June 6, 2013


Argentina's soy prices may drop on falling protein content


Argentina's soy protein content has fallen and is not expected to recover, moving toward lower soymeal prices ahead and prompting the country's export companies to amend their standard soymeal contract to reflect the change.


The reason for the slouch in protein varies from new weather patterns to the emphasis that farmers have put on genetically altered (GMO) technology focused on increasing yields at the expense of bean content, sources said on Tuesday (May 28).


The South American grains powerhouse is the world's no. one exporter of soymeal cattle feed, used throughout Europe and as far away as China to fuel Asia's booming demand for beef steak.


Traders say the fall in protein could harm Argentine meal prices and make US meal more competitive on the world market.


"During the last years we have seen a steady reduction of the protein content in Argentine soy. At this stage we believe these changes have become irreversible," said a statement issued by Argentina's Ciara grains industry chamber.


"We have been facing restrictions as an industry on our capacity to deliver a steady 47% protein soymeal as specified in the present standard contractual terms," the chamber said.


To reflect actual protein content in Argentine "Hipro Soymeal," CIARA associates agreed to lower the protein content terms of their standard contracts to 46.5%, the statement added. Minimum protein content in the contracts was moved at the start of this month to 45.5% from 46%.


"The industry will probably try to put downward pressure on prices now that lower protein levels have been acknowledged," said David Hughes, who manages thousands of hectares of land in Argentina's main farm province of Buenos Aires.


To keep up with demand as world population reaches toward nine billion, the United Nations says global grains output must increase by 70% by 2050.


This has placed strong emphasis on increasing yields, but the protein included in soymeal is important as well, as Asia's demographic shift toward the middle class is stoking demand for steak, pork and poultry, requiring more livestock feeds.


Argentina is the world's top exporter of soyoil, used in the booming international biofuels sector, as well as the no. three supplier of soy.


The country has embraced GMO technology as a way of increasing soy harvest size, leaving the protein content of new varieties of beans a secondary concern even though this is an important factor when judging the quality of soymeal.


Hughes, the Buenos Aires farmer, said lack of crop rotation, as Argentine farmers choose to plant soy instead of wheat and corn in order to avoid export curbs the government places on those two crops, is another trend that goes against high soy protein.


A source at one major trading company with operations in Argentina confirmed that Argentina is seeing a structural reduction of the protein content of soy.


"This points to lower prices going forward for Argentina soymeal," said the source, who asked not to be named.


"One reason for the reduction in protein is the increase in extreme weather we have seen, going more frequently from floods to drought and back again," the source said. "Another is the new genetically engineered yield-oriented soy varieties are lower on protein content, even though yields are higher.

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