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Argentina's likely export curb move to benefit US soybean meal: sources

Highlights

Tax hike expected on Argentinian beans, meal, oil

Official confirmation yet to be received

New Delhi — Argentina's surprise move to suspend export registrations Wednesday fueled market expectations of imminent tariff hike on soybean, soybean meal and soybean oil exports, with the industry expecting the move to benefit US soybean meal exports over soybeans.

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The US is an important competitor against Argentina's soymeal exports.

On Wednesday, Argentina's Ministry of Agriculture closed export registrations temporarily, which could mean they could raise export taxes on soybeans, soymeal and soy oil to 33% from current 30%, according to an Argentina-based analyst.

However, there has been no official confirmation yet on the hike of export tax.

A group of agricultural producers in Argentina, including the Confederaciones Rurales Argentinas, or CRA, will be meeting the country's Ministry of Agriculture on Thursday, to discuss the latest move.

The July soybeans contract traded on the Chicago Board of Trade rose on the news, briefly rising 1% from a previous close to $9/bu during Wednesday's day session.

However, sources told S&P Global Platts the impact of the Argentinian news on the soybeans market is limited.

The price support from this news development was short lived, sources said, as soybeans future prices fell back to $9/bu level in the overnight session, as of 5:44 am CT (1144 GMT).

Following the news, Argentina's May soybean shipments traded at 115 cents/bu over CBOT July contract, up 10-15 cents/bu higher than trade level seen last week, making Argentina beans less competitive to Brazil's.

Also, focus in the soybean market soon shifted back to the demand side, as the spread of coronavirus outside of China continued to add pressure on soybean prices, according to sources.

China's daily addition to the number of coronavirus cases have slowed down, while Brazil confirmed its first case, while the infection has spread in the Middle East.

Sources said Argentina's move of hiking export taxes could benefit US soybean meal exports more than soybeans itself.

US soymeal outlook for 2020 looks positive on the back of slower expected selling from farmers in Argentina, while meal yields from crushing are lower than average in Brazil, the Argentina-based analyst said.

Majority of Argentina's domestic crush for beans is used for exports.

The July soybean meal contract on the Chicago Board of Trade rose 2.2% on Wednesday to a high of $305.9/st from a previous close of $299.4/st. Prices were seen at $302.4/st as of 5:44 am CT in the overnight session.

Argentina is the world's largest soybean meal exporter, and is expected to ship out 30.85 million mt of meal in 2019-20 (October-September), up 7% from the previous year, according to the latest estimates from the US Department of Agriculture.

The Argentinian government made a similar move of export curbs in December 2019, as it closed export registrations and raised export taxes on soybeans to 30% from 24.7%. Taxes were also raised on both corn and wheat exports, from an earlier rate of 6.7% to 12%.