May 30, 2005

 

Argentina's soybean output at 39 million tonnes; hampered by logistic difficulties
 

 

Argentina's current soybean harvest (market year 2004-05) is expected to be around 39 million tonnes from a cultivated area of 14.2 million hectares. Most soybeans are exported as meal or oil, mostly to China.

 

The next market year's cultivation area is expected to go up slightly to 14.5 million hectares with production forecast at 38 million tonnes.

 

Major investments in the crushing industry over the next few years would increase crushing capacity by 50 percent.

 

Market Year	Area under cultivation	Output forecast	Export forecast
May-04	14.2 million hectares	39 million tonnes	9 million tonnes
Jun-05	14.5 million hectares	38 million tonnes	9.5 million tonnes
Source: USDA

 

Logistical and storage difficulties are being experienced in the final stages of the harvest. With nearly 90 percent of the expected 39 million tonnes of soybean production making its way to the Rosario area, bottlenecks at the ports and crushing facilities are becoming common. About 30,000 trucks pass through the area daily; unloading waiting times can range from two to five days. Many truckers opt to forgo entering the port area, looking for routes that allow them to drop their cargo in country elevators. Others have no problem entering the port, but for a price: transport charges have increased as much as 20 percent over last year.

 

Many producers, either unable to contract transport for their harvest or deciding to forgo the increased costs, have opted for on-farm storage.  Silo-bag storage for all grains is expected to increase 30 percent this year to 18 million tonnes. Static storage, not including silo-bags, is approximately 45 million tonnes (wheat basis). Considering total grain production this year is about 82 million tonnes, there is a definite need for additional capacity.

 

The export and crushing industries, in an effort to overcome these bottlenecks, have announced investments of over US$600 million to expand crushing, storage, and port facilities, over the next several years.

 

The planned investments in the crushing industry would increase crushing capacity 50 percent by 2006. Total crushing capacity would reach 160,000 tonnes per day or 45 million tonnes annually, 15 percent above this year's soybean production of 39 million tonnes. 

 

Additionally, 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 pay fees to store grain in storage facilities.  They can now keep grain in their own backyard and decide the opportune moment to sell. 

 

 

Soybean production
 

In the coming year, overall increases in soybean area are expected. While competition in prime agricultural areas of central Argentina may limit expansion of first crop soy, increases in second crop soy, due to forecast increases in wheat area, are expected. Yields are expected near average due to increases in less productive marginal areas dragging down the overall yield.

 

For Market Year 2005-06 soybean harvested area is forecast at 14.5 million ha and production at 38 million tonnes.

 

As of early May, about 75 percent of soybean area was harvested with the average yield at close to 2.87 tonne/ha. Over 80 percent of first crop and 50 percent of second crop soybeans have been harvested.

 

Logistical inconveniences are being felt throughout the country. With an underutilised railway system -- only 15 percent of production is transported by train --  the bulk of production is transported by truck to crushing facilities and ports. Road conditions have worsened due to overuse, subsequently increasing transport costs.

 

Additionally, producers are experiencing a shortage of trucks to haul away their production. Truckers, on the other hand, can wait up to several days to offload their cargo at the storage and crushing facilities, again, increasing costs.

 

 

Soybean trade
 

Market Year 2005-06 soybean export is forecast at 9.5 million tonnes, compared with 9 million tonnes expected in MY 2004-05 (market year is from April to March).

 

From Customs port data, MY 2003-04 soybean exports were 7.05 million tonnes.  Over 65 percent of total soybean exports were to China. Other important destinations included Thailand (10 percent) and Turkey (4 percent). Whether these markets would remain key players in the coming year depend on the price of Argentine beans compared with other suppliers.

 

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 MY 2004-05 may increase in order to keep crushers satisfied. Soybean imports during April 2004 - March 2005 totalled 759,453 tonnes, according to port data.

 

 

Soybean consumption
 

Argentina is a nett soybean product exporter, most of the export going to China. As soybean production increases, the natural outlet is through export as meal or oil. Crushers are expected to absorb the increased raw material production in order to fill capacity and keep crushing margins in check. During January - March 2005, crush margins were $8.18/tonne.

 

MY 2005-06 soybean crush forecast is at 29 million tonnes, an increase of 5 percent from MY 2004-05. MY2005-06 soybean meal and oil production forecasts are 22.75 and 5.25 million tonnes, respectively.

 

Argentine government statistics show 25.07 million tonnes of soybeans were processed from April 2004 - March 2005. This resulted in the manufacturing of 19.74 million tonnes of soy meal and 4.724 million tonnes of soy oil.