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November 19, 2020

Dryness Worries Soy Farmers in Argentina, Forward Sales very Slow

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The dryer-than-normal spring weather in southern South America is impacting farmers in Argentina as well as in southern Brazil. There were some localized heavier rains over the weekend in western and northern Argentina, but not enough to recharge the depleted soil moisture. In the dryer areas of Santa Fe and Cordoba provinces, they will need 4-6 inches of precipitation to recharge the soil moisture.

Argentine farmers had planted 20% of their 2020/21 soybeans as of late last week according the Buenos Aires Grain Exchange. In their latest Panorama Agricola, the Grain Exchange estimates that farmers in Argentina will plant 17.2 million hectares of soybeans (42.4 million acres) in 2020/21 and that the soybean production will be 46.5 million tons. Prior to the complications from the dry weather, the Grain Exchange had projected that Argentina would plant 19 million hectares of soybeans in 2020/21 (46.9 million acres) with a production of 55 million tons.

Reports from Clarin Rural indicate that Argentina farmers continue to be slow sellers of last year's soybean crop as well as this year's crops. Farmers have sold 69% of the 50 million tons of soybeans produced in 20219/20 compared to 72% a year earlier. For the 2020/21 crop, farmers in Argentina have only sold 7% of their anticipated production compared to 60% sold in Brazil. There was very little forward contracting of the 2020/21 soybean crop in October compared to September or even compared to July and August.

Ever since restrictions were placed on the buying of dollars in 2011, farmers in Argentina have preferred to store more of their soybeans than normal as a hedge against inflation and the devaluation of the Argentine peso. Farmers in Argentina feel they are at a competitive disadvantage compared to the exchange rate in Brazil.

The soybean crushing industry in Argentina is even preoccupied with the slow farmer selling than the farmers themselves. The crushers are having a hard time sourcing soybeans and they are operating at only about 60% capacity. Argentina accounts for 50% of the world's production and export of soybean meal and soybean oil. With Argentine crushers operating at reduced capacities, Brazil's exports of meal and oil have been very good and there was a record amount of soybeans crushed in the U.S. during October.