October 9, 2023

Argentine soybean crush sector flounders with low capacity utilisation, dismal margins

Low levels of capacity utilisation and worsening margins continue to keep Argentina's soybean crush industry in a grim state, according to the country's oil industry chamber, CIARA-CEC.

Argentine soybean crush in August hit a record low for the month at 2.1 million metric tonnes (-18.8% month-on-month). Furthermore, soybean crushed through the first eight months of the year was recorded at 19.6 million metric tonnes, the lowest level in 12 years.

The chamber also highlighted that negative crush margins in August further deteriorated in September, as falling prices of downstream products provided no incentive for a pickup in crush activity. Market sources have opined that lower soybean availability could keep crush rate low before the arrival of the 2023/24 season crop next year (+92% year-on-year), with a Mintec source adding: "…the biggest bullish factor coming from Argentina is not the weather but the crush rate, which will be decimated in November-February due to limited soybean availability."

Dry conditions persist in Argentina and have led to sunflower and corn planting delays, which could be favourable for soybean planting as acreage could shift to the latter with a forecast of improved weather, according to market sources. Another source, however, noted: "…everyone is expecting a big Argentinian crop, but if the dryness persists, soybean yields could be impacted."

Weather developments will thus be a watch-out factor for domestic crop output and yield.

The fourth 'soy dollar' preferential exchange rate scheme, launched on September 5, was extended from its initial end date of September 30 to October 25 to boost the country's reserves.

According to the Rosario Stock Exchange (BCR), the latest scheme was successful, with sales meeting the target of 4.7 million metric tonnes. However, in line with market players' expectations of a slow pick up in sales due to limited soybean availability, in the first few days following the extension, soybean sales have returned to low levels seen before the implementation of the fourth soy dollar programme, according to market sources.

- Mintec