Covid-19 restrictions affecting the soybean crushing industry in Argentina

Argentina ranks as the world’s top supplier of soymeal and third largest exporter of soybeans. The largest soy crushing plant is located in Rosario, Argentina which handles most of the country’s soymeal production and export.  Soybean and corn industries are two of Argentina’s main sources of export earnings.

Argentina: Production and Exports of Soybean Meal (1000T)

  Production Exports
2017 31,963 30,570
2018 27,757 26,134
2019 31,537 30,139

Source: Oil World

Logistics disruptions in Argentina are causing soybean shortage at the crushing plants, putting strain on crushing activities and affecting soybean oil and soymeal production and export. The country’s preventive measures against the coronavirus pandemic have created disruptions in the supply chain of the soybean industry. 

Soybean deliveries to crushing plants have been delayed after more than 70 municipalities throughout the country are enforcing precaution measures by controlling the movement of farm produce through their jurisdictions (Reuters, April 2020). Argentine municipalities are installing roadblocks and restricting truck movement causing a decline in truck deliveries of soybeans and soy-based products to plants and ports. According to Reuters (March 2020), supplies of soybeans from farms to Argentina’s export hub of Rosario declined by more than 50%. The situation is made worse by the decision of the Argentina government to impose stricter inspections of incoming cargo ships to curb any possible virus spread by crew members. This situation creates further delays and backlogs of the exports from Argentina.

On the other hand, this could create market and supply opportunities to other competing suppliers particularly Argentina’s rival competitor; the United States. CBOT soybean futures was up by 0.4% at USD 8.50 per bushel as of 15th April, having dropped to its lowest in March. This increment is supported by a pick-up in export demand for US commodities (Reuters, March 2020).

Due to insufficient soybean oil and soymeal production from Argentina, demand for US supplies have picked up. The volume of soybeans crushed in February at US plants is at 4.9 million tonnes (181.6 million bushels), rising by 7.7% on the year, according to the National Oilseed Processors Association (NOPA). The U.S. Department of Agriculture forecasts Argentina will export 30 million tonnes of soymeal this season while US is expected to export 12 million tonnes (Reuters, March 2020).

Chinese buyers have already started purchasing US soybeans because of the current low stocks at several Chinese crushing plants. China’s national weekly soybean inventories have fallen sharply, reaching 3.316 million tonnes by March 23, their lowest levels since at least August, 2010 (Reuters, April 2020). China has bought 8 cargoes of soybeans, to be shipped in the April-May period, over the past two weeks according to S&P Global Platts. The slowdown in ethanol production has caused issues in the protein market, decreasing supplies of dried distillers grains which is the byproduct of ethanol. This on the other hand is pushing soymeal price higher on the expectation of increased meal demand.

Sources :

  1. Reuters, 26 March 2020. https://de.reuters.com/article/argentina-grains-idAFL1N2BI0G7
  2. Reuters, 27 March 2020. https://www.reuters.com/article/us-argentina-grains/supply-of-soy-to-argentine-livestock-feed-factories-down-by-half-and-falling-idUSKBN21E2FH
  3. Reuters, 2 April 2020. https://www.reuters.com/article/health-coronavirus-argentina-grains/argentine-farm-export-dollar-revenue-dives-6-9-in-march-due-to-pandemic-idUSL1N2BP11J
  4. Oil World, 3 April 2020. No. 13 Vol. 63. The Corona Pandemic Is Threatening Supplies of Some Key Exporting Countries in South America and Southeast Asia
  5. National Oilseed Processors Association (NOPA)
  6. S&P Global Platts

Prepared by Zainuddin Hassan and Nur Adibah 

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