January 2, 2024

 

Latin American soybean crushing expected to surge in 2024

Latin American soybean crushing volumes are anticipated to witness a substantial increase in 2024, propelled by a recovery in Argentina's crop output and an elevated biodiesel mandate set for Brazil, S&P Global reported.

 

Estimates from S&P Global Commodity Insights suggest that the combined crush for Argentina and Brazil is projected to reach 92.10 million metric tonnes in 2024, marking a significant 15.3% increase from 2023. This surge follows a historical drought in Argentina that led to a roughly 50% reduction in its harvest in the previous year, causing it to lose its top position for soybean meal to Brazil.

 

For the marketing year 2023-24 (April-March), S&P Global predicts Argentina's soybean harvest to reach 50.50 million metric tonnes, more than double the 22 million metric tonnes in the previous season. The availability of raw material, a critical aspect for the soybean value chain, is expected to improve with better soil moisture due to the correction of the El-Nino phenomenon, facilitating a proper planting season.

 

Javier Preciado Patino, an agriculture analyst and former undersecretary of agricultural markets at Argentina's agriculture ministry, expressed optimism about the upcoming season. He highlighted the favourable conditions, stating that 97% of soybean plots in Argentina are in normal to excellent condition, leading to expectations of a 48 to 50 million metric tonnes output.

 

Over the past three years, Argentina faced the consequences of the La Nina weather pattern, resulting in below-normal rains. But wetter conditions due to a strong El Nino are supporting local crop development this time.

 

Despite the positive outlook, there are concerns about potential government decisions impacting the industry. Argentina's new president, Javier Milei, has introduced changes in forex rates and export tariffs for soybean meal and oil. The industry anticipates a recovery in crushing activity in the new campaign, but potential export tax increases pose a threat.

 

In 2023, spot prices for FOB Upriver soybean meal cargoes surpassed those in Brazil's FOB Paranagua, deviating from the historical pattern. The market expects an increase in soybean oil purchases by major consumers like India and China.

 

India's imports of palm oil and sunflower oil surged to record highs in 2022-23, driven by increased consumption and favourable prices compared to soybean oil. Tushar Agarwal, a senior vegetable oil analyst, mentioned that Argentina is expected to increase sales post-April 2024, with potential demand surges in the first quarter of 2024. Additionally, changes in China's soybean meal feed policies may impact raw bean crush and increase oil derivative demand.

 

The European Union has witnessed a rise in soybean oil imports amid a decline in palm and rapeseed purchases. EU's soybean oil imports in MY 2023-24 (July-June) have surged, reaching 307,486 metric tonnes as of December 19, compared to 228,481 metric tonnes during the same period a year earlier, according to European Commission data from December 21.

 

-      S&P Global