April 23, 2015
Record Production Resulting in Mountains of Soybeans in Argentina
Farmers in Argentina are in the midst of harvesting a record large soybean crop. Excellent weather throughout the growing season has resulting in farmers reporting soybean yields as high as 5,000 kg/ha or 72 bu/ac. Most estimates for the 2014/15 Argentine soybean crop are in the range of 58 to 59 million tons with some estimates as high as 60 million tons. The 2013/14 Argentine soybean crop was 54.0 million tons.
The record large crop is forcing farmers and grain elevators to scramble to find enough storage space for the soybean and corn crops. The soybeans are being stored in traditional grain silos, they are being put in plastic silo bags, and they are being piled outside in mountains of soybeans covered by tarpaulins.
Even though farmers in Argentina will have a record amount of soybeans to sell, low prices and high inflation rates are convincing farmers to be very cautious sellers of their soybean and corn crops. It is expected that they will only sell enough of their crops to pay immediate bills in the hope of improved prices going forward. Improved prices though may be elusive due to recent record soybean production in both Brazil and the United States.
Argentine farmers are also hoping that presidential elections in October will usher in a new regime that is more willing to work with the agricultural sector. One leading presidential contender has already stated that if elected, he would immediately eliminate the export taxes on corn and wheat and that he would eliminate the 35% export tax on soybeans in steps over a three year period. Approximately 70% of Argentina's soybean crop will be exported in either grain or soybean meal and 60% of the corn crop will be exported.
Argentine farmers still have many millions of tons of soybeans carried over from last year and even two years ago. If farmers sell their grain as slowly as expected, by the time the next planting season arrives in September, Argentina may still have as much as 35 million tons of soybeans in storage. According to the U.S. Department of Agriculture, 39% of the global soybean reserves will be in the hands of Argentine farmers. Increasing the amount of soybeans in storage is not sustainable long term and eventually the farmers in Argentina must sell their grain.
The Argentine government has been pressuring farmers to sell their soybeans in order for the government to receive the 35% export tax on soybeans. Earlier this year, the government started to reduce the amount of new credit available to farmers from the national bank if they felt the farmers were too slow in selling their soybeans. It remains to be seen how aggressive the government will be going forward in trying to force farmers to sell their soybean and corn production.