Soy is crucial for the Argentine economy. On their exports, as grain or as flour, oil or biodiesel, they depend on one out of every four dollars that enters an Argentina that is in need of foreign exchange to cover up its constant fiscal imbalances.
For this reason, any variation in harvest volumes or in international prices constitutes a headache, not only for producers, but for the economy in general and for the national government, which aspires to have in the oilseed industry – via withholdings– a support for public accounts.
The problem is that this year, two winds are blowing simultaneously. From the second half of February to last week, a critical period for the definition of soybean yields, the scarcity of rains and high temperatures caused water stress that damaged many lots in the most productive areas of the country.
The Rosario Stock Exchange, which in February projected a national harvest of 55 million tons, reduced the outlook to 51.5 million. In Córdoba, the adjustment is 660 thousand tons: from 16.05 million to 15.39 million, according to the entity from Rosario.
At the same time, the oil price (full export price, without the impact of withholdings) of the oilseed fell $ 24, from $ 332 (at the end of February) to $ 308 last Monday. The explanation for this drop (-7.2 percent) is that soy is no stranger to the global retraction phenomenon caused by the coronavirus pandemic and the collapse of oil prices, which impacts on raw materials.
The economist Gonzalo Agusto, from the Córdoba Cereal Exchange, summarized that 15 days ago a national soybean crop was expected that would contribute 18,260 million dollars. Now they would be 15,862 million; that is to say, 2.4 billion less, distributed almost equally in the combo of lack of rains and global crisis.
If prices had not dropped, the water shortage would subtract 1,160 million dollars, while the effect of lower prices is what explains the remaining 1,240 million.
As for Córdoba, from a gross value of soybean production of 5,330 million dollars, estimated until last month, it goes to 4,740 million, that is, almost 600 million dollars less.
Incidentally, they are theoretical calculations that may vary depending on the dynamism of the markets and the possibility that the rains registered in the last week may recover the situation in some lots.
Not least is that Argentina is the third largest soybean producer in the world and the main exporter of soybean meal and oil; for this reason, the evolution of its harvest also impacts on the formation of international prices.
“If we did not have a drought here, prices would perhaps be even lower,” said Agusto.
One hope is the data coming from China – the world’s leading buyer of the oilseed – which is beginning to recover after overcoming the worst stage of the Covid-19 outbreak.
“Surely this has to help a recovery in prices, but we must remember that we come from a discouraging scenario, even before the virus,” said Agusto.
Last January, soybeans remained around $ 350 a ton, a better price than today, but historically low: between 2008 and 2015, for example, it averaged more than $ 500.
“At most, the price could return to that level ($ 350) if the situation begins to normalize, but we don’t even know when that could happen. In addition, the record harvest in Brazil somewhat overshadows the Argentine drought, “added Agusto.
Powdered milk: Also “sick”
The price fell to its worst level since December 2018.
Not only the grains suffer the recessive effect of the coronavirus. In the international auction of dairy products of Fonterra (world reference for the values of these foods), the price of whole milk powder – the main export product of the Argentine dairy chain – fell 4.2 percent compared to the auction previous (they are fortnightly). The price stood at $ 2,797 a tonne, the lowest value since December 2018.
The original text of this article was published on 03/18/2020 in our printed edition.