May 11, 2004

Argentina's 2005/06 Soybean Production Forecasted At 39 Million MT

Argentina's total soybean production in MY 2005/06 is forecast at 39 million metric tons, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site, dated April 26.
 
Executive Summary
 
The Argentine agricultural sector is the engine that is bringing the country out of the doldrums it experienced after the devaluation in 2001, the report said. New machinery and infrastructure investments can be seen throughout the historical production areas in central Argentina, as well as in nontraditional grain and oilseed agricultural areas such as the Chaco and La Pampa. Oilseed, especially soybean, producers are in the best financial position they've been in for years and crushing facilities are working at full capacity to keep up with the export demand.
 
Not only is the agricultural sector benefiting from an increase in world market prices, the Government of Argentina (GOA), as well is reaping the benefits of higher FOB prices. In CY2003, export taxes for all agricultural exports, calculated using FOB prices, accounted for over US$2 billion of income for the GOA. This income is mostly used to finance social programs.
 
Increased on farm storage, via silo bags, has allowed producers more flexibility in selling decisions. No longer do producers have to turn over their production at the moment of harvest and/or pay fees to store grain in storage facilities. They can now keep grain in their 'backyard' and decide the opportune moment to sell.
 
While there have been worries over soybean rust outbreaks, and increasing input costs, the outlook for oilseeds and products in the next year is excellent. As long as prices remain relatively stable to up, the agricultural sector will continue growing.
 
PRODUCTION
 
Soybean
 
While planted area in Argentina's most productive agricultural area, the Pampa Humeda, is saturated with soybeans, total planted area in MY05/06 will depend on planting decisions in nontraditional production areas, such as the Provinces of La Pampa, Chaco, Salta, Misiones, and Corrientes. Planting decisions will definitely be based on price, and if the rhythm of the market over the past months continues, it will be hard to find a producer who will not dedicate at least some area to soybeans. The question remains, however, how much more land is there that can be planted to soy?
 
On the other hand, various factors may limit production in the coming year. The first factor is an increase in the price of glyphosate. Due to a supply shortage in China that significantly reduced the availability of glyphosate imported into the Argentine market, glyphosate-based herbicide prices have almost doubled. Prices range from US$4.20/liter for herbicides made with imported glyphosate to US$4.70/liter for herbicides manufactured with locally produced glyphosate. Whether the increase in prices will continue is yet to be determined.
 
Another factor in the coming year will be the risk of soybean rust. The Secretariat of Agriculture, Livestock, Fisheries, and Food (SAGPyA), reports that soybean rust may have been detected in northern and eastern Tucuman, southeast Chaco, eastern Salta, and northern Santa Fe, as well as in the provinces of Misiones and Corrientes. The National Soybean Rust Program collected samples of a suspicious looking fungus and is conducting tests to confirm the presence of soybean rust. Over the past week, early autumn rains combined with moderate temperatures, provided the perfect climatic conditions for rust to develop in these areas. However, even if its presence is confirmed, damages are expected to be minimal due to the advanced stage of crop development.
 
There is a chance, if its presence if confirmed, that rust will persist and reappear during the next season. If this is the case producers may face lower yields, as well as the cost of fungicides to treat the rust. Fungicide can run between US$23-35/ha not including application costs. Overall, increases in production costs due to increased variable input costs, coupled with the risk of yield reductions due to rust may have producers scrambling to recalculate their margins before next years planting.
 
As producers increase wheat area, second crop soybean plantings are forecast to increase. Overall MY05/06 harvested area is expected to be 14.2 million hectares (has), slightly higher than last year, the report said. In the absence of drought, production should increase compared to MY04/05. Assuming a yield of 2.7 MT/ha, slightly above the five-year average yield of 2.6 MT/ha, Post forecasts MY05/06 production is forecast at 39 million MT on 14.2 million has.
 
This year's harvest is off to a slow start. The drought that delayed planting and affected the last few months of the growing season has given way to downpours in some areas, forcing producers to delay harvest. As of April 23, only 40% of area was harvested, compared to 60% at the same time last year.
 
