Report Highlights:

2015/16 soybean production area is unchanged at 20 million hectares with production forecast at 57 million tons. Lower soybean area in less profitable regions is expected to be offset by a shift to soybeans from planting corn and wheat. Low economic returns, a strong currency, and political uncertainty, are exerting downward pressure on overall grains and oilseed area. 2015/16 sunflower production is revised up significantly to 3.2 million tons based on favorable conditions.

Soybeans

Oilseed, Soybean (Local)

2013/2014

2014/2015

2015/2016

Market Begin Year

Apr 2013

Apr 2014

May 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Planted

19400

19400

19300

19300

20000

20000

Area Harvested

19400

19400

19300

19300

20000

20000

Beginning Stocks

7515

7515

10600

10600

16585

16585

Production

53500

53500

60800

60800

57000

57000

MY Imports

2

2

2

2

2

2

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

61017

61017

71402

71402

73587

73587

MY Exports

7433

7433

9700

9700

9775

9775

MY Exp. to EU

50

50

50

50

50

50

Crush

38497

38497

40100

40100

42500

42500

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom. Cons.

4487

4487

5017

5017

5102

5102

Total Dom. Cons.

42984

42984

45117

45117

47602

47602

Ending Stocks

10600

10600

16585

16585

16210

16210

Total Distribution

61017

61017

71402

71402

73587

73587

(1000 HA) ,(1000 MT)

In 2015/2016, soy producers face significant challenges including lower prices, high production costs, an approaching El Nino weather pattern, and an uncertain political climate. Based on Post analysis and insight from industry contacts, production and trade for 2015/2016 are left unchanged. FAS Buenos Aires will continue to monitor the situation as the season progresses.

Low to Negative Profitability

2015/2016 production is unchanged at 57 million tons, a 6 percent decline from 2014/2015 as yields are expected to revert to trend levels. At the onset of the season, many producers (particularly those renting land) are facing low to negative margins as a result of lower prices, high production costs – energy, taxes, labor, and transportation – high export taxes, and a strong local currency that is eroding competitiveness relative to other exporters. According to industry contacts, soy producers in the main production zone (composed of areas in Buenos Aires, Cordoba, Santa Fe and Entre Rios provinces) will see roughly a third of revenues going towards export taxes, with a significant portion of the remainder going to transportation and local taxes. In production areas far from ports such as Salta province, transportation costs can take up 40-45 percent of revenues. Hailed as the new frontier for crop production, the provinces of Salta, Tucuman, Santiago del Estero and Chaco face higher transportation costs in order to transport product across the country by truck to the port of Rosario, a trip of over 600-1,000 kilometers. The situation is especially difficult for producers who rent land. Those farmers who produce on their own land are in better position but will still encounter potential tight margins. A recent report estimates that the government collects over 94 percent of net profits in the agricultural sector, this includes the sum of taxes, including provincial and export duties, and intervention costs – the costs of delayed export licenses.

Due to the confluence of these factors, producers will lower their use of technology/inputs – fungicides, fertilizers, inoculants, and high quality seed – and use less-expensive and lower quality substitutes in order to curb costs. The decreased use of inputs normally leads to lower yields; however, producers believe El Nino which normally delivers more moisture, will offset these losses. Post estimates yields will average around 2.9 tons per hectare which is close to trend levels. Contacts expect some lower areas may be negatively affected by El Nino, where excess rainfall could result in flooding. On the other hand, better yields in non-affected and more productive areas are expected to more than offset any potential area lost due to flooding.

Due to the low profitability of grains in 2015/2016 season, contacts expect total wheat and corn area to decline by 1.5 million hectares. This significant decline is due to the various economic constraints noted earlier, and concerns on continued export license allocation (ROEs) delays. A large portion of the area lost to corn is expected to be allocated to soybean production due to its lower input costs. The area not planted to wheat will most likely be planted directly to first soy crop, which normally yields higher than soy planted after the wheat harvest. Accordingly, soybean area harvested is left unchanged at 20 million hectares, an increase of 3.6 percent (700,000 hectares) compared to the year before.

Strong Currency

While the Argentine peso has mostly retained its value relative to the dollar, when inflation is taken into account, other South American soy suppliers – Uruguay, Brazil and Paraguay – have seen the value of their currencies fall, particularly over the past year. This has diminished the competitiveness of local producers as they must absorb the full impact of lower commodity prices and high inflation.

Policy Situation

Looming over the beginning of the season is the presidential election slated to take place on October 25th. The three major presidential candidates – Daniel Scioli, Mauricio Macri and Sergio Massa – have signaled possible agricultural policy changes if elected. At present, there is much speculation over how any new administration will direct policies as it takes office in December 2015. The current government has in place several policies that impact oilseed production. The most significant are: 1) a strong local currency, 2) high taxes and 3) high export taxes on soybeans and products. Much of the industry expects these policies to be modified after a new administration takes power. Nonetheless, current polices combined with speculation on the likely winner and his administration's policies has created significant uncertainty on planting decisions. Many producers are expected to base their decisions on an expectation that policy modifications will improve returns in time for harvest around March and April.

