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Commodities 2021: Soybean crush outlook diverges on recovery in Brazil, recession in Argentina

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Commodities 2021: Soybean crush outlook diverges on recovery in Brazil, recession in Argentina


Low crush margin set to hamper Argentina's crush

High export taxes to curtail Argentina's soy meal, oil shipments

Raw beans supply tight in Argentina on drought, farmer hoarding

Brazil's soy meal, oil usage seen rising on economic recovery

New Delhi — Brazil's soybean crush volumes are expected to remain elevated in 2021 on high demand, while the outlook for Argentina's crushing industry is precarious as Buenos Aires grapples with recession and more than $323 billion of mounting debt.

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Brazilian crushers' sales soared for most of 2020 due to high domestic and export demand, while Argentina's crushers grappled with labor strikes, high taxes, negative margins, tight raw beans supply and logistical bottlenecks, analysts said, predicting similar trends for the two nations in 2021.

They key challenge for the Argentinian processors in 2021 is likely to be a low or even negative crush margin due to soaring input and logistical costs, a Rosario-based economist said. Argentinian soybean prices, which rose almost 88% year on year to $341/mt in December 2020, are expected to continue surging in 2021, putting margins under tremendous pressure, she said.

The world's largest soy meal and oil exporter is also expected to ship low volumes of soy product in 2021 due to high export taxes of 31%.

Argentina typically exports over 90% of its soy products, according to Pete Meyer, head of grain and oilseed analytics at S&P Global Platts. But high export taxes are likely to bring down the export volume markedly, he said.

In addition, crushers in Argentina are expected to face a supply crunch for raw soybeans in 2021, as the government's currency control policies discourage farmers from selling.

According to economists, the gap between official and unofficial exchange rates in Argentina ended 2020 at close to 75 pesos per US$ and was likely to widen to 100 pesos in the second half of 2021.

Once the currency control measures are lifted and the two exchange rates converge, the peso could devalue more than 110% against the US$, leading to higher profits for soy farmers, a Chicago-based analyst said. Consequently, soybean hoarding is likely to be rampant in 2021, stoking tight supply concerns for the crushing industry, he said.

Dry weather is also seen tightening the supply situation in 2021. La Nina, a drought-inducing weather phenomenon, is widely seen limiting Argentinian soybean output to 46 million mt in the 2020-21 marketing year (October-September), down 11% from initial estimates.

Tight supply concerns have already started to impact prices.

The soybean meal FOB Up River outright price was estimated at $503.09/mt Dec. 31, the highest since the assessment launched in Sep. 2019, while the soybean oil FOB Up River outright price ended the year at $1,033.97/mt, its second-highest level since inauguration, according to Platts assessments.

Argentina's domestic crush is projected at 39 million mt in the 2020-21 marketing year, edging up 0.06% year on year, according to the US Department of Agriculture. While soy meal exports are forecast to fall 2.5% over the same period to 26.7 million mt, soy oil shipments are seen rising 4.6% to 5.65 million mt, USDA added.

Analysts expect the projections to be revised down in coming months due to the constraints faced by Argentinian crushers in 2021.


In a stark contrast to Argentina, analysts see sustained momentum for a high crush output in Brazil in 2021, despite the soaring input cost of raw beans.

The average price of Brazilian beans is projected to rise over 20% year on year in 2021 due to tight supply, a Goiania-based consultant said. However, the crush volume is likely to remain elevated on high prices and strong demand momentum as the global economy recovers from the pandemic, she added.

The soybean meal FOB Paranagua outright price was estimated at $500.89/mt Dec. 31, the highest since the assessment was launched in March 2020, while the soybean oil FOB Paranagua outright price ended the year at $1056.02/mt, its second highest level since inauguration, according to Platts assessments.

Brazilian national agricultural entity Conab said the country's crushers faced high demand in 2019-20, with crush estimates at 48.9 million mt, up 10% on year. Domestic crush demand in 2020-21 is expected to remain high at 49 million mt due to a thriving meat industry and higher biodiesel mixture requirements, it added.

Analysts also anticipate stronger domestic demand curtailing exports of Brazilian soy meal and oil in 2021.

Brazil is forecast to export 16.8 million mt of soybean meal and 1.15 million mt of soy oil in 2020-21, down 7% and 9% on year, respectively, according to the USDA's December report.

The increase in domestic demand for soybean products is based on the expectation of economic recovery in 2021, which should drive soy oil and meal consumption, a Chicago-based agricultural consultant said. Brazilian beef and pork production is expected to rise due to continued strong exports to China and improved domestic demand, he added.

A higher blending mandate is also expected to boost biodiesel demand in Brazil in 2021. The mandate is set to increase to B13 (13% blend rate) in March 2021 from the current B12.

Soybean meal is extensively used in animal feed, while soybean oil comprises over 80% of the vegetable oil used for biodiesel production in Brazil.