Production estimates for MY04/05 range widely. Some analysts' estimates are as low as 31 million MT, while others over 35 million MT. As one industry contact pointed out, due to the increase in on-farm storage, the market is still trying to finalize MY03/04's production.
 
Historically, SAGPyA's report of stocks in public places was considered the total stock number.
 
Over the past years, however, the increase of on-farm storage, via silo bags, has added much uncertainty to stock calculation. Only when the "silo bag beans" begin entering the marketing chain, in the form of exports or milling, can the market concretely put a number on production. Taking this into consideration, conservative production changes may be prudent until we get a little further into the MY. Post maintains its MY04/05 production estimate unchanged.
 
Sunflowerseed
 
Sunflowerseed plantings are expected to rebound this year, after last year's drought at planting time. An increase in sunflowerseed prices over the past few months, compared to last year, support this rebound in planted area. FAS/Buenos Aires forecasts harvested area in MY05/06 will be 2.35 million has. Forecasting yields near the five-year average, Post forecasts MY05/06 production at 4.0 million MT.
 
Sunflowerseed plantings in MY04/05 were down due to drought during planting. As the drought continued and optimal planting dates passed, many producers decided to not risk late sunflowerseed planting and switched to soybeans. This year, however, it is expected sunflowerseed plantings will return to normal levels, assuming no unforeseen climatic shocks.
 
Based on official data, which reflect the impact of the drought, FAS/Buenos Aires revises its MY04/05 harvested area to 1.83 million has and places sunflowerseed production at 3.24 million MT.
 
Peanut
 
Assuming the weather cooperates, harvested peanut area should rebound in MY05/06. Post forecasts MY05/06 harvested area at 190,000 has. Estimating average yields, production will be approximately 399,000 MT (in-shell).
 
Drought affected peanut plantings in November-December 2003. Originally, producers expected to plant around 190,000 has, but the unfortunate climatic conditions forced a reduction in area of about 14% compared to initial planting intentions. Recently, SAGPyA reports final planted area at 163,000 has. The harvest is just beginning in many areas and if the first harvested fields are any indication of average yields, production should be higher than initially expected.
 
FAS/Buenos Aires revises its MY04/05 harvested area and production estimate to reflect this new data. Harvested area and production are reduced to 163,000 has and 324,000 MT, respectively.
 
Cottonseed
 
Lint cotton production for MY05/06 is forecast at 125,000 MT, on 300,000 has. Post forecasts MY05/06 cottonseed production will be approximately 250,000 MT. As a consequence of lower than expected cotton production, due to drought, cottonseed production in MY04/05 will also suffer. Raw cotton production is estimated at 287,000 MT. FAS/Buenos Aires increases its MY04/05 cottonseed production estimate to 155,000 MT.
 
CONSUMPTION
 
In CY2003, the Argentine crushing industry registered the highest crushing volume on record in the history of Argentina. Crushing of all major oilseeds totaled 27.6 million MT, 13.6% higher than 2002. Total installed crushing capacity in Argentina is approximately 32 million MT.
 
The largest crushing plant in the world is located in Argentina with installed capacity of 12,000 MT per day. Several enterprises are preparing to vie for this title as they plan to expand capacity to 12,000 MT per day or higher over the next several years.
 
Soybean
 
As world demand for soybean products grows, and prices respond, Argentina's crushing industry is gearing up to satisfy the demand. Argentine soybean crushing capacity is forecast to increase over the next few years by approximately 17,000 MT per day. With soybean production expected to increase, crushers should not have any problem obtaining the beans necessary to run their facilities at full capacity.
 
The crushing forecast during MY05/06 reflects these changes. FAS/Buenos Aires forecasts MY05/06 soybean crush at 27 million MT, an increase of 5% from MY04/05. MY05/06 soybean meal and oil production forecasts are 21.47 and 4.78 million MT.
 
Post's soybean crush estimate for MY04/05 is raised to 26 million MT to reflect growing demand for soybean meal and oil exports. The production estimates for MY04/05 soybean meal and oil production are changed to 20.9 and 4.6 million MT, respectively.
 
With only eleven months of MY03/04 data reported, total soybean crush to date is 23.3 million MT, 11% higher than the same period last year, according to official statistics. Estimating March 2004 crush will be slightly higher than March 2003, Post revises its total soybean crush to reach 24.7 million MT. Production of soybean meal and oil is reported at 19.64 and 4.37 million MT.
 

