Foreign sales of maize and soybean by-products accelerate

Despite still being negative, the industry’s theoretical margin is decompressed, boosting sales. In maize, business totaled 1.3 million tonnes in just two days, although due to the lack of water, the area pending planting is the second highest on record.

The bulk of the DJVE of the soybean complex recorded since the end of September are of manufactured products

One of the serious consequences of the fall in soybean production in the current season lies in the impact it has had on the industrial production of oilseed by-products, the star product of Argentine exports, as evidenced by the fact that soybean crushing so far this season has reached 18-year lows at the same time as record idle capacity.

On September 04^th the government made official by means of Decree 443/2023 the fifth instance of the Export Increase Programme (PIE V) for the settlement of exports of the soya complex made between September 05^th and 30^th, which was extended by means of Decree 492/2023 until October 25^th. Among the recitals of the resolution, the objective of generating greater dynamism in the activity of the Argentine crushing industry is mentioned.

Taking into consideration only the Sworn Declarations of Sales Abroad (DJVE) for shipment within the next 360 days, during most of September it was observed that the DJVE recorded under PIE V were for unprocessed soybeans. However, towards the end of last month and so far in October, the bulk of the DJVE recorded correspond to by-products of the industrialization of soya beans.

If we analyze the theoretical margin of industry and export, the price ratio at the beginning of PIE V favored grain exports relatively more than industrial exports, since the margin of the former was positive during most of September, which justifies that most of the sales abroad during this period have been of unprocessed soybeans. However, since the end of last month, there has been a deterioration in the theoretical gross export margin, which moved into negative territory and is now even below the theoretical gross margin of the industry. Thus, the spread in favour of industrial exports over grain exports improved in relative terms, even though both are in negative territory. In this context and within the framework of the PIE V, foreign sales of manufactured oilseed products were boosted in the last few days.

As for the commercialization of the oilseed in the local market, during the week it has been observed that the meagre volume available for commercialization is having a bullish impact on the price of November soybean futures in Matba-Rofex. Considering that one fifth of the open interest in soybean are contracts maturing next month, the prices of the financial instrument have grown by 21% from mid-August to the current date in the face of a demand that does not find support in production. In this way, the drought is making its impact felt on the Argentinean futures market, considering that in the same period the Chicago soybean showed a drop of approximately 4%.

The maize area to be planted is the second highest on record

Water shortages due to the lack of rainfall continue to delay maize planting throughout the country. Weekly data from the Secretariat of Agriculture, Livestock and Fisheries (SAGyP) show a sowing progress of 18% of the estimated area, which is just 1 p.p. ahead of the progress of the same period last year but indicates a delay of 11 p.p. with respect to the average of the last 5 years.

The area to be sown of the cereal currently reaches 82% of the target area and is shown as the second highest recorded both in percentage and absolute terms, only behind the 2022/23 campaign. If planting is achieved in the total estimated area, the 2023/24 season will again be a late maize season, postponing the harvest of the cereal mainly to the months of May and June. However, part of these lots could eventually be switched to soybeans, considering the context of financial and climatic uncertainty surrounding the current season, mainly following the poor results of the 2022/23 season.

New supply and demand estimates from the USDA

Last Thursday, the United States Department of Agriculture (USDA) published its monthly report on World Agricultural Supply and Demand Estimates (WASDE). The report shows a 1.1 million tonnes reduction in US soybean production for the 2023/24 compared to the estimates published in the September report, placing it at 111.7 million tonnes, due to a drop in yields. In addition, the agency cut global production of the oilseed as a result of lower US output, leaving supplies from Argentina, Brazil and Paraguay unchanged. On the export, US sales are projected to fall due to increased competitiveness of South American countries, mainly Brazil.

On the maize side, production was estimated at 382.6 million tonnes in the United States, 1.8 million tonnes lower than the figures published in September due to the drop in yields. Exports, use of corn as feed and use as residue were also reduced, although by less than the drop in production, thus lowering the estimate of final stocks.

However, the estimate of world cereal production was increased, mainly because of a 1.0 million tonnes increase in Argentina’s production due to the forecast of a larger planted area. Along with the higher supply, the USDA increased by 0.5 million tonnes the projection of Argentinean exports for the coming season.

The cut in production of both crops had a clear upward impact on prices following the release of the report. Additionally, during the week it was noted that drought in Brazil is disrupting barge traffic on the Tapajós River in the Amazon rainforest, while in the US, low water levels in the lower Mississippi River are expected to persist at least until January, even though above-normal rainfall is expected in the US South this winter. In the immediate term, low river levels in both countries complicate their export logistics and underpin both soybean and maize prices, while there are fears that the drought in Brazil will also affect heavy planting.

Source: https://bcr.com.ar/

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