Argentina expected to regain first place in soy meal exports despite fierce competition

Argentina is on track to regain its position as the largest soy meal exporter in 2023-2024, with its soybean crop  – which has nearly doubled in size – starting to be harvested, but the country faces increasing competition from Brazil and the US for global market share, Fastmarkets understands

Argentina’s soybean output is forecast at 49.7 million tonnes in 2023-2024, up by 99% from 25 million tonnes in the previous crop year, the country’s Secretariat of Agriculture, Livestock and Fisheries (Sagyp) said last week in its first estimate of the new crop production.

The US Department of Agriculture (USDA) expected a similar soybean output at 50 million tonnes, with Argentina to increase its share in global soy meal exports to 34.8% in 2023-2024 from 30.8% in the previous crop year.

Brazil became the largest soy meal exporter in 2022-2023 amid production losses in Argentina, but this year, its share is expected to decrease to 29.4% from 31.7%, returning to second place, while the US market share is anticipated to increase to 20.5% from 19.8%, according to the USDA.

Argentina’s soybean crush industry intended to at least return to historical soybean crush levels of around 36 million tonnes in 2023-2024, leaving behind “one of the worst agricultural campaigns” in its history, Gustavo Idigoras, president of oil industry chamber Ciara-CEC, said in a recent webinar.

“The annual rate we used to have on soybean crush was around 36 million tonnes per year, and we, as an industry, are trying to work on that level for this year,” Idigoras said.

In 2022-2023, after losing 30 million tonnes of soybeans due to a drought, Argentina’s soybean crush levels fell to 27 million tonnes, down by 30% year on year.

Higher crush volumes anticipated

Local analysts expected even higher crush volumes in 2023-2024.

Rosario Grains Exchange (BCR)’s latest estimate was 39.6 million tonnes, considering that soybean supply is higher and demand for Argentina’s soy meal “continues to be strong,” Guido D’Angelo, analyst at BCR, told Fastmarkets.

“We had a campaign last year [that should be] forgotten, so the international market is waiting for Argentina’s return,” D’Angelo said.

Export prices of Argentinian soy meal in Up River ports remained 1.3% higher than their Brazilian counterpart in the Port of Paranaguá for May loading and 0.5% higher for June loading, according to Fastmarkets’ latest assessment.

Argentinian soy meal prices were higher than in Brazil because of harvest delays due to excess rain in Argentina, according to D’Angelo.

Market sources said farmer selling has also been slower in Argentina compared with Brazil, where a recent devaluation of the Real led to increased soybean sales amid strong crushing demand for biodiesel blending.

That said, sources expected Argentinian soy meal prices to become more competitive once local harvest and sales pick up.

“Argentinian soy meal prices should come down versus Brazil,” one Argentina-based source said.

Independent market analyst Javier Preciado Patiño said he is also “more optimistic” than the local industry, estimating soybean crush around 40 million tonnes, but in a more competitive environment for soy meal exports.

“Everything suggests that it will be a complicated campaign, with supply putting downward pressure on prices, so there will be competition among the three origins in the international markets based on industrialization costs and the domestic soybean price,” Patiño told Fastmarkets.

“We are confident that the Rosario crushing hub is extremely competitive and the industry based in Argentina will be able to export without difficulty, despite competition from Brazil and the US,” Patiño said.

Argentina is expected to export 28.0 million tonnes of soy meal, up by 51% from the previous campaign and by 10% from the previous five-year average, according to BCR.

The figure is similar to Ciara-CEC’s estimates of 27-28 million tonnes for Argentinian soy meal exports.

“We will see if we can recover our position as the first [global] supplier, but that will depend a lot on US and Brazilian offers,” Idigoras said.

Soy meal supply to increase

The global oilseed crushing industry is growing due to increased demand for oils in the biofuel sector; Brazil and the US are competing for a larger share in typical import markets for Argentina’s soy meal, such as Vietnam, Indonesia and Malaysia.

One of Argentina’s strategies to differentiate itself from competitors is the Argentinian Gran Chaco Sectoral Vision (VISEC) program to certify that soybeans and soybean products come from areas that have been deforestation-free since December 2020, the cut-off date in new regulation from the European Union – the second-largest global soy meal importer region after Southeast Asia – set to enter into force on December 30, 2024.

The main threat for Argentinian soy meal is that, in Brazil and the US, domestic demand has not been growing as fast as crushing levels, leaving more soy meal to be exported instead, BCR said in a recent report.

Between the 2013-2014 and 2023-2024 campaigns, Brazil and the US increased their soybean meal production by just over 12 million tonnes per marketing campaign, according to BCR.

In Brazil, 50% of this soy meal production increase was destined for export; in the US, it was around 30%.

“With prospects that both countries will continue to increase their blending of biofuels and demand more soybean oil, it is feasible that soybean crush will continue to grow and competition will increase to place surplus soy meal on the international market,” the report said.

Argentina will face tougher soy meal export competition this year already, Scott Gerlt, chief economist for the American Soybean Association, told Fastmarkets.

With domestic soybean crush capacity expanding in the US, Gerlt expected increased exports out of the country.

“While the domestic market can absorb some more meal, much of it will likely be exported. We have seen upgrades to export terminals in the Pacific Northwest to be able to handle the additional meal,” Gerlt said.

But in the short term, US soybean meal stocks have been getting tighter amid seasonal downtime, and Argentina’s soy meal was expected “to undercut” US shipments until Argentinian supplies for export start to slow, Terry Reilly, senior agricultural strategist for Marex, told Fastmarkets.

“US soybean meal exports will not stop as long as crush plants run at high daily rates, but Argentina should become the number one exporter during the remainder of spring and summer months [of the Northern Hemisphere],” Reilly added.

Strong performance from the Brazilian market

In Brazil, soybean crush is expected to hit 54.5 million tonnes in 2023-2024, up year on year from 54.2 million tonnes, but soy meal exports are expected to decrease to 21.6 million tonnes from 22.5 million tonnes in the previous crop year, according to the Brazilian Association of Vegetable Oil Industries (Abiove).

“The decrease is mainly due to increased competition with Argentina, which is expected to grow its share of soy meal exports compared with the previous year,” Daniel Furlan Amaral, director of economics and regulatory affairs at Abiove, told Fastmarkets.

Nonetheless, Brazil started the year at a strong export pace, having shipped 5.4 million tonnes of soy meal abroad in the first quarter, up by 15% year on year from 4.7 million tonnes, and the country is diversifying its export destinations.

“The Middle East is a destination that has been growing significantly in purchasing Brazilian soy meal,” Amaral said.

Shipments to Middle Eastern countries increased by 138% year on year in January-March, although Southeast Asia and the EU remained the main importers for Brazilian soy meal.

A strong dip in Brazil’s soy meal shipments is unlikely, considering that foreign consumption is expected to grow, Francisco Queiroz, analyst at Itaú BBA’s Agribusiness Consulting, told Fastmarkets.

“The outlook is for global meal production to increase, and the growth in soy meal supply should keep prices very competitive on the international market, favoring increased demand,” Queiroz added.

Global soy meal production is expected to grow mainly because of a strong economic outlook for Southeast Asia – the largest soy meal importer region – with rising meat production and consumption leading to higher soy meal imports, BCR’s Guido D’Angelo said.

The USDA forecast global soy meal imports at 67.41 million tonnes in 2023-2024, up by 7.1% year on year, with Southeast Asian countries expected to show a 6.2% increase in imports.

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