Sunflowerseed
 
After 3 years of decline, the sunflowerseed crush in 2003 rebounded 10% from the previous year. During January-December 2003, sunflowerseed crush totaled 3.29 million MT, up from 2.99 million MT in CY 2002.
 
Industry sources believe the sunflowerseed crush rebound will continue. Sunflowerseed exports are drastically down so far this MY. This combined with high FOB prices of meal and oil may lead to a strong demand from the crushing industry. Post forecasts MY05/06 the sunflowerseed crush will reach 3.5 million MT. Sunflowerseed meal and oil production is revised accordingly.
 
The sunflowerseed crush estimate for MY04/05 is also revised to 3.3 million MT. FAS/Buenos Aires reduces its MY03/04 sunflowerseed crush estimate to 3.029 million MT to reflect new data received from official sources. Sunflowerseed oil and meal production estimates are revised to 1.294 and 1.274 million MT, respectively.
 
Peanut
 
The peanut crush is forecast to rebound over the next few years. As world prices for meal and oil are expected to increase, crushers in Argentina are will increase processing and ultimately increase meal and oil exports. Post forecasts MY05/06 crush will be 170,000 MT for a production of peanut meal and oil of 65,000 and 54,000 MT, respectively.
 
Likewise, Post revises its MY04/05 peanut crush estimate to 145,000 MT, the report said. Peanut meal and oil estimates are changed accordingly. SAGPyA reports peanut crush during MY03/04 totaled 94,915 MT shelled, or 135,000 MT in shell. Production of peanut oil and meal totaled 43,000 and 52,000 MT, respectively.
 
Cottonseed
 
There are very few crushers dedicated to cottonseed in Argentina. In 2003, only 5 plants reported installed capacity for cottonseed crushing. Of these five, only one reported cottonseed crushing during 2002 (the most recent statistics available). The rest were either closed or did not dedicate any crushing capacity to cottonseed. Cottonseed feed consumption is forecast to increase in the future. Post forecasts MY05/06 cottonseed crush will be 40,000 MT. Feed, seed, and waste is forecast at 150,000 MT.
 
Official GOA statistics report cottonseed crush during MY03/04 totaled only 39,475 MT. Production of cottonseed oil and meal totaled 7,019 and 19,060 MT, respectively. FAS/Buenos Aires lowers the MY03/04 crush estimate to reflect these data.
 
TRADE
 
Soybeans
 
From April 1-April 28, the Argentine Port Authority reports soybean exports of 1,149,700 MT, with another 784,390 MT waiting to be shipped over the next 15 days. The pace is not quite up to last year's shipments. During the month of April 2003, 1.68 million MT of soybeans were shipped. As crushing capacity increases, it is probable that unprocessed soybean exports will fall.
 
Post forecasts MY05/06 soybean exports stable at 9 million MT. Soybean exports during MY04/05 are estimated at 9 million MT, as well.
 
Official Argentine statistics, provided by the National Census and Statistic Institute (INDEC), report that soybean exports during the first eleven months of MY03/04 (April 2003-February 2004) totaled 8.7 million MT. This year, approximately 70% of soybean exports went to China, up from 45% during the previous year. Other major markets include Thailand, Turkey, and Egypt.
 
The export pace during MY03/04 was down, compared to previous years. With only one month of official data needed to complete the marketing year, exports are likely to be under 9 million MT. Historically, exports during the last month of the marketing year average only 10,000-18,000 MT. However, March 2003 was an exceptional month with 68,000 MT shipped therefore, it is likely exports during March 2004 will total at least 50,000 MT. Post revises its previous MY03/04 export estimate down to 8.75 million MT.
 
The location of the major crushers in Puerto San Martin and the Rosario area along the Parana River is an ideal stop for barges, which come from Paraguay. Imports in MY04/05 may increase in order to keep crushers satisfied in light of the lower than expected production this year. Post slightly increases it MY04/05 import estimate to 400,000 MT to reflect this possibility.
 
