Soy dropped at the lowest price in 10 years and the crop lost $ 3 billion – 05/13/2019

The soybeans hit yesterday the lowest level in ten years and it has activated all alarms. Not only those on the ground, who are progressing with the harvest, but the government and economic badysts. That's by far the main exportable product of Argentina, with shipments that have exceeded $ 20 billion in recent years.

In a month, the price of soybeans in Chicago has lost more than 15%, break the legendary ground of $ 300 a ton last Friday. The fall has shifted linearly to the local market, where it is already around $ 200. The difference with Chicago comes from the fact that it applies here to 28% export duties, plus the difference in freight to the main destinations served by Argentina.

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The fall in prices, in this way, has an impact on both foreign exchange earnings and the fiscal front. For a crop of 60 million tonnes, as expected, at an average price of $ 340 (like last year), this would have accounted for just over $ 20 billion. If the prices stay at the same level as yesterday, the reduction would be $ 3,000 million.

The collection would follow the same path. About $ 5.7 billion was expected. Now it would be 900 million less. Entities in the field have already argued the need to reduce withholding taxes, due to the lack of profitability of the previous conditions. From now on, only those farms that achieve or have achieved much above average yields will be above the waterline.

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The reason for the collapse is the Commercial war between the United States and China. The United States is one of the top three exporters of soybeans. The other two are Brazil and Argentina. President Donald Trump opened hostilities by importing imports of Chinese origin. His pair, Xi Jinping, responded with 25% import duties on soybeans. China is the world's largest importer of the product, which forms fundamental part of the diet of its pigs, birds, fish and other aquaculture species bred in captivity.

At first, it was thought that China would import South American soybeans, and this is partly the case. But the unexpected happened: a outbreak of "African swine fever" he decimated his pork farms. Demand for soybeans, which had reached 100 million tonnes, went down to 85. The perfect storm has been configured like this. Falling prices also shook Midwestern farmers who launched the cry in the sky. Yesterday, Trump tried to conform them, promising $ 13 billion in economic aid offset the fall in prices, while redoubling its protectionist offer.

The fall of soy lags behind its two main industrial derivatives: high-protein flour, and oil. It should be recalled that Argentina basically exports these value-added products. Over the past thirty years, a powerful crushing industry has been built, with an installed capacity of more than 60 million tonnes. It ranks first in the world as an exporter of both products.

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But now, it faces a new threat: with these low soybean prices in the United States, the margin obtained by American crushers is huge. So, they go out to compete with the Argentinian origin. In addition, they closed the entry of biodiesel, biofuel obtained from soybean oil. Argentina served this market until last year, when the United States imposed import tariffs that left Argentina totally out of the fight.

The tribulations of the sector do not stop there. The capacity installed in the ports of Paraná, north and south of Rosario, allowed the local industry to process soybeans from neighboring countries, which was admitted by temporary admission. More than 4 million tons are planned for this year. The application, since last week, of a statistical rate of 2.5% (the previous was 0.5% but did not apply to Mercosur products) extremely complicates this operation.