Argentina soybean crushing to hit fresh lows

Argentina's soybean crushing could fall to multi-year lows in 2022-23, as its drought-stricken domestic output is increasingly unable to meet processors' demand, with a number of plants already halting operations, awaiting imports from Paraguay and Brazil.

The sharp year-on-year decline in Argentina's 2022-23 soybean production is affecting the domestic crushing industry, with plants likely to be forced to import soybeans from Paraguay and Brazil to cover local demand and keep processing going, Gustavo Idigoras, head of Argentinian oilseed industry chamber Ciara, has said.

Argentinian farmers have sold 4.12mn t of 2022-23 harvest soybeans to the domestic industry so far, less than half of the 8.6mn t of new-crop sold at the same time last year. Farmers have been reluctant to sell amid persisting unfavourable weather for the crops and in anticipation of further yield losses.

This could lead to higher soy imports from neighbouring Brazil and Paraguay, with market participants estimating up to 6-8mn t of receipts to keep processing plants operating. Some crushers anticipated imports to rise as much as 9mn-10mn t in 2022-23, stating that crushing volumes this year could fall to their lowest to date.

The US Department of Agriculture (USDA) projects Argentina's crushing at 35.25mn t for 2022-23, down from 38.83mn t a year earlier and soybean imports to rise to 7.25mn t from 3.84mn t a year ago. Both projections were revised down and up, respectively, from earlier estimates, reflecting lower production.

Meanwhile, USDA pegged Paraguay's — the third-largest exporter of soybean seeds and oil in South America after Argentina and Brazil — 2022-23 soybean production at 10mn t, with its exports projected to reach 6.4mn t from 2.27mn t in 2021-22. And some portion of Brazil's record soybean crop is expected to be delivered into Argentina.

Temperatures in Argentina over November-January were at their highest for the period since 1961, according to the national weather service's data. The drought began in 2019 and intensified in 2022 amid repeated La Nina weather conditions. Argentina also received its lowest rainfall in four decades in the final quarter of 2022.

The Rosario Board of Trade and Buenos Aires Grain Exchange last week cut their projections for Argentina's 2022-23 soybean output to multi-year lows of 27mn t and 29mn t, respectively, down from their previous estimates of 34.5mn t and 33.5mn t, and below the 33mn t estimated by USDA, as volatile weather in February caused additional crop losses. But a number of Argentinian traders told Argus that they are already working with a production estimate of 24-25mn t or as low as 20mn t.

By Krisitn Yavorska