Imports during April 2003-February 2004, totaled 322,000. Post revises its MY03/04 soybean imports estimate to 350,000 to reflect this data.
 
Soybean Oil
 
The outlook for soybean oil exports in MY05/06 is very bright. MY05/06 soybean oil exports are forecast at 4.6 million MT. Strong world demand and increased prices have made the crushing and export business very profitable. Also, Argentina has a relatively low domestic consumption of soybean oil leading to a large exportable supply. Post does not foresee this scenario changing in the near future and increases its MY04/05 soybean oil export estimate to 4.5 million MT.
 
Soybean oil exports during the first eleven months of MY03/04 (April 2003 - February 2004) totaled 4.0 million MT. Exports to China accounted for more than 40%, or 1.8 million MT, of total soybean oil exports, an increase of 150% from the previous year. India was the second largest market for soybean oil. FAS/Buenos Aires revises its previous MY03/04 export estimate down to 4.2 million MT.
 
Soybean Meal
 
As with soybean oil, soybean meal exports in MY05/06 should be strong. Post forecasts MY05/06 soybean meal exports will increase from MY04/05 by about 10%, to 22 million MT.
 
Soybean meal exports during the period April 2003-February 2004 totaled 17.43 million MT. Primary destinations include Spain, the Netherlands, and Italy. Post revises its MY03/04 export estimate down to 18.4 million MT to reflect these new data.
 
Sunflowerseed
 
Sunflowerseed exports during MY04/05 will depend heavily on price, as lower production will tighten supplies. Local FOB prices for sunflowerseed oil and meal are up, compared to past years. If these levels are sustained, sunflowerseed exports may fall, as meal and oil exports increase.
 
Another factor to consider is the increase in world sea freight costs. Transport costs per ton of sunflowerseed are very high given the relatively low weight of sunflowerseed. Additionally, traditional sunflowerseed importers in Europe are now taking advantage of good sunflowerseed harvest in Russia and Ukraine.
 
Historically, over 70% of total MY exports were shipped during March and April. As of April 21, 2004, only 13,000 MT of sunflowerseed had been shipped since the beginning of the marketing year (March). SAGPyA reports another 21,000 MT will be loaded during the coming week, bringing the marketing year- to-date exports to approximately 34,000 MT. Last year, shipments during March- April totaled 164,000 MT, 77% of total MY exports.
 
Industry sources state they will be surprised if Argentina exports over 50,000 MT during MY04/05. Post forecasts MY04/05 sunflowerseed exports at 75,000 MT, down significantly from last year's exports.
 
Sunflower seed exports during MY03/04 totaled 212,000 MT according to official GOA statistics. The main destinations for sunflowerseed exports in MY04/05 were Mexico and the Netherlands. FAS/Buenos Aires revises its MY03/04 export estimate to 212,000 to reflect these new data.
 
Sunflowerseed Oil
 
Reacting to FOB increases, sunflowerseed oil exports are forecast to increase in MY05/06. Post forecasts MY05/06 oil exports at 1.0 million MT, up 10% from MY04/05, the report said. Exports during MY04/05 are also expected to increase to 900,000 MT.
 
Sunflowerseed oil exports during MY03/04 totaled 793,000 MT. Primary destinations include, the Netherlands, India, and Egypt. Post revises its MY03/04 export estimate to 793,000 to reflect these new data.
 
Sunflowerseed Meal
 
Meal FOB prices, as well, have been on the rise. Post forecasts sunflowerseed meal exports in MY05/06 will rise accordingly to 1.3 million MT. Exports during MY04/05 are expected to reach 1.2 million MT.
 
Sunflower seed meal exports during MY03/04 totaled 1.1 million MT, according to official GOA statistics. Primary destinations include, the Netherlands and the United Kingdom. Post revises its MY03/04 estimate down to 1.108 million MT to reflect these new data.
 
Peanut
 
FOB prices for peanut meal and oil are on the rise. Peanut oil prices in October 2003 were almost triple the past year's prices. Post forecasts meal and oil exports will increase over the next MY, into MY05/06. Additionally, Argentina exported approximately 11,000 MT or peanut butter and/or blanched peanuts (H.S. 200811) during MY04/05.
 

Source: USDA