Uruguay: Soybean harvest exceeds forecasts, prices skyrocket

RIO DE JANEIRO, BRAZIL – The soybean harvest in Uruguay, which is about to end, exceeded forecasts. Continued high prices, which last week hit another record high of US$652 in Chicago, combined with exceptional yields of 3,000 kilos per hectare on average, resulted in a soybean season that was expected to be good but will close even better.

Soybean exports from Uruguay will be around US$1.75 billion by 2022, according to projections made by the Center for Development Studies (CED) in a sectoral bulletin where the think tank analyzed the sector. It is the second-highest figure since records have been kept and the highest since the 2013 harvest.

“The fundamentals of the world soybean market with supply problems and booming Chinese demand are consistent with price levels at record highs, even higher than those seen in the commodity supercycle. In the last week of May, Uruguay exported at US$640 per ton,” the report noted, referring to the values at the Port of Nueva Palmira.

The CED also pointed out that the 2021/2022 harvest will result in the highest production of this crop in the last five years, with an estimate of close to 3,000,000 tons.

That, on the one hand, is due to an 8% increase in planted area compared to the previous season, to 980,690 hectares. On the other hand, it is due to the higher average productivity per hectare (3,000 kilos).

Speaking to Bloomberg Línea, CED economist Ignacio Umpiérrez remarked that “the three key variables were aligned” for a good harvest concerning weather, prices, and yield per hectare.

Uruguay recorded good rainfall levels in the second half of January, allowing summer crops to be developed, unlike the problems experienced by competitors such as Paraguay, Argentina, and southern Brazil.

At the same time, prices consolidated after the outbreak of the war. “The Russia-Ukraine war has come to firm the price at high levels, which does not look like it will change in the short term. There is still a fairly tight market, with supply tight and demand buoyant,” he said.

“In this 2022, the number of days that soybeans have been above US$600 is an absolute record high compared even to the commodity supercycle years,” he added.

On the yield, which generated “intrigue”, the economist said it would finally be “very good” and above the historical average.

“That, together with the increase in area, is going to generate a production of 3 million tons, which is high,” he synthesized.

Thus, the CED pointed out that soybeans and beef underpin a new record year of exports for Uruguay. In the first five months of the year, Uruguayan placements of goods for US$5.5 billion, 40% more than the same period of the previous year.

The year 2021 represented, for Uruguay, the year with the highest level of exports since records exist with US$11.6 billion, but the trend of 2022 allows to visualize that it will be surpassed.

Unindustrialized Uruguayan soybeans are placed in few markets, with sales to China accounting for more than half of the total value exported, where they pay a 3% tariff. However, in recent years the incidence of markets such as Egypt, Bangladesh, and Turkey has increased.

BY ZONES AND EMPLOYMENT LEVEL

The areas of Uruguay with the highest concentration of soybean crops are the departments of Soriano with 235,000 hectares, Colonia with 160,000 hectares, and Río Negro with 141,000 hectares, according to data from the Ministry of Livestock, Agriculture, and Fisheries.

According to numbers prepared by CED based on microdata from the Continuous Household Survey of the National Institute of Statistics, the oilseed sector employed 3,993 people on farms and 4,338 in support services during 2021.

Although there has been a decreasing trend in recent years since 2014, due to the fall in the sown area, the research center warns that this may be reversed in 2022 due to the increase in the cultivated area, better prices, and favorable weather.

Preliminary data from some sectors give the guideline. Only the logistics to move soybeans from the farms to the ports in this harvest generated about 2,000 workers for freight, with a wage bill of US$3.6 million and a gross production value of US$90 million in the transfers item, the report said.

With information from Bloomberg