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While Brazil and the US are expanding soybean planted areas and
production, the third largest soybean producing country in the
world, Argentina, is seeing soybean planted area taking a step back
as compared to the previous season.
Policy, costs, competition and inflation are negatively
impacting soybeans, but corn is taking a step up. Below are some of
our forecasts on the outlook of the soybean industry in Argentina
for the 2021/ 22 season.
Soybean planting was 10% completed by November 3 in Argentina,
compared to 6% last year and 8% for the five-year average. The
fast-planting pace is related with farmers trying to adjust the
crop calendar to the expected rainfall under La Niña's
influence.
IHS Markit forecasts Argentina's soybean planted area in the
2021/ 22 season at 16.9 million hectares, down 2% from the previous
season, at the lowest level since 2007. The export tariff policy,
higher production costs, the competition with corn and the strong
inflationary pressure over processors' operating costs are behind
the reduction in the soybean planted area.
With surging production costs, especially through glyphosate
and phosphate fertilizer prices, Argentine farmers have become
increasingly perceptive of international commodity prices. Despite
lower production costs of soybeans compared to corn, corn margin is
expected to be 8% higher than soybean margin in the 2021/ 22
marketing year due to lower taxes and better prices of the grain.
Corn area has been increasing since 2016 when corn export tariff
favored corn over the soybean complex. Currently exports tariffs
are 12% for corn, 33% for soybean, and 31% for soybean
products.
The higher export tariff makes profits from soybean sales more
dependent on the crush industry performance, whose activity has
remained almost stagnated over the last ten years. Regardless of
the surge in international soybean oil prices, lower soybean meal
prices and the strong inflationary pressure on operating costs
undermined gains and led processors to operate with low margins for
months. This context reduced the relationship between actual use
capacity and installed capacity to the second-lowest level a decade
in 2021 and eroded industries' potential to pay more for the
oilseed.
With Argentina's farmer selling pace below the 5-yr average
confirms the challenges that the Argentinean soybean complex is
facing and highlights the restrictions over Argentina's crushing
activity as the country continues to lose space to Brazil and the
US in the international supply of soybean products.
Our Argentina 2021/ 22 soybean crush forecast was reduced by
500,000 tonnes to 43 million tonnes, with chances of further
reduction if our forecast for production becomes too optimistic
going forward.
Posted 11 November 2021 by Emerson Wohlenberg, Principal Research Analyst, IHS Markit
