2021 closed with the highest volume of processed SB since 2016

2021 closed with the highest volume of processed SB since 2016

The 2021 calendar year ended with the largest processing of SB since 2016, totaling 42.4 Mil MT. For its part, corn sales reach 30% of the production estimated for the 21/22 cycle, exceeding the records of previous campaigns.

The industrial aspect within the SB productive framework leads Argentina to be the main exporter of meals and oils of this oilseed, while contributing enormously to the generation of foreign exchange within the Argentine trade balance. For this reason, the level of processing or local crushing acquires a noticeable relevance when evaluating the performance of the sector.

With the crush data for December 2021, published on January 21^st, the calendar year with the highest local processing since 2016 has come to a close. In the last month of last year, 2.95 Mil MT of SB were crushed, reaching a total of 42.4 Mil MT for the year’s accumulated value. This record exceeds the previous year by 17.7%, after crushing in 2020 was 35.1 Mil MT due to the COVID-19 pandemic, and the social and economic impact that it implied. Later, with the partial normalization of working conditions, a good campaign in terms of SB production during the 2020/21 harvest, and the increase in the value of commodities in the international markets, a favorable context was presented for the processing of the soybean. This way, 2021 holds the new record as the best year for SB crushing since the reigning champion, 2016, with its 44.5 Mil MT.

As mentioned, the number corresponds to the calendar year. If the processing figures are analyzed, while from one calendar year to the next the industrialization increases by 6.4 Mil MT, from one commercial campaign to the other the figure only grows by 1.7 Mil MT. This means that the lower total supply (similar volume of imported SB but lower domestic production) is partially offset by the lower output of SB exported as unprocessed raw material.

Meanwhile, looking at the next commercial campaign, the current situation maintains a certain level of uncertainty due to the drought that occurred between December and January. The estimates of the productive results of the primary sector of the SB complex had cuts in recent weeks due to the lack of rain. However, in the last few days, rain fell in a good portion of the central of the Pampa region, giving some of the summer crops a break. The main beneficiaries are second-crop SB and late-planted corn, whose yields have yet to be defined and this increase in moisture has given them vital reinforcement to continue in the productive race. On the hand, despite these precipitations, the chances that these rains were able to improve the scenarios for first-crop SB and early maize is low. This way, it is estimated that close to half of the early harvest cereals present conditions between bad and regular, with yields that will be between 4 and 6 MT/Ha, while 40% would have a good/average yield close to range from 8 to 9 MT/Ha, and barely 10% of the planted area would exceed these volumes. Furthermore, first-crop SB would also present a high status between fair and poor, around 30% of the area planted with the oilseed, estimating losses of between 10% and 50% depending on the condition of these crops. The local market is faced with this scenario, still waiting for new rains to ensure the yields of the later-planted and second-crops.

At the same time, this sharp drop production estimations for maize indirectly generated an increase in the proportion of the cereal for the 2021/22 campaign marketed. In other words, going from an estimate of 56 Mil MT (in December) to the 48 Mil MT that is currently forecast, the supply of cereal is reduced compared to the commitments already agreed, which implies a narrowing of the supply capacity of the maize market. Therefore, 14.6 Mil MT of the next cereal harvest has been marketed, currently representing 30.5% of the national production. If the projections had remained constant, this would represent a lower, 26.1% of the 2021/22 cycle. Both the tonnage in absolute terms and relative to production are at high levels compared to what has happened in recent years. The average of the last 5 campaigns results in commitments equivalent to 10.3 Mil MT, while they would represent 22.1% of the average production for that period, for which the 2021/22 harvest is almost 4.3 Mil MT per year, above the average and by 8.4 percentage points as a proportion of their production estimates.

Meanwhile, the evolution of local trades differs noticeably from the volume of export permits (DJVE) approved by the Argentinian Ministry of Agriculture, Livestock and Fisheries (MAGyP), since external commitments reach more than 22, 5 Mil MT of the period starting in March 2022, while only half of these commitments have been covered in the local market. Bearing in mind that the export quota established by the National State are 25 Mil MT for the next cycle, this means that there is still the possibility of generating export permits for an additional 2.5 Mil MT of tons, even though this volume is well below preliminary export estimates for the 2021/22 harvest.

International context

On the one hand, the military tension that is taking place in the Black Sea region, more precisely between Ukraine and Russia, generates uncertainty in the international market for agricultural commodities. This is a consequence of the importance of cereal production in the region since Ukraine and Russia represent 16% and 2% of world maize exports, respectively. In addition, the tonnage exported has been increasing hand in hand with an increasingly voluminous international trade. This way, it is expected that 204 Mil MT will be exported worldwide in the 2021/22 cycle, surpassing the previous record of 183 Mil MT that occurred in the 2018/19 campaign. Although the production region is far from the territory where the tension is taking place, there could be logistical complications due to the area of ​​influence of the conflict and the location of the main exporting ports in this territory.

On the other hand, the oil market has also been propping up international cereal prices in recent days. This is so because the cereal is used as an input for the production of ethanol and, consequently, being within the fuel market, its prices are influenced by the oil market. During this last week, a barrel of oil traded at 87.4 USD/barrel, representing a rise of 59.7% compared to the value it had a year ago (52.2 USD/barrel) while resulting in the highest price since 2014. Likewise, SB were also affected by these upward movements in the oil market, due to the production of biodiesel derived from SB oil.

Meanwhile, restrictions on palm oil exports imposed by Indonesia also pushed SB oil higher in the last few rounds. As oilseed subproducts behave as substitute goods, their price variations partially translate into changes in the values ​​of the other. This way, in the last rounds, there were news about the imposition of quotas on the island country’s exports, to supply the domestic market more smoothly, which could generate greater increases in the SB market.

Source: https://bcr.com.ar/

Photo: REUTERS/Stringer

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