Argentina’s soybean crushers likely to face headwinds until next harvest: Bunge

The Argentinian crushing industry is expected to face a severe supply crunch amid significant cuts in the raw soybeans output forecast for the 2022-23 marketing year, Gregory A. Heckman, CEO of grains trader Bunge Ltd., said in first quarter earnings call.

It’s going to be tough in Argentina’s crushing industry with the soy crop size down from last year’s 44 million mt to 27 million mt in MY 2022-23, Heckman said May 3. The crush capacity in rest of the world will need to replace those lost volumes of soybean meal and oil from Argentina, he added.

“We even saw beans moving from Brazil to Argentina, early; that’s going to stop [in coming days],” Heckman said. “So that makes the second half [of MY 2022-23] really tough [for Argentina],” he said.

Argentina’s crushing industry — one of the world’s largest — processes 38 million-40 million mt /yearof raw soybeans, making the South American country the top exporter of soybean meal and oil.

However, according to commodity analysts, the country’s crush sector is expected to process less than 30 million mt in MY 2022-23 amid a severe domestic supply crunch.

The expectation of a lower crush is likely to support soybean meal and oil prices amid tight supply fears.

Platts assessed Soybean Meal Argentina FOB Up River for June deliveries at $479.39/mt May 3,and Soybean Oil Argentina FOB Up River at $933.44/mt, according to S&P Global Commodity Insights data.

Argentina has been suffering one of the most severe droughts in its history since late last year, hampering the soybeans crop yield and causing widespread acreage losses in key regions.

The Buenos Aires Grains Exchange’s latest estimate on April 27 pegs the MY 2022-23 soybeans yield at 15.9 quintals/hectares, down 42.5% on the year. The Rosario Grains Exchange sees it at 18.6 quintals/ha, 32.8% lower year on year.

There is a sizable dip in soybean yield estimates across the country and a simultaneous rise in harvestable area losses, BAGE said. “If this trend continues, it could impact our current production forecast of 22.5 million mt in MY 2022-23,” it added.

Agreeing with BAGE’s concerns, commodity analysts see Argentina’s harvest prospects dipping below 22 million mt, the lowest in several decades, as key regions of Santa Fe, Córdoba and Buenos Aires were battered by severe heat waves as recently as March, leading to large-scale crop losses.

As a result, commodities analysts expect Argentina to import nearly three times higher volumes of soybeans on the year at 11 million mt in MY 2022-23, making it the second-largest purchaser in the world behind China, which is not an ideal scenario for the cash-strapped country.

The South American country’s soybean supply woes are not seen recovering at least until the next harvest, Heckman said.

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