Presidential candidates Kamala Harris and Donald Trump are expected to implement similar economic measures to compensate farmers with internal support amid falling grain prices, while an aggressive biofuels policy in the US continues to threaten Argentina's oilseed industry, Javier Preciado Patiño, agronomist and former undersecretary of agricultural markets at Argentina's Ministry of Agriculture told S&P Global Commodity Insights.
“Subsidizing the vegoils to be used in renewable biodiesel production, both federal and state governments induce the creation of more soybean meal surplus that the US cannot absorb, and therefore they are aggressively operating in the overseas markets (Southeast Asia) where the Argentine oilseed industry is currently supplying SB meal,” Patiño said.
The US Department of Agriculture projects marketing yea 2024-25 domestic soybean meal production at 51.78 million mt, up 5.35% year on year, and exports at 15.88 million mt, 8.7% higher, according to the World Agricultural Supply and Demand Estimates report Oct. 12.
In the period from Nov. 1, 2023 to Oct. 22, the US exported a net total of 6 million mt of soybean meal, out of which 2.5 million mt or 41.7% was supplied to Philippines alone, data from S&P Global Commodities at Sea showed.
Biofuels policy continues to be a silver lining for the US, and both presidential candidates have extended support to biofuel programs in their announcements as well as precedents.
“In my opinion, this is the largest threat over our Argentinian agriculture value-chain,” Patiño said.
Protectionism could drive transaction costs
Patiño said Trump has larger support among farmers and rural communities, but “the main difference is more protectionism with Trump emerging as president.”
“This could expose the market to higher transaction costs, and in the case of Argentina, we must remember that in Trump’s administration, our biodiesel exports to the US were blocked,” Patiño said.
In 2017, the US imported roughly 289 million gallons of biodiesel from Argentina, its largest supplier for the year. Between 2018 to 2021, there we no supplies at all, according to the US International Trade Commission.
The halt of supplies was a result of heavy import duties levied by the US Department of Commerce on Argentina at an average of 74% in April 2018.
Harris, on the other hand, has a more pro-environment image, and is expected to promote more rules and measures in favor of clean energies, which in the case of biofuels could harm the Argentine oilseed industry, Patiño said.
Scenario of a shifting Chinese preference
“I think that countries don’t have preferences for one or other origin, since it’s just a matter of food security or business,” Patiño said.
“In the particular case of the soybean imports, China has found in Brazil a good and reliable supplier, since the South American country has doubled its soybean production in the last 10 years and has no problem in shipping more than 100 million mt of soybeans per year.”
Between Nov. 1, 2023 and Oct. 22, China’s soybean imports amounted to 106.5 million mt, out of which 76.7 million mt or 72% came from Brazil, 21.4 million mt or 20% from the US, and another 4.7 million mt or 4.4% from Argentina, according to CAS data.
“On the other hand, the US policy promotes the use of soybean oil as raw material for the renewable diesel industry, limiting its capacity to export the bean,” Patiño said.
“I think that in the short/medium term, China will continue to rely on food imports, mostly on high-quality food like beef, milk, cheese, wine, tobacco, poultry or even pork.”
This represents a great and valuable opportunity for Argentina, “because we have a high surplus of the raw materials [grains and oilseeds] to produce high-quality food.”
However, this depends on Argentina’s own capacity to do good business, and is independent of US policies, Patiño said.
South American supplies pressuring prices
Patiño said the most meaningful bullish factor for an upward push on prices would be a significant failure of South American corn and soybean production due to climatic events such as a severe drought or large floods.
“But the chances of this assumption occurring over such a massive area are not large since everything indicates that we will see a relatively weak market in the coming years, where corn and soybean supplies will overtake demand, increasing stocks,” he said.
Market sources believe that abundant supply from South America is putting downward pressure on global corn and soybean prices.
Platts, part of Commodity Insights, assessed Argentina corn FOB Up River at $205.02/mt Oct. 28, down $4.13/mt from the previous assessment. It is also down $7.87/mt from a year ago, and $72.83/mt below the price on Oct. 28, 2022.
Similarly, Platts assessed the SOYBEX FOB Santos soybean price for December loading at $428.45/mt Oct. 28, down $2.48/mt from the previous assessment. That is also down $91.31/mt from the year-ago price and $177.94/mt below the assessment of Oct. 28, 2022.
“I think that the worst scenario for Argentina is low prices and higher production in Brazil and the US," Patiño said. "Despite the capacity of our farmers to adapt to any circumstance, if the Argentinian government doesn’t change some policies [export taxes, for example], we will face hard times.”
