Price Decline Amidst Increased Supply
For the first time in two years, export prices for soybean meal in Argentina have fallen below Chicago-based meal futures. This decline is attributed to weak demand and the arrival of the new soybean crop.
Record Soybean Harvest
According to S&P Global Commodity Insights, Argentina is concluding its soybean harvest with the FY2023/24 crop expected to reach 50.5 million tonnes. This is nearly double the previous season’s crop, which was severely affected by adverse weather conditions. Soybean processing is also projected to increase by 40% to 40.5 million tonnes, peaking in June and exerting further pressure on prices.
Increased Exports
Argentina, one of the world’s largest exporters of soybean meal and oil, is expected to increase its soybean meal exports by 50% to 28.5 million tonnes in the 2023/24 marketing year, according to S&P Global forecasts.
Comparative Prices
August meal futures on the Chicago exchange are currently trading at $383.5 per tonne, while August delivery FOB Up River is $2 per tonne cheaper. The last observed discount of $5 per tonne was on September 6, 2022, according to Platts.
Impact on Export Demand and Freight Market
After several months of higher prices compared to neighboring Brazil, Argentina’s export demand has eased, negatively impacting the freight market. Brazil has increased its exports at slightly lower prices due to a devaluation of the local currency, with the Brazilian real falling 5.2% in one month from 5.2322 to 5.5023 reais per US dollar.
Brazilian Market Comparison
Brazilian soybean prices on a FOB Paranagua basis are also $2 per tonne lower than Chicago, as reported by Platts. This discount compared to Chicago futures was recorded for the second time in June. Brazil completed its soybean harvest before Argentina, allowing it to accelerate shipments of soybeans and soybean meal to the global market, while Argentina is only now ramping up exports.
Processing Rates and Future Pressure on Feed Crop Prices
The recovery of the soybean harvest in Argentina has positively affected processing rates and prices. Last year at this time, the FOB Up River spot base was $13 per tonne higher. The current low soybean meal prices are expected to increase pressure on feed crop prices, including barley and corn, in the near future.
The significant drop in Argentine soybean meal prices below Chicago futures highlights the changing dynamics in global agriculture markets. As Argentina boosts its production and exports, stakeholders should closely monitor price trends and supply changes to make informed decisions. The ripple effect on feed crop prices underscores the interconnected nature of agricultural commodities.