Brazil may triple soybean exports to Argentina

Argentina stepped up purchases of Brazilian soybeans in January and may import up to 2mn metric tonnes (t) from its neighbor in 2023 as it faces a crop shortfall and lower domestic supply.

Market participants from both countries say that in the first weeks of January, 300,000t-400,000t of Brazilian soybeans were traded to Argentina for shipment in February-March. They estimate that 1mn t of the oilseed have been negotiated for the year and that shipments could reach 2mn t in 2023. The most soybeans Brazil has exported to Argentina was 657,000t in 2018, but shipments have not exceeded 300,000t in recent years.

The increase in shipments was driven by a crop failure in drought-stricken Argentina. Soybean production is expected to reach 41mn t in the 2022-23 marketing year, down by 7mn t from the previous forecast, according to Buenos Aires Grain Exchange (Bage)'s last estimate. That is still much higher than the Rosario Board of Trade (BCR)'s forecast, which was recently trimmed to 37mn t from a previous 49mn t.

Argentina has a robust soybean meal and oil industry. Therefore, crushers increase grain imports from neighboring countries, especially Paraguay, when national production dips.

Taking the scenic route

Brazilian soybeans usually reach Argentina by river, with shipments dispatched from Porto Murtinho, in Mato Grosso do Sul state.

Argentina also borders Rio Grande do Sul state, one of Brazil's largest soybean producers. But both states still did not have soybeans available for export in January because of their crop calendars.

Therefore, atypical logistics had to be adopted to guarantee a soybean supply to Argentinians. Most of the deals closed in January for shipment until March used Para state's Santarem port, in Brazil's northern region, about 4,500km (2,800 miles) from Buenos Aires. Exporters can pull soybeans that are harvested between the end of December and the beginning of January — especially from Mato Grosso state — through the Northern Arc, Brazil's north Atlantic ports.

Crushing margins in Argentina from now on will define import volumes from Brazil, since buying the oilseed from the neighbouring country to then crush it and continue exporting soybean meal and oil globally may be economically advantageous, says Daniele Siqueira, an analyst at consulting firm AgRural. The Argentinian crop is planted in October and November and harvested in March and April, so future weather patterns can still affect production — the situation may normalize or worsen if dry weather continues to prevail.

Chinese demand has also been weaker, while Brazil's soy output is expected to reach a new record — above 152 mn t — so the country should have more soybeans available to export to Argentina. The industry would have lost $75/t if it chose to buy Argentinian soybeans instead of the Brazilian product in mid-January, when soybean export deals from Santarem were reported, according to Siqueira.

At least three trading companies have closed deals to export soybeans to Argentina through Santarem, market participants confirmed to Argus. The companies did not reveal the price that was paid in these transactions, but it is estimated that at the peak of the industry's need — in mid-January — deals went out at a premium of 110¢/bushel over the Chicago Board of Trade's March contract, which at that time represented around $590/t.

Argentinian buyers were still inquiring about product from northern Brazilian ports last week, but the movement has slowed in the latter half of the month. Soy exports through Porto Murtinho may increase as the harvest advances in Brazil's central-west. The route could ship 600,000t this year, sources told Argus.

Imports to meet contracts

Argentinian crushers are purchasing feedstock from both Brazilian and Paraguayan suppliers while its farmers are holding back soybean trades since the country's soy dollar policy ended in late December, sources told Argus.

Several soybean oil exporters who had shipments scheduled for February and March will need to import the grain.

As the Paraguayan harvest starts in mid-February, a window has opened for Brazilian soybean in Argentina, where trading companies are seeking to meet their contract obligations. The country is a global leader in soyoil sales and an important shipper of biodiesel to the EU.

In order for Argentinian exporters to fulfill their contracts, Brazilian soybeans must arrive at the Rosario ports no later than in the first half of February. At least three ships have not been loaded or are yet to leave Santarem, which has brought concerns to Argentinian soyoil producers.

A possible delay in unhedged shipments increases risk for buyers as the economic outlook can change by the time soybeans arrive at the destination. Extended travel times can erode the cargo's competitiveness with Paraguayan shipments.

"For Argentinians, it is better to buy soybeans from Paraguay," said Anilbagani Bagani, commodity research head at Sunvin Group. "It is much cheaper than Brazilian product and it is transported by the Parana river." Freight from the Northern Arc is more expensive compared with Paraguay.

By Alessandra Mello and Alexandre Melo