Recent policy changes in Argentina have helped energise many sectors of the agricultural economy. In addition to a lowering in the exchange rate and ending restrictions on converting Pesos to US Dollars, many export taxes and restrictions have also been eliminated.

For wheat, corn and sunflower seed, this has led to a surge in producer sales. For soybean and derived products, which have never faced export restrictions, export taxes were only reduced 5 percentage points, resulting in a more modest rise in producer sales.

Soybean processors, in contrast, have reacted to the lower exchange rate by dramatically increasing crush volumes. Accordingly, soybean crush for the first quarter of 2016 is forecast to rise nearly 60% over the same quarter in 2015, and is likely to exceed the quantity processed from October to December 2015.

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Though processors in Argentina have generally been increasing meal and oil production from year to year in response to rising global demand, a strengthening Peso – when accounting for inflation – had been significantly impacting competitiveness and profitability of the sector. With a 40% devaluation of the Peso on Dec 19, 2015, coupled with continued depreciation, both competitiveness and profitability have improved dramatically.

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Processors anticipated the change and have been holding additional stocks that are now being rushed to market. This expansion is expected to continue for the next few months when additional supplies from the 2016 harvest will become available. Subsequently, crush is expected to resume growing in line with historical trends.

The rapid increase in Argentine processing activity in early 2016 will be felt by other soybean meal and oil exporters who will now face additional competition in global export markets. This higher crush could also add downward pressure on meal prices worldwide.

Global soybean overview

Global production went down in March 2016 on lower estimates for Russia and Serbia while exports were raised on greater shipments from Brazil. Imports were boosted with growing demand in China and Bangladesh, more than offsetting reduced shipments to the European Union (EU), Mexico and Pakistan.

Global stocks were also lowered, reflecting rising crush in Argentina and strong demand for protein meal. The US season-average farm price were slightly lower.

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In terms of price, US export bids in February, FOB Gulf, averaged US$345/tonne, down US$10 from January.

As at the week ending Feb 25, the US 2015/16 soybean export commitments (outstanding sales plus accumulated exports) to China totalled 26.7 million tonnes, compared with 29.7 million tonnes a year ago. Total commitments to the world were 42.4 million tonnes, compared with 47.6 million tonnes for the same period last year.

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