India, the world’s biggest soybean oil buyer, canceled several more cargoes from South America as a rally in international prices gave traders an opportunity to book profits.
About 65,000 to 75,000 tonnes that Indian traders booked for April to July have been scrapped in recent days, said Aashish Acharya, vice president at Patanjali Foods Ltd., one of India’s top vegetable oil buyers. The move involves buyers cancelling the cargoes and effectively selling them back to the supplier at a higher price, providing a profit of roughly $40 to $60 a tonne, Acharya said.
The amount of so-called washed out soybean oil could reach around 100,000 to 120,000 tonnes in the coming days, he said. Several other vegetable oil traders confirmed the moves to Bloomberg.
Weak rupee forces India to scrap South American soy oil shipments
Benchmark soybean oil futures have rallied to a more than two-year high in Chicago amid stronger energy prices, Washington’s trade deal with India and optimism that US biofuels blending quotas will support demand. The cargo cancellations come as Indian buyers have enough soybean oil and expect a potentially record South American crop to bolster supplies from around April.
“Buyers who previously purchased contracts at lower prices of around $1,080 to $1,100 a tonne are now exiting those positions, as prices have risen to $1,140 to $1,147.50,” Acharya said. There will be more “in and out” trading as the market braces for large South American supplies, he added.
When buyers decide not to take delivery of cargoes, sellers typically then won’t need to source physical supplies and incur related costs. Canceling shipments now can also reduce the risk Indian traders could face in selling the oil locally later in the year, when new South American supplies could pressure the market.
Argentine soybean oil imports to India stall amid rising domestic availability, higher prices
India has already canceled soybean oil cargoes. Earlier this year, it backed out of at least 35,000 to 40,000 tonnes from Brazil and Argentina as the rupee’s slump made imports more expensive and uneconomical. That followed the scrapping or delay of more than 100,000 tonnes of Argentinian deals in December.
The bumper South American soy crop is expected to hit the market between April and July, which will likely drag down prices, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental. That’s why the recent rise in US soy oil futures — which sets the tone for physical prices — had prompted the washouts, he said.
