FEATURE: 'Perfect storm' hampers Argentina's 2021-22 soybean crop start

Argentina has had a complicated harvest start to its 2021-22 soybean crop year (November-October) so far after suffering from drought earlier in the season, which is likely to support soybean meal and oil prices in the country -- the world's largest exporter of both the commodities.

The most recent concern is the fuel supply for harvest activities and transportation to export terminals or crusher plants. Nearly 90% of Argentina's soybeans are sent to ports by trucks, but sources have been reporting some diesel shortages amid disruptions to global crude flows due to the Russia-Ukraine conflict.

In this context, the Argentinian National Transport Federation, or Fe.Tr.A., has called for a national trucker strike starting April 11, demanding higher grain freight rates to make up for surging fuel costs. The federation has also asked for improvements in ports infrastructure and safer conditions to work around the terminals.

The looming strike and fuel shortages follow sooner-than-expected frosts in some soybean producing-areas in late March. "Frosts recorded over the last few weeks could lead to further [crop] losses and even losses of harvestable area," the Buenos Aires Grains Exchange, or BAGE, said in a weekly report released March 31.

Soybean crop failure

According to BAGE, 4.4% of this year's soybean acreage had been harvested as of March 30.

The production for the 2021-22 marketing year (April 2022-May 2023) is forecast at 40 million-42 million mt, far below the near 55 million mt expected prior to the drought impacts earlier this year. It would also be lower than 43 million mt seen in 2020-21.

"It is a perfect storm," an Argentinian soybean oil broker said, referring to several concerns surrounding the country's soybean crop.

The Argentinian FOB Up River soybean meal outright price has increased 17% so far this year, being assessed April 4 at $514.88/mt for May loading, according to S&P Global Commodity Insights data. On the year, the prices jumped 23%.

As for soybean oil, the FOB Up River outright price has recorded an even sharper increase so far in 2022. It was assessed April 4 at $1,683.01/mt for May shipment, up 29% since the beginning of the year and 41% higher compared to this time in 2021, according to S&P Global data.

Most of these gains were also led by soaring commodity prices in the international market following the conflict in the Black Sea. Chicago Board of Trade soybean meal and oil futures have risen 13% and 29%, respectively, so far in 2022 after reaching multi-year highs in March.

Higher export taxes

The soybean industry is a key sector for Argentina, providing highly needed US dollars for the local economy to flourish.

The government raised export taxes over soybean meal and oil to 33% in March, from 31% previously, matching the soybean levy and compared to 12% on each corn and wheat. The measure is expected to last until the end of the year and aims at combating inflation, although tends to further pressure margins for crushers, sources said.

In addition, exporters are again expected to face operational difficulties in the parched Parana river as water levels remain lower-than-normal for nearly three straight years. The river is a key waterway for Argentinian agricultural exports, with the hub of Rosario accounting for around 80% of all these shipments.

According to the country's water agency, or INA, water levels in Rosario are around 3 meters below the historical average for this time, although recent rains might partially improve the situation. Such shallow water levels forces vessels to load less volumes to meet navigation conditions, leading to higher costs as they eventually need to resort to sea-based ports in Argentina or even Brazil.