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October 12, 2017

Record Soy Carryover in Argentina expected to Pressure Prices

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

Farmers in Argentina are currently planting their 2017/18 corn crop and getting ready to start planting their soybeans. The springtime weather in Argentina has been wetter than normal, but it has started to dry out somewhat over the last few weeks. Weather is not the only thing Argentine farmers are worried about, they are also concerned about low soybean prices.

According to the Rosario Grain Exchange (BCR), the soybean carryover in Argentina this year will be a record 16 million tons. This large carryover is expected to help keep a lid on domestic soybean prices. The soybean carryover last year was approximately 11 million tons, which at the time was a record large carryover.

Low domestic soybean prices continue to encourage Argentine farmers to hold onto their soybeans with many farmers purchasing silo bags to store their soybeans. They are hoping for improved prices of course, but it remains to be seen if prices will improve significantly any time soon.

Farmers in Argentina are also waiting for the current 30% export tax on soybeans to start declining in January of 2018. The Argentine government has committed to start reducing the soybean export tax by 0.5% per month starting next January. So even if the international price of soybeans does not improve, at least the tax burden will start to decline in January.

Low domestic soybean prices and high export taxes are convincing farmers in Argentina to increase their corn acreage and to reduce their soybean acreage. All they need now is for the weather to cooperate.

Parts of Argentina have been plagued by excessive rainfall for more than a year. The Argentine Minister of Agriculture recently announced that 4 to 6 million hectares of farmland are saturated and that 1.8 million hectares are flooded. The most impacted areas are also some of the most productive areas in the country.

Even though the recent weather has turned dryer, the areas impacted by the flooding are very flat and the water takes a long time to drain away. The Minister said that unfortunately, the problem will not be resolved any time soon.