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Slow farmer selling, La Niña likely to hurt S American soybean exports in 2021-22: sources

Highlights

70%-80% chance of La Nina reoccurring in late 2021-early 2022

Dry weather could cause delayed planting in Brazil, Argentina

High domestic demand for crushing amid national biodiesel mandates

Slow farmer selling in Brazil and Argentina and the likelihood of La Niña reoccurring in the upcoming months is expected to hurt soybean exports in 2021-22 marketing year (April 2022-March 2023), amid tight stocks of the oilseed, sources told S&P Global Platts in the week to Oct. 1.

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This could support US soybean exports, which touched a six-month high at 1.1 million mt over Sept. 17-23 following the resumption of work at grain terminals after Hurricane Ida, according to the US Department of Agriculture weekly inspections report from Sept. 27.

Brazil's cereal exporters association ANEC on Sept. 28 pegged 2021 soybean exports at 79 million mt, compared with 82.3 million mt in 2020. For September, ANEC expects exports to drop 18.2% month on month to 4.7 million mt.

For Argentina, 2021-22 soybean exports are estimated to be between 6 million mt and 6.5 million mt, compared with 6.62 million mt in the previous season, according to S&P Global Platts Analytics.

Brazil is the largest exporter of soybeans, followed by the US and Argentina.

La Niña could delay planting

There is a 70%-80% likelihood of another La Niña weather event towards the end of 2021 and early 2022, after an episode in late 2020, the US National Oceanic and Atmospheric Administration said in a recent note.

The La Niña event, wherein the ocean surface cools leading to low rainfall, is expected to result in drier weather in Argentina and Brazil that could affect yields due to low soil moisture, according to meteorologists.

For both the countries, October to January is crucial sowing and harvesting period for cash crops, including soybeans and corn.

"La Niña-related dryness implies no relief from the drought and a threat to crop output for the 2022 harvest in Argentina," Bryce Anderson, senior agriculture meteorologist at DTN/Progressive Farmer said in a note.

"In Brazil, southern and south-central areas have the highest relationship to La Niña production impact. Already, early corn planting in south-central areas is off to a slow start because of low soil moisture," Anderson added.

However, for soybeans, it is still too early to assess the impact of dry weather on 2021-22 output, after a record production of 136 million mt in 2020-21, market sources said. But there could be a delay in planting and unpredictable weather conditions could become a significant issue for crop development, they added.

Argentina's exports lag

Farmers in Argentina have sold 30.5 million mt for marketing year 2020-21 until Sept. 22, but the pace remains slower than the previous year when around 32.2 million mt of beans were sold by the same period, according to the country's Ministry of Agriculture data released Sept. 28.

For marketing year 2021-22, sales have reached 1.9 million mt, compared with 2.6 million mt of soybeans sold by the same time in the previous season, the data showed.

Farmers are hoarding stocks of the dollar-denominated crop against rising inflation and a depreciating peso, sources said. They have also been diverting produce to local industry amid high domestic demand for producing soybean oil, rather than sell their goods for exports, sources added.

Also, historically low water levels across the Parana river, a key waterway for grain exports, is also adding to logistical woes for exporters, who have already lost $620 million in soybean meal and oil exports, Rosario Grain Exchange, or BCR, said Sept. 24.

Biodiesel demand creates divide

Both Brazil and Argentina have national biodiesel mandates that currently require blend of 12% and 5%, respectively, of biodiesel in gasoil.

High global demand and rising prices of soybean oil, the main feedstock for producing biodiesel, is making soybean crushing operations more lucrative for local industry participants, thereby increasing domestic demand for raw beans, BCR said earlier.

Due to this, BCR projected that a greater tonnage of the oilseed will be processed locally and then its byproducts exported, instead of directly shipping the grains.

Argentina is the world's largest supplier of soybean oil and meal.

Recently, a Brazilian biodiesel producer imported 15,000 mt of soybean oil from Argentina as domestic prices of the soy derivative were above export prices, according to sources.

As of Aug. 31, soybean oil imports had reached 86,129 mt, compared with 22,118 mt in the same period in 2020, data from Brazil's agriculture ministry showed.