Sunflowerseed

Oilseed, Sunflowerseed

2013/2014

2014/2015

2015/2016

Market Begin Year

Mar 2013

Mar 2014

May 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Planted

1300

1300

1440

1440

1400

1600

Area Harvested

1300

1300

1440

1440

1400

1600

Beginning Stocks

998

998

675

675

920

920

Production

2000

2000

3160

3160

2600

3200

MY Imports

1

1

1

1

2

2

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

2999

2999

3836

3836

3522

4122

MY Exports

73

73

70

70

85

85

MY Exp. to EU

18

18

20

20

20

20

Crush

2211

2211

2800

2800

2700

3094

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom. Cons.

40

40

46

46

54

58

Total Dom. Cons.

2251

2251

2846

2846

2754

3152

Ending Stocks

675

675

920

920

683

885

Total Distribution

2999

2999

3836

3836

3522

4122

(1000 HA) ,(1000 MT)

Sunflower area harvested is revised up significantly to 1.6 million hectares in 2015/2016 due to favorable weather conditions that encouraged greater planting, especially in Chaco and Santa Fe provinces. While yields are not expected to reach the record levels of last season, they are expected to be healthy and above average around 2 tons per hectare. Production is revised up to 3.2 million metric tons, an increase of 1.3 percent compared to the previous season.

Planting areas throughout the entire country are experiencing good conditions spurring higher production. As of late September, this season's national planting progress is above average compared to other years with 23 percent of the crop already planted according to industry sources. Rains in the areas of Chaco, Formosa and East Santiago del Estero during the end of August have provided adequate water tables to regulate. Although colder temperatures hit the Chaco area – specifically the localities of San Bernardo and Hermoso Campo - two weeks ago and resulted in some damaged and burnt leaves, these lesions were not enough to hurt the crop in any significant way. According to sources, the expected planting for the central north part of Santa Fe has just finalized under conditions of adequate humidity. Meanwhile, planting continues in the central north Cordoba, Nucleo North, Central-East Entre Rios and Corrientes under optimal moisture levels and plant health with expectations of greater copper fluidity. In the south of the national agricultural area, specifically in the southeast of Buenos Ares and south La Pampa, planting conditions are looking favorable with the possibility of sowing occurring within the next few weeks.

Trade is left unchanged as year-to-date trade data reflects current estimates. Although shipments have slowed down to the Middle East, Brazil and Mexico, this is not expected to have a significant impact on exports as shipments to the Spain, the United States and Algeria are growing. Crush is revised up accordingly to nearly 3.1 million tons, an increase of 10 percent from the previous season. Due to this increased crush use and relatively unchanged feed and waste use, ending stocks are revised up to 885,000 tons, up 4 percent from the previous year.

Peanuts

Oilseed, Peanut

2013/2014

2014/2015

2015/2016

Market Begin Year

Mar 2014

Mar 2015

May 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Planted

380

380

385

343

365

370

Area Harvested

378

378

383

341

365

370

Beginning Stocks

447

447

598

598

875

695

Production

997

997

1343

1188

1060

1090

MY Imports

0

0

0

0

0

0

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

1444

1444

1941

1786

1935

1785

MY Exports

566

566

725

750

750

780

MY Exp. to EU

370

370

465

465

485

485

Crush

210

210

265

265

265

275

Food Use Dom. Cons.

50

50

53

53

55

55

Feed Waste Dom. Cons.

20

20

23

23

25

25

Total Dom. Cons.

280

280

341

341

345

355

Ending Stocks

598

598

875

695

840

650

Total Distribution

1444

1444

1941

1786

1935

1785

(1000 HA) ,(1000 MT)

2014/2015 area harvested is revised down to 341,000 hectares based on the latest industry production summaries. Conditions were so optimal during the 2014/2015 season that it led to historic yields estimated at nearly 3.5 tons per hectare. Due to lower area harvested yet historic yields, 2014/2015 production is revised down to 1.19 million tons, an increase of 19 percent over the previous season.

Planting occurred during the months of October (32 percent), November (66 percent) and December (2 percent) with most of it concentrated during the month of November due to better weather conditions. November had precipitation levels of an average of 87 milometers, an increase of almost 28 percent from the prior month of October. Heavy rains in the mouths of February and March further helped the crop along the season. Overall plant health was great during the season despite some disease and pests. Reported diseases were caused by sclerotinia, fusarium y cercospora, with an average of three applications used in order to control smallpox. Pests – spider mites and grasshoppers – were reported at low to medium incidence.

2014/201515 exports are revised up to 750,000 tons based on strong shipments to the European Union and Russia. In fact, year-to-date exports for the season are up 53 percent compared to the same period last marketing year. Due to lower production and higher exports for the 2014/2015 season, stocks will be drawn at a larger level, leading to revised ending stocks of 695,000 tons.

For the 2015/2016 season, planting area is revised up slightly to 370,000 hectares. Yields are not expected to reach the historic levels of the previous seasons; however, higher moisture levels spurred by the upcoming El Nino will lead to healthy yields around 2.9 tons yield. Accordingly, 2015/2016 production is revised up to 1.09 million tons. This production increase is encouraged by greater exports and slightly higher crush levels, both revised up at 780,000 and 275,000 tons, respectively. The additional demand will lead to a drawdown of stocks which are expected to end at 650,000 for the season.