Highlights

There continues to be significant discussion over the short-term effects of the government's decision to delay the reduction of soybean export taxes; and the introduction of a 5 percent export tax rebate for northern provinces expected to take effect March 2017. Post estimates that is too early to alter its production forecast based on these developments and thus its 2016/17 soybean production estimate is left unchanged at 55 million tons. Adverse weather and erratic temperatures have delayed peanut sowing in south Cordoba province. Producers will be forced to quickly reaccelerate planting as the optimal planting window usually concludes around mid to late November.

Soybeans

Oilseed, Soybean (Local)

2014/2015

2015/2016

2016/2017

Market Begin Year

Apr 2015

Apr 2016

Apr 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Planted

19400

20000

19700

20250

19450

19500

Area Harvested

19340

19300

19530

19530

19450

19300

Beginning Stocks

10214

10214

10915

9252

12500

10602

Production

61400

60800

56800

56800

57000

55000

MY Imports

35

35

650

600

300

300

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

71649

71049

68365

66652

69800

65902

MY Exports

11669

11670

10100

10100

9650

10000

MY Exp. to EU

60

60

60

60

0

65

Crush

44890

45110

41400

40850

44300

43500

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom. Cons.

4175

5017

4365

5100

4455

5150

Total Dom. Cons.

49065

50127

45765

45950

48755

48650

Ending Stocks

10915

9252

12500

10602

11395

7252

Total Distribution

71649

71049

68365

66652

69800

65902

As touched upon in Post's previous oilseeds update, there continues to be discussion over the short and long term effects of the government's decision to the delay of the reduction of export taxes on soybeans until January 2018 and bolster soy production in ten northern provinces by providing a rebate equivalent to 5 percent of the FOB price Most discussion has focused on the implications for this season. One segment of contacts reports that the government's decision to provide a 5 percent refund to producers in the north will not necessarily encourage a significant increase in area planted but will act as income support for producers who traditionally endure a higher cost burden, due to pest control and transportation costs. Other sources suggest that these northern producers may opt for more soybeans in December. This could potentially alter previous area estimates and make the expected decline in soybean area for 2016/17 less pronounced. Post currently estimates a 3.7 percent reduction in 2016/17 area planted from the previous season. At the same time, areas in the NOA, NEA, north La Pampa, San Luis, and west and central Buenos Aires are expected to expand plantings in lots that were previously fallow due to high production costs, environmental limitations or a combination of both.

Other analysts have begun to speculate that the delay in soybean export tax reduction could cause some producers to avoid soybeans as crop choice in 2018. Post estimates it is still too early to adjust its production estimates based on these policy changes as producers still have ample time to monitor market conditions and evaluate other crop alternatives. As such, Post's area harvested and production estimates are left unchanged at 19.3 million hectares and 55 million tons, respectively.

Local sources expect a La Nina or neutral season in terms of weather conditions. As a result, they expect that these conditions will not inhibit conditions during the planting window but could present moisture deficiencies during key growing stages. As for expected returns for this season, one analysis projects that an increase in soybean gross margins of 114 percent for 2016/17 compared to the previous season – from U.S. $70 (15/16) to $150 (16/17) for the areas in southeast and west Buenos Aires province (based on an average yield of 1.8 million tons). Meanwhile, gross margin estimates for the nation's most fertile soybean area of north Buenos Aires and south Santa Fe provinces are $404 per hectare (based on an average yield of 3.4 tons per hectare). Provinces in the north such Santiago de Estero and Salta are expected to deliver gross margins of $72 and $99 per hectare, respectively.Margins are traditionally lower in the northern areas due to lower average yields and elevated transported costs. Freight costs for this region can represent 35 percent of costs. Moreover, it is estimated that the cost of transporting soybeans at distance of 1,100 kilometers to the Rosario Port is nearly $76 dollars per ton.

Crush and Trade.

Based on updated crush figures, 2015/2016 crush is revised down to 40.85 million tons. 2016/2017 exports and crush are revised up to 10 million tons and 43.5 million tons, respectively.

Sunflower

Oilseed, Sunflowerseed

2014/2015

2015/2016

2016/2017

Market Begin Year

Mar 2015

Mar 2016

Mar 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Planted

1440

1300

1300

1250

1650

1675

Area Harvested

1440

1240

1270

1200

1650

1650

Beginning Stocks

740

740

1038

636

454

144

Production

3160

2755

2700

2600

3300

3300

MY Imports

1

1

0

2

0

2

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

3901

3496

3738

3238

3754

3446

MY Exports

63

62

300

305

118

80

MY Exp. to EU

13

20

250

20

15

0

Crush

2749

2750

2930

2735

3000

3150

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom. Cons.

51

48

54

54

54

60

Total Dom. Cons.

