Oil industry idle capacity to reach 70% by the end of 2022/23 season
Oil industry idle capacity to reach 70% by the end of 2022/23 season
Soybean crushing in the first four months of the season is the lowest since 2007/08, while the industry’s idle capacity is on the rise. Soybean imports so far in 2023 have already surpassed the annual record.
Soybean crushing in the first four months of the current season is the lowest in 15 years, while idle capacity in the industry could reach 70% by the end of the season.
The historic drought that affected the current season cut soybean production by more than 50% compared to the previous year, with a harvest of only 20 million tonnes expected for the 2022/23 season, compared to the 42.2 million tonnes reached during the previous season. One of the main impacts of this unprecedented drop in soybean production has to do with the oil and flour industry, which uses soybeans as its main input, bearing in mind that a large part of the oilseed’s production is destined for local industry. In this context, if we analyze soybean crush during the first four months of each season, it is at historically low levels during the current cycle. According to data from the Secretariat of Agriculture, Livestock and Fisheries (SAGyP), the crush of the oilseed amounted to 11.9 million tonnes from April to July this year, the lowest volume in 15 years.
In terms of what is projected for the rest of the season, monthly soybean crush is expected to be lower in the months to March 2024. This is related to purely seasonal issues, where during the early months of the season, abundant supply as a result of the harvest brings higher crush volumes, while these volumes tend to decline as the season progresses. However, this situation is worrying in the current context, given the meagre volumes in the months already elapsed.
The industry’s current milling capacity is estimated at 67.5 million tonnes per year in active plants, equivalent to 5.6 million tonnes per month. If we compare these values with the monthly milling projections for the coming months, we observe that by the end of the current season we would reach an idle capacity of around 70%.
In only 7 months, Argentina surpassed the annual record of soybean imports.
To partially counteract the effect of the drought on the industry and alleviate idle capacity, there has been a high volume of soybean imports so far this year compared to previous years. Analyzing historical data provided by the National Institute of Statistics and Census (INDEC), it is observed that 2018, also impacted by a severe drought, marked the year with the highest volume of imports of the grain, with an accumulated total of 6.4 million tonnes for the 12 months of the year. However, the latest data compiled by INDEC show that so far in 2023, Argentina has accumulated a total of 7.2 million tonnes of soybean imports. In other words, in just 7 months Argentina surpassed the historical annual record of soybean imports.
However, despite the record number of annual imports, if we analyze the numbers month by month, we can observe a 37.5% drop in soy imports from June to July. This drop is mainly due to the lower volume of imports from Brazil. While in June the purchase of soya from the neighbouring country reached 1.1 million tonnes, in July this amount fell to 0.6 million tonnes, a month-on-month drop of 47.1%.
As for what is projected for the remaining months of 2023 in terms of imports, these are expected to continue to fall.
Source: https://bcr.com.ar/
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