Brazil ready to supply Argentina with soybeans for the its crushing industry
04.04.2023 (Merco Press) - Brazil has enough potential to supply up to half of the soybeans that Argentina will import to keep its industrial park running in the face of the historic drought that ravaged the 2022/23 crop in the country, which is usually the largest exporter of soy oil and soy meal in the world.
Argentina, which is expected to reap a mere 25 million tons this season, may have to import up to 10 million tons of soy, more than double than in previous years, mainly from Paraguay and Brazil, according to cereal traders.
Meanwhile Brazil is harvesting a record crop and could increase sales to Argentina by at least ten times, said Sol Arcidiacono, the Rosario-based head of Latam Grains at HEDGEpoint Global Markets.
Brazil will export at least 3 million tons to Argentina, but if international soy meal prices pay off, that volume can reach 5 million tons, Arcidiacono said, adding that Argentine crushers’ margins are currently negative.
The expert also noted that sales by Argentine farmers are at their lowest levels in 20 years, in addition to the fact that the country is experiencing one of the worst droughts in 100 years, which reduced the oilseed crop by 45% from initial estimates.
“They are holding on to soybeans until the harvest without pricing,” she said, noting that this is one of the factors driving imports to record levels this season.
According to Arcidiacono, the price of grains has been a problem at the time of sale, both due to the lack of references and negative crushing margins, since supply is still low in the country, also considering that the harvest is just beginning and imports from Brazil are still relatively small.
According to Carlos Gogo, a consultant, Brazil may export up to 97 million tons on the back of a bumper crop. Some 5 million tons may be shipped to Argentina, or more, depending on Chinese demand, he added.
Cogo pointed out that Paraguay is also a key regional supplier but has a limited output, as its soy crop is estimated at around 8.8 million tons. The US Department of Agriculture (USDA) estimates the Paraguayan 2022/23 harvest at 10 million tons.
Bolivia and Uruguay will supply soy to Argentina, albeit at lower volumes, analysts estimate. Although Uruguay has also suffered a serious drought with poor yields.
Cogo commented that Brazil shipped almost 230,000 tons of oilseeds to Argentina in the first two months of 2023 compared to only 167 kilograms in the same period last year, which indicates that volumes will increase throughout the year.
“This year, purchases from Argentina should jump to 10 million tons as the crop losses are very high, and crushing is reduced.”
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In light of the impending national elections in Argentina, growing political and macroeconomic uncertainty, and meager carry-over stocks after the lowest harvest in two decades, Arcidiacono noted that the increased interest in imports should continue in the year’s final quarter.
There are reports of shipments of Brazilian soybeans leaving for Argentina from Porto Murtinho, in the state of Mato Grosso do Sul, and Santarem, in the state of Para, a market source said.
“I understand that the price in Brazil dropped so much with the record harvest that it became feasible to export (to Argentina) from Northern ports,” the source said.
The source recalled that, in addition to historical output, sales by Brazilian farmers have been good in recent weeks, with producers without space to store grains.
“The basis of soybeans in Brazil follows with a discount compared to the quotation of the Chicago Stock Exchange,” he pointed out.
Agrinvest soybean analyst Eduardo Vanin said if Brazilian soy premiums continued to fall, Brazilian suppliers will remain competitive against their Paraguayan counterparts to sell to Argentina.