Platts assessed Brazilian Biodiesel DAP Paulinia at Real 5,/cu m July 27, down 10.5% on the month and at the lowest level since the assessment was launched Nov. 4, according to S&P Global Commodity Insights data, mirroring a drop in the soybean oil outright price and the real’s appreciation against the dollar.
The Platts Brazilian FOB Paranagua soybean oil outright price for September loading declined 12.3% month on month to $1,/mt July 27, with the real trading at highs of Real 5.50 against the dollar July 22 and paring to Real 5.25 July 27.
Brazilian biodiesel is almost 90% sourced from soybean oil. Regular feedstocks, such as tallow or other vegetable oils, mostly track the soybean oil chain prices. Any changes in the international soybean oil market or the Brazilian exchange rate directly impacts the Brazilian B100 supply cost.
Brazilian biodiesel producers who bought soybean oil in advance and did not hedge long positions have been complaining about negative margins while trading term contracts based on pricing formulas, which reflect the volatility in the spot soybean oil international market and exchange rates.
A few biodiesel producers have been increasing their exposure to the spot market, which has paid a premium over the calculated formula as they reduced positions in the highly volatile edible oils market.
Platts calculated biodiesel’s price at Real 5,811cu m July 27 based on the conversion of soybean oil FOB Paranagua to biodiesel density equivalent excluding any additional fee. However, the price reduces to Real 5,/cu m if a discount fee of Real /cu m is considered, suggesting that spot market DAP Paulinia was paying a Real /cu m premium over term contracts based on formulas.
The premium falls to near Real /cu m after adding the logistical differential from FOB Paranagua to DAP Paulinia.
Biodiesel producers have argued that the inventory cost is currently much higher than the international market and it is not feasible to source soybean oil in the domestic market at such low levels.
Platts biodiesel DAP Paulinia rebounded 2.54% July 28, while the calculated price formula based on soybean oil FOB Paranagua gained 3.36%.
