Pressure on Argentina’s soy crushing sector

By Jane Byrne contact

- Last updated on GMT

© GettyImages/Phototreat
© GettyImages/Phototreat

Related tags: soy crushing, export tax

Soy exports from Argentina have been hit by production, logistics and tax bottlenecks, according to the latest analysis from S&P Global Platts.

Argentina, the world’s leading soybean meal exporter, has been facing supply constraints caused by prolonged dry weather conditions, coronavirus-related logistical issues, receding river levels and rising export taxes in recent months, reported​ the analysts.

The country's soybean crushing sector has reportedly experienced challenges in procuring raw soybeans due to coronavirus related restrictions, with truck deliveries disrupted by the pandemic.

The number of trucks loaded with beans entering Argentinian ports was 60% to 75% lower than the same period a year ago, said Platts, citing commodities transporting firm, Agroentregas.

Quarantine steps at Argentinian crushing plants and ports could also support Brazilian soybean meal exports.

The USDA in a FAS report​ last month, said that at least some processing capacity could be temporarily offline for disinfection in the coming months, as the number of COVID-19 cases increase in Argentina.

"The Argentine lockdown is one of the most aggressive in the region but because of its critical importance for providing food and feed to Argentina and the world, the agricultural industry has largely been allowed to continue functioning by national authorities. However in recent weeks, conflicting local and provincial regulations around transportation and sanitation have contributed to confusion and slowdowns at the Argentine river port complex along the Parana River. Through consultation, most of these restrictions have been lifted, leading to more normal operations. However concern remains that outbreaks of COVID-19 among processing plant employees or truck drivers could lead to a temporary loss of processing and export capacity in coming months."

Receding river levels, export taxes

Meanwhile, water levels on all major rivers in the country, including the Parana, have fallen significantly due to prolonged drought in the region, which has affected port operations, said the Platts team, referencing data from Bolsa de Comercio de Rosario (BCR).

In recent days, Argentina has experienced heavy rains which may increase the Parana's level in three weeks, a market source told Platts. However, until then, the crushing industry may have to make do with their existing raw beans inventory, said the analysts.

On top of those production and export constraints, the new Argentinian government has resorted to taxing the country's soybean sector as a fiscal measure.

Taxes on soybean and soy products were raised 9 percentage points to 33% in March, limiting farmers' soy sales intentions.

Typically, 92%-93% of Argentinian soy meal production is exported but the export tax increase could see that level drop below 90% this year, said Pete Meyer, head of grain and oilseed analytics at S&P Global Platts.

With most soybean farmers reluctant to sell in a lower production and high tax environment, Argentina's crushing sector may have to be dependent on imported beans during the coming months, said Platts, citing industry sources.

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