Almost all of the DJVE of the soya complex recorded since the introduction of PIE V are for unprocessed grain

Almost all of the DJVE of the soya complex recorded since the introduction of PIE V are for unprocessed grain

The cause could be found in the differential in gross margins that exists between the industry and exports. In the meantime, corn mutual funds in Chicago are trading at 2020 levels.

99.7% of the DJVE of the soybean complex recorded as of PIE V are grain exports

In the context of a campaign marked by a brutal drought, one of the sectors that most absorbed the negative effects of the same is the soybean oil industry. According to data from the Secretariat of Agriculture, Livestock and Fisheries (SAGyP), the lower production of the oilseed led to the amount of milling during the first 5 months of the campaign to reach 14 million tonnes and is at minimum levels since the 2004/05 cycle.

On 04th September, the Minister of Economy established, by means of Decree 443/2023, the fifth instance of the Export Increase Programme (PIE V). Unlike previous editions in which the exporter could liquidate the currency at a differential exchange rate, in the current instance the exporter can freely dispose of 25% of the dollars generated by the export of products from the soya complex, liquidating the remaining 75% at the official exchange rate. The establishment of this new stage of the programme generated greater dynamism in the first days for the commercialization of the oilseed, as evidenced by the operations registered through SIO Granos, where it is observed that since the beginning of PIE V, operations for more than 3.1 million tonnes of soybeans have been carried out.

However, it is interesting to observe the Foreign Sales Affidavits (DJVE) of the soybean complex recorded since the beginning of PIE V, taking as such those submitted since 05th September for shipment in the next 360 days, it is observed that 99.7% of them correspond to soybean exports, while the remaining 0.3% cover soybean oil and by-products. In this context, an important fact to highlight is that the prices of the most important international vegetable oils have shown a downward trend in recent months, partly because of the easing of tensions between Russia and Ukraine and the availability of a better production from the Black Sea region than originally expected, despite the continuation of the war.

Meanwhile, the price of crude oil, one of the main determinants of the value of vegetable oils due to their substitutability as a fuel source, has been on the rise in recent months. In addition, this week the Russian government introduced temporary restrictions on gasoline and diesel exports to stabilize its domestic market, giving an additional boost to oil prices. This could eventually put a floor on vegetable oil prices and fuel the rebound.

Chicago corn mutual funds reached their largest net sold position in three years

Although Chicago corn mutual funds were already in negative in the last month, they reached a net position sold of 17.1 million tonnes. This volume has not been this low since at least August 2020.

The net sold position would seem to indicate that market participants expect the downward trend in prices to continue, considering that prices have fallen by 30% so far this year. In fact, over the past week, corn prices in Chicago plummeted to the lowest since 2020. This brutal decline is underpinned by harvest pressure in the US Midwest, which began earlier this month, as opposed to weak export demand as a result of large shipments from Brazil.


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