SAO PAULO: Brazil’s soyabean market got another boost this week with local oilseeds processors increasingly competing with Chinese buyers for one of Brazil’s most prized export commodities, causing prices in local currency to spike.

While traders reported Chinese buying more than 1 million tonnes of soyabeans from Brazil and Argentina in the last two days alone, farmers have also been selling their beans to local crushers, who need them to produce biofuel and animal feed.

“There is a new factor contributing to the intensifying of competition for the raw material: the government’s biodiesel auctions,” Cepea researcher Lucilio Alves told Reuters on Friday.

According to biofuel lobby Ubrabio, increasing the mandatory biodiesel mix to 11% from 10% will demand an additional 200,000 tonnes of soyabeans per month.

Port premiums at Paranaguá rose by more than 15% this week to $1.50 per bushel, the highest level since November 2018 in the face of strong Chinese demand, according to Refinitiv data.

In Brazil, soyabean prices reached 85.40 reais per 60 kg bag, the highest since mid-November and a 10% rise in the month, according to Cepea.

“This is a sign of increased Chinese demand for South American soyabeans, especially from Brazil and Argentina,” Luiz Pacheco, an analyst with T&F Agronomics, wrote in a report.

He said 14 shipments to China were reported on Wednesday and four more on Thursday, totaling more than 1 million tonnes.

Also driving exports to China are the weaker Brazilian currency and a global trade war causing the Asian country to turn to South America for soyabean supplies.

In Brazil, the currency fell to a multi-week low of more than 4 reais per dollar on Wednesday. A political crisis in Argentina made the peso tumble to a record low of 65 pesos per dollar this week.

“The escalation of the trade war... has created uncertainties, and the tipping point has been the devaluation of the Chinese currency against the dollar,” Cepea’s Alves said.

New rules for mixing more biodiesel into diesel will take effect in September.

At the same time, local crushers’ demand for soya to make animal feed should stay strong as Brazilian meat-packers will continue to demand it in order to produce meat and sell it in export markets, where demand is strong due to the outbreak of African swine fever in Asia.—Reuters