Soybean Shortage Shuts Brazil's Processing Plants

19.08.2016

The reduction in the Brazilian soybean production on the 2015/2016 crop and the economic crisis have made the soybean processing industries hit the brakes on the second semester of this year.

Recently, the processor of agricultural goods Louis Dreyfus Company declared to Successful Farming Brasil that it will temporarily suspend its bean processing activities in two of its units in Brazil, in Jataí (GO) and Ponta Grossa (PR). According to the company, the decision was made due to the market’s current supply and demand status. There are rumors that Cargill is also halting its soybean operations.

Aedson Pereira, analyst from Informa Economics FNP, stated that some companies, which he cannot name, are already planning temporary halts for the coming weeks or months in the states of Mato Grosso and Goiás. “Companies are paralyzing their activities due to the moment we are facing, especially with sparse supply and difficulty for buying. This is common in this scenario,” says Pereira.

For the analyst, this is a strategic decision because when companies resume the crushing operations, probably after September, there will be a soybean offer with lower prices and better market definition about the demand for this oilseed. “Usually, the industry reduces processing between November and January. Now, companies are stopping earlier and also resuming earlier,” states Pereira.

This is the first time the processing industry needs to halt activities in Brazil, because, currently, the physical market has less than 15% of the soybean harvest available for trading. According to the expert, the decrease is also a reflection of what was reported early this year, when the global demand was high and the commercialization of Brazilian soybean moved the domestic market.

Despite speculations, Cargill did not confirm shutdowns at its units in Brazil. Contacted by Successful Farming Brasil, the company stated that it has a silence policy and would not comment on the topic. “Cargill clarifies that there is no intention or plans to shut down activities at the soybean processing units in Brazil,” stated the company.

On the other hand, the Louis Dreyfus Company said that, during the break on activities, it will conduct an annual maintenance service on its plants.

The forecast is for the situation of soybean processing in Brazil to be normalized before December ends, when the price of by-products, now considered low, may recover. “The soybean meal segment has a more consistent flow in the end of the year. With this, the meal and oil prices may increase again. If the by-products become better paid, the industry margins start to improve,” says Pereira.

Exports of soybean oil and meal

According to the analyst, the Brazilian exports of soybean by-products were harmed because of the good soybean harvest in Argentina, one of the main exporters of soybean meal and oil and competitor of Brazil in the international market. “Mato Grosso and Goiás are major exporters of by-products. But Argentina has better price and limits this flow,” explains Pereira.

However, the good phase by Argentina will not continue for very long. According to the grain team from the Center for Advanced Studies in Applied Economics (Centro de Estudos Avançados em Economia Aplicada (Cepea)), the Argentinean industry is already concerned with supplying soybeans, which may limit the processing and, consequently, the production of meal and oil.

“Aware of the possibility that the neighbor country may not be able to meet the demand for soybean meal and oil, Brazilian sellers who still have soