EUROPE’S LARGEST SOYMEAL SUPPLIER, ARGENTINA HAS BEEN BUSY WEATHERING ECONOMIC STORMS.
Soybean purchases have also stepped up. As of Sept. 17, US exports to China for 2020-21 totaled 19mmt, with a further 10mmt in outstanding sales to “unknown destinations,” many of which may be switched to China. This compares to just 2mmt by the same date last year, during the midst of the trade war. While the recent rise in Chinese imports of US soybeans is undoubtedly impressive, this pales in comparison to the flow of soybeans from Brazil. During the first seven months of this calendar year Brazil exported 70 mmt of soybeans, hitting monthly record highs of 16.3 million mt and 15.5 million mt in April and May respectively. This total represents a 36% increase on the year, with 73% of these shipments purchased by China. Brazilian farmers are now planting their 2020-21 crop, which is forecast it to be the world’s largest ever, at 133mmt, with some 85mmt pegged for export. By comparison, the 2020 US crop is estimated to be 117.4 mmt, with 57.83 mmt of exports. Given the tighter stocks, growing conditions will need to be watched carefully.
Reported cases of ASF in Wild Boar in Germany and elsewhere have also allowed Brazil to become exporters of meat to both China and Europe. with poultry and pork exports set to expand by 15% this year. Consequently, they require large quantities of feed to sustain the burgeoning livestock industry pushing domestic soybean crush in 2020-21 up 750,000 mt on the year to reach 45mmt. The US meat industry has struggled to take advantage, given a lack of processing capacity caused by Covid-19 shutdowns. However, this bottleneck has resulted in higher numbers of animals on feed, again lending support to domestic demand.
Europe’s largest soymeal supplier, Argentina has been busy weathering economic storms: Having reached a debt- restructuring deal with private creditors in August to end its ninth default, the country is now heading towards its seventh currency devaluation in 20 years. This is likely to be catastrophic given that poverty in the country has risen to more than 40% following to the pandemic, and is likely to do little to convince farmers to part with their soybeans which form a perennial hedge against inflation.
Farmer retention has also been a feature in the Black Sea this season, with harvest coming late and yields disappointing, causing markets to become technical during the transition between crops. At the time of writing, the bull market shows no sign of abating. China has not been alone in building up stocks: Jordan has built record wheat reserves while Egypt took the unusual step of boosted imports during their domestic harvest by more than 50% since April. Taiwan also said it will boost strategic food stockpiles. Rumours of Chinese purchases of DDGS continue to circulate, though to date none of which have been proven to be founded. However, one thing that we know for certain is that the storms on the agricultural commodity markets have not passed yet.
Nick Halle E:
nick.halle@adm.com T: +44(0) 7818 572 541
5 | ADMISI - The Ghost In The Machine | Q4 Edition
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