New Delhi — Argentinian soybean crushing industry has been operating well below its potential due to the currency crisis, Thomas Mielke, executive director of Hamburg-based forecaster Oil World, said at the Globoil India webinar Oct. 8.
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Soybean crushing in Argentina -- world's largest exporter of soybean meal and oil -- remains well below potential, and would probably go down even lower than expected, Mielke said. At present, a little over 33 million mt, more than 50% of the Argentinian soy crop stock, is still being hoarded by the farmers, who are waiting for devaluing of the Argentinian peso, he said.
The Argentinian government had recently revised its foreign currency transaction policy, under which it has become more difficult for the soybean farmers to receive dollars for their soybean export sales.
With limited raw soybeans supply, the Argentinian crushers are struggling to meet rising global demand for soybean meal and oil.
Argentinian farmers don't want peso instead of dollars and so they are holding on to their stocks and hoping for policy changes, Mielke said.
CHINA DEMAND DRIVING PRICES
According to Mielke, China has been the main driving force in the recent price rally seen in raw soybean and soy complex futures.
China has been continuously buying raw soybeans from the US, as the Asian nation has been building its reserve stocks of soybean, vegetable oils and other agricultural commodities, to hedge against future supply disruptions, Mielke said.
Soybean exports from the US have been boosted by hefty Chinese demand in the 2020-21 marketing year (September-August) amid the Phase 1 trade deal commitments and strong hog herd recovery in China.
US soybean export inspections were at 6.6 million mt as of the week ended Oct. 1, compared with 4.2 million mt a year ago, with over half of the shipments destined for China, a US Department of Agriculture report said Oct. 5.
This large-scale buying by China, coupled with delayed start to Brazilian soybean planting, contributed to the bullish price trend of recent weeks, he added.
While November soybean futures are heading toward $10.60/bushel, December soyoil futures inched toward $33.00/lb on Chicago Board of Trade, both commodities trading at multi-year high.
PALM OIL PRODUCTION SLUGGISH
In 2020, palm oil producers experienced declining yields due to lack of replanting and ageing trees, Mielke said.
Labor shortages due to coronavirus restrictions have also contributed significantly to the decreased palm oil plantation, he added.
World palm oil production would likely be down 3.5 million tons in the 2019-20 and there will be a considerable slowing down of palm oil production in the years ahead, Mielke said.
According to Mielka, September crude palm oil prices for FOB Indonesia were seen at $725/mt, compared with $510/mt last year.
In coming months, palm oil prices can cross $780/mt mark on supply pressures, he added.
The palm oil price hike is primarily attributable to global production decline, while the demand remained low.
In 2019-20, global palm oil consumption declined 2 million mt on the coronavirus pandemic, which badly affected the hospitality and food processing industries.
Declining palm oil production, coupled with decreased consumption volumes signals tough challenges for the commodity in coming years, Mielke said.