2800

2798

2984

2789

3054

3210

Ending Stocks

1038

636

454

144

582

156

Total Distribution

3901

3496

3738

3238

3754

3446

2016/2017

Private estimates indicate that almost half of this season's crop has been planted – almost 834,000 hectares – as of October 28th. This represents more accelerated crop progress compared to the historical average. Major sunflower production zones are reporting favorable moisture levels which are resulting in good crop conditions. In the northern production areas (NEA), those lots planted earlier are beginning to flower, and moisture levels are fine overall with some select areas reporting excessive levels in lower areas. Just south of this region, central-north Santa Fe province is reporting varied moisture levels from optimal to excessive. Overall, the crop in this region is in good condition although low temperatures at the beginning of the season led to slower sowing progress. In the other major sunflower production zone of north La Pampa-west Buenos Aires provinces, planting progress advanced slowly due to excessive moisture levels. Select low areas in General Villegas and Carlos Tejedor could be compromised by additional rainfall. The remaining areas are reporting very good conditions, partly due to preventive measures taken to control caterpillar cutter (orgua cortadora). As such, yields are expected to be greater than historical area averages. In southeast Buenos Aires province, recent rains delayed crop progress, leading to only 12 percent of crop planted in an expected planting area of 360,000 hectares – making southeast Buenos Aires the second largest production area in the country. This area is experiencing a reported area increase of 20 percent compared to last season. Like other areas of the country, the recovery in sunflower prices and elimination of export taxes is encouraging a significant increase in plantings. Moreover, a sunflower crop allows producers in this area to finalize harvest in March, allowing for the planning of winter crops such as wheat or barley soon after.

Per analysis from the Grains Exchange of Bahia Blanca, gross margins for conventional and high oleic sunflower are expected to more than double, with high oleic sunflower receiving price premium of $5-$10 per ton. The increase of sunflower prices by a reported 30 percent in combination with lower agrochemical costs is resulting in gross margins of $90 and $100 per hectare for conventional and high oleic sunflower, respectively. Based on an average yield of 1.5 metric tons per hectare, 2016/17 gross margins for sunflower ($95 per hectare) are 111% higher than 2015/16 margins ($45 per hectare). The above-mentioned factors support Post's current expectations for the 2016/17 season and as such, area harvested and production are left unchanged at 1.65 million hectares and 3.3 million tons.

Local producer groups, particularly Rural Confederations of Argentina (CRA in Spanish), have expressed dissatisfaction with the prices offered by buyers. CRA claims the prices are lower than what could be offered and cite 2017 forward prices at $245 - $260 per ton as below what it estimates processors could offer - $310 per ton. This group fears such a price gap could lead to lower investment in the sector. It seeks greater cooperation with the Ministry of Agro-Industry to make the market more competitive and equip producers with better tools to market their product.

Trade

Based on updated trade data, 2015/16 exports are revised up to 305,000 tons.

Peanuts

Oilseed, Peanut

2014/2015

2015/2016

2016/2017

Market Begin Year

Mar 2015

Mar 2016

Mar 2017

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Planted

341

345

300

330

350

365

Area Harvested

341

341

290

290

350

360

Beginning Stocks

587

587

595

589

334

317

Production

1188

1188

930

930

1155

1190

MY ImporArts

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

1775

1775

1525

1519

1489

1507

MY Exports

833

833

870

870

875

900

MY Exp. to EU

520

465

490

450

450

490

Crush

278

277

245

252

270

270

Food Use Dom. Cons.

48

53

50

55

53

58

Feed Waste Dom. Cons.

21

23

26

25

27

27

Total Dom. Cons.

347

353

321

332

350

355

Ending Stocks

595

589

334

317

264

252

Total Distribution

1775

1775

1525

1519

1489

1507

Local reports indicate that peanut sowing is delayed to adverse weather conditions. As of present, rainfall has arrived late and erratically in the main production zone of south Cordoba. Some areas are reporting adequate moisture for plantings while others are reporting deficient levels. Local observers indicate that there was virtually no rainfall during month of September with rainfall finally occurring in October. Moreover, in some circumstances, dramatic rainfall occurred as was in the case in Huinca Renanco and surrounding areas where hail occurred. However, producers are more worried about the lower temperatures. The past few weeks reported temperatures around 28-30 ºC which are optimal for planting, however, these were followed by erratic temperature drops to 4-5 ºC.

It is believed that the optimal planting window for peanuts is between October 15 to November 15, with a desired water table of almost two inches. Because of the mentioned conditions, planting progress has been limited. Although there is no estimate of sowing progress for this season, sources indicate that it is well below historical averages and that usually by late October 50 percent of the crop is planted. While planting has been delayed, it is expected that producers will accelerate sowing as soon as better conditions manifest themselves. Based on these factors, area harvested and production is left unchanged at 360,000 hectares and 1.19 million tons, respectively.