in prices and, consequently, in the amounts paid by this industry to purchase the commodity, according to Marques.

“This industry is no longer paying a high premium because the market is no longer demanding as before, so it cannot pay a higher price for this soybean that originates in Brazil and then goes on to export”, explains the director of Boa Crop.

COLLABORA COMMODITY PRICE

The drop in the soybean bag, an oil input, is another factor that contributes to a decline in the price of the product. Marques recalls that a bag once cost R$180 and today it is around R$120.

This reduction is due to the expectation of a good soybean crop in the United States, and also due to the positive result of the crop in Brazil, which increases the supply forecast for the commodity in the market.

From January to March of this year, Brazil’s GDP (Gross Domestic Product) rose by 1.9% compared to the fourth quarter of 2022, with agriculture leading the way. And soy is driving the sector, with a forecast for a record harvest this year.

This is due to the climate issue. “In the 2020/2021 and 2021/2022 harvests, Brazil and other countries had climate problems that frustrated the initial expectations of oilseed production. But the picture changed in the 2022/2023 harvest”, says Felipe Fabbri, an analyst at Scot Consultancy.