Argentina Soybean Rebound Will Shore Up Global Vegetable Oil Supplies

Argentina’s soybean production forecast has rebounded, after recent rains rescued the crop from earlier drought damage. The improved outlook in Argentina, the world’s largest exporter of soybean oil, is welcome news as the Russia-Ukraine war reduces global vegetable oil supplies and drives prices higher. 

Gro predicts Argentina soybean production will roughly match last year’s output, based on forecasts by Gro’s machine learning-based Argentina Soybean Yield Forecast Model. Earlier this season, production looked headed for a double-digit-percentage decline due to severe dryness and high temperatures in December and early January. 

World soybean oil stocks-to-use ratio, an important measure of supply availability, is currently at the tightest level in at least 20 years. Competing global vegetable oil supplies are also under pressure, especially as Russia’s attack on Ukraine stalls shipments of sunflower oil from the region. In addition, supplies of palm oil, the most popular edible oil, are being squeezed after top producer Indonesia restricted exports, sending big importers such as India scrambling for alternative supplies. 

Vegetable oil prices have risen sharply in the past year — soybean oil futures, for example, are more than double year-ago prices. That has lifted profit margins for oilseed crushers and processors, but has raised ingredient costs for packaged food manufacturers and pinched consumer wallets. Gro’s US Food Price Index, which reflects prices based on consumption of a wide range of food items, is up 32% from this time last year. 

Argentina’s soybean crop turnaround came as a result of above normal rainfall in February across the main soybean producing regions of Cordoba and Buenos Aires. Forecasts for the region call for decent rainfall and mild temperatures, providing good finishing weather as the first harvests begin toward the end of March. 

Heightened dryness persists in the more northerly provinces of Santa Fe and Entre Rios. Gro’s yield forecast model, which updates daily, should continue to be monitored to assess crop health and production potential. Argentina produces soybeans in two phases, with a first harvest in April-May and a second in May-June. 

Meanwhile, neighboring Brazil’s soybean crop, the world’s largest, is currently being harvested. Gro predicts production will see a double-digit-percentage decline from last year due to drought, brought on by La Niña, in Brazil’s southern states. 

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