How is the supply and consumption of soybeans 2022/23 in Argentina?

How is the supply and consumption of soybeans 2022/23 in Argentina?

Large carry plus record imports fail to compensate for the drop in production: crush levels fall to a minimum in two decades, and bean exports are expected to place at the lowest volume since the mid-1990s.

The 2022/23 season will go down in history as affected by one of the most severe droughts Argentina has ever experienced. The third consecutive Niña year resulted in an accumulated rainfall that, from March 2022 to March 2023, was well below normal (50% on average in the Core Region). This is in addition to the carry-over from the two previous Niña years, which had already left a very low level of water reserves in the soils. All this led to a drop in soybean production 2022/23: 25 Mil MT estimated to date, the lowest volume since 1999/2000.

A necessary clarification regarding the estimated 25 Mil MT of SB production: although the last estimate of national production of GEA-BCR in early March stood at 27 Mil MT, in its weekly report of March 16th GEA-BCR cut its estimate for the Core Area by another 2 Mil MT that were not included in the 27 Mil MT projection and will not be compensated by the rest of the country’s areas, which puts a cap on national production in precisely those 25 Mil MT. However, it should be noted that the national figure may possibly undergo further modifications when GEA-BCR makes its new production estimate in mid-April.

In view of this extremely complicated scenario, and although initial stocks for the season are estimated to be relatively high at 6 Mil MT, temporary soybean imports to supply the crushing industry are projected at 9.5 Mil MT. Paraguay could contribute 5 Mil MT, while Bolivia and Uruguay could add another 1.5 Mil MT. The question is what will happen with Brasil, as the South American powerhouse since the record harvest (153 Mil MT according to the USDA, and up to 155 Mil MT according to private consultants such as Agroconsult) has caused a sharp drop in export premiums for Brazilian beans, making the operation more attractive pricewise. For this reason, it is estimated that soybean imports from Brazil could add another 3 Mil MT, although we can’t rule out that the volume could be even higher.

Thus, given this production estimate, carryout and imported tons, the total liquidity for the 2022/23 season would reach 40.5 Mil MT—a minimum since 2008/09.

As for soybean processing, a total crush of 29.2 Mil MT is projected. This number includes both solvent extraction and crushing by pressing/extrusion. Solvent extraction soybean crushing, i.e. that which takes place in the large oilseed crushing plants (the vast majority of which are located in Greater Rosario) is projected at 28 Mil MT—a low since 2002/03.

This sharp drop in soybean crushing by solvent will have a strong impact on economic activity in the region. To mention an example, and simply considering one of the direct sectors where the impact can be seen, the entry of trucks with soybeans to the Gran Rosario terminals is projected to fall by 50% compared to a normal year. Usually, in a good season, around one million truckloads of soybeans arrive at the area’s crushing plants. However, under these crushing projections, and considering that a large part of the merchandise for industrialization would be imported, it is projected that the entry of trucks during 2022/23 will reach only 550,000 units.

Lastly, bean exports are projected at 2.8 Mil MT, the lowest volume since the 1996/97 season. This volume is mainly explained by production in the southern region of Buenos Aires and La Pampa, where completion cargos are loaded. Currently, the industry’s theoretical margin (theoretical FAS minus CACR price in US$) is negative. In view of this, and due to the distance between the harvest area and Gran Rosario area, it doesn’t make sense economically to transport beans all the way to Rosario for crushing, so it would it would be shipped out directly as beans from the seaports of Bahía Blanca and Necochea/Quequén.

In conclusion, the drought has affected soybean production in such a way that, even with a good carry-over stocks and imports projected at record levels, both crush and bean exports are expected to be at their lowest levels in over 20 years, and final stocks will be very tight for next year.


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