Soybeans: why there is so much volatility in its international price and how this can impact the Argentinian market

Entre el miércoles último y ayer el mercado de granos de Chicago presented a contexto de elevadísima volatilidad en los precios, como consecuencia de los datos de siembra de soya y maíz en los Estados Unidos, el rebrote de fiebre porcina en China y el protagonismo de los investment funds.

The impact of the operations of these funds, which took profit yesterday, caused soybean’s May 2021 position to drop by $ 12.77 per tonne and was listed at $ 515.15. On the grain side, May 2021 maize fell $ 1.77 and traded at $ 220.37 per tonne and May 2021 wheat fell $ 2.57 and recorded a price of $ 224.50. the ton.

Beyond the fact that yesterday there was no activity at the local level due to the Easter holidays, the behavior of international prices has no impact on the Argentinian market. It should also be remembered that foreign prices are a reference for national production, which must also face the effect of withholding taxes, the split in the exchange rate, political and economic uncertainty and the consequences of the advance of the coronavirus, as many effects very present at the time of decision-making.

The grain market analyst, Carlos EtchepareHe recalled that data released last Wednesday by the US Department of Agriculture showed a much smaller soybean plantation with 1,000,000 hectares less than the market expected and also corn. “You have to take into account the fact that this report is made on the basis of surveys and planting intentions, and that it does not say what is really going to be sown. Therefore, this is a report that also lends itself to continued volatility and it will continue to be very important, ”he said.

To all this is added the actions of investment funds, “very active” according to the analyst. “In the days leading up to the report, they lowered prices and before raised them. What happened after the USDA data on Wednesday was that they took revenge, drove prices up and yesterday they took a profit. That is to say, volatility that will continue at least until June, since the panorama of seedlings in the United States will be much clearer and everything related to the climate, since on the basis of the latter, producers will take decisions, ”Etchepare said.

For its part, Dante Roman, FyO Analyst, in dialogue with Infobae added another aspect to keep in mind: “There is a price effect on everything to do with active demand from China, making a lot of progress on stocks and on that there is a very high seedling expectation in the United States, but lower than that. that was expected. And on the other hand, there is the reappearance of African swine fever in China., where there are already reports that show a 20% reduction in stock in March compared to February, and could impact soybean and corn prices ”.

And he added, “The rare thing is that there are declines in the shortest soybean positions, around $ 510 and $ 520 a tonne, and not the furthest, which are lagging a bit behind. It can mean that the market does not take swine fever so seriously and this is a question that will now have to be thought through ”.

In this context of high volatility, analysts say it is very difficult to predict what will happen in the coming weeks with prices. “I still think that between now and June we have a semester with relatively good prices and then the other stage starts to play, which is related to the evolution of cultures in the United States,” Etchepare said.

Local market

While the Chicago market, a world benchmark, presents a scenario of price volatility, the local scene is very different. The strong increases in the international plan last Wednesday did not have their impact in Argentina, which shows the decoupling of our country from what is happening abroad. Buyers know there is a lot of speculation in Chicago and they are not playing to validate price hikes like this week’s.

In relation to all this, Etchepare said that for Argentinian producers it is still a decision that they should consider continuing to conserve without selling soybeans, corn and wheat, not only because of what can arrive on the international market, but also because of the domestic political risk.

“Producers need to get used to the fact that when they already have a guaranteed profit margin, they should secure the price, because due to the uncertainty of the climate, the black swans of the global market, as the pandemic is fighting between the United States and China and Russia, it should be added that in the Argentinian market there is another level of risk which is the government’s own intervention», Concluded the analyst.

Price decoupling

In the opinion of the analysts consulted, the growth between the decoupling of the international price of cereals and what the Argentine producer receives appears to be one of the main problems to be solved.

One of the main factors that produce this decoupling that prevents an Argentinian producer from not receiving the full or very close international price of the grain, as if farmers in competing countries were doing so, is withholdings, as the value of the product must be subtracted, in the case of soybeans, 33% of export duties.

A report from Think Foundation warned that the price received by the producer is increasingly distant from that of its international competitors. “This is undeniably detrimental, as it will mean less investment in technology and supplies, a shift towards cheaper crops to be less exposed to risk and, ultimately, stagnation or decrease in production. We were on our way to 200 million tonnes produced in a much more sustainable way than 5 years ago and with these measures, in the best case, we were back on “pause”, “says the document.

For example, currently the soybean producer receives around 40% of the total international price from the sale of the bean, while in 2019 he received almost 70%. In this sense, the report underlines that “the Argentine producer has never been able to charge the same as in other countries. Export duties and the “subtle” interventions that have been imposed on prices and the exchange rate create an indefatigable gap. “

In the case of wheat, something similar happens. According to the Foundation’s presentation, the Argentine producer today receives less than 60% of the international price of the cereal, while in 2019 he received more than 80% and in 2017 more than 90%.. So today it gets a price “lower than anywhere else in the world because of the combination of export duties and the exchange rate differential.”

Finally, In corn, the price received corresponds to 50% of the international value, while in 2019 the producer received more than 80% and in 2016 100% of the price. The report recalls that under the administration of the previous government, production increased “by more than 20 million tonnes, we achieved a sustainable rotation in environmental terms and we were able to supply the domestic market for the production of animal proteins of such way that we break records of exports and production of meat ”, among other points mentioned.

KEEP READING: