Brazil, USA challenge Argentina’s soybean meal and oil leadership

Soybean processing in Argentina has already accumulated a drop of almost 10% in the 12 months to June, which may be higher throughout the year, to accelerate the financial deterioration of the country and with possible union conflicts of factories and stevedores in the ports towards the end of the year, due to strong inflationary pressure.

Argentina’s global role in soybean meal and oil balance is very important. Argentina accounts for 40% of the world soybean meal trade and 46% of the world soybean oil trade.

Soybean meal exports between January and June totaled 12.97 million tons compared to 14.37 million tons in the same period last year, a 10% decrease. Soybean oil exports fell much more. Exports totaled 2.4 million tons, a drop of 28% year-on-year. The US is exploiting this space lost by Argentina.

Although Argentina continues to be the leading supplier of soybean meal to the world, with estimated exports for the new season at around 28.5 million tons, well above both Brazil’s 18.7 million tons and the United States’ 12.7 million tons, Argentina’s relative share in the world total will fall for the second consecutive year.

RECORD VOLUMES FROM BRAZIL

Brazil is on track to produce record volumes of soybean meal and oil in 2021/22, possibly surpassing such marks next season amid persistently attractive crush margins for local processors.

In its latest World Agricultural Supply and Demand Estimates report, released Aug. 12, the US Department of Agriculture (USDA) projected Brazil’s 2022/23 soybean meal and oil production at record highs of 38.4 million tons and 9.5 million tons, respectively.

Brazil has had soybean crush growth for the fourth consecutive year and is beginning to differentiate itself from Argentina, which is stagnant in its production.

Private analysts are projecting South America’s total 2022/23 soybean supply at 216.0 million tons versus 172.0 million tons for 2021/22 soybeans.

USDA SURPRISES AND RAISES US SOYBEAN YIELDS, PRODUCTION, AND INVENTORIES

USDA surprised market expectations and revised US 2022/23 soybean crop numbers. Oilseed productivity increased from 34.64 to 34.90 qq/ha, producing 122.6 to 123.31 million tons.

USDA also presents a revision of US 22/23 soybean planted acreage, from 35.73 to 35.69 million ha, and harvested, from 35.41 to 35.29 million ha.

US soybean ending stocks were estimated at 6.67 million tons, also higher than July’s figure of 6.26 million.

US soybean crush remains at 61.1 million tons; however, exports were revised upward from 58.11 to 58.65 million tons.

Meanwhile, the USDA aligned with market expectations for corn, reducing its numbers for the 2022/23 US corn crop. 22/23 US corn productivity varied from 111.10 to 110.10 qq/ha, taking production from 368.45 to 364.74 million tons.

US corn ending stocks have also been corrected and are now estimated at 35.26 million tons versus July’s 37.34 million.

US grain use for ethanol production remains at 136.53 million tons, and exports decreased slightly, from 60.96 to 60.33 million tons, according to USDA data.

DROUGHT IN THE EUROPEAN UNION

The drought in the European Union continues to expand, and production forecasts are falling accordingly. We continue to see corn shipments from Ukraine, but all are smaller in size, and now some are being rejected due to poor quality.

There are now estimates that the EU will need to import more than 25 million tons of corn this year, which would place the Union as the world’s largest importer for the year.

The EU’s needs were verified by removing almost all GMO import restrictions. A strong rebound in Brazilian corn that placed them above the US was also favorable for future exports.

COMMODITY CYCLE

We can see that the current high commodity cycle started to form during 2020/21. The replenishment of inventories after months of reduced consumption, followed by poor harvests, the energy crisis in China, reorganization of production chains based in China, and the outbreak of the Ukraine-Russia war, gave a big boost to raw material prices.

Among foodstuffs, vegetable oils were the leaders in price appreciation to a large extent, thus pushing soybean oil prices upwards.

For its part, soybean meal accompanied this movement, as the crushing margin caused by the sharp rise in oil encouraged soybean processing, thus increasing the supply of soybean meal accordingly. Different analysts point out that the commodity boom cycle seems to be over.

On the other hand, we see that, in Argentina, due to strong economic distortions in the market, political turbulences, uncertainty, and exchange rate gap, our country’s economic policies are leading us to continue losing markets and discouraging the sale of goods to the benefit of our main competitors such as Brazil and the USA.

With information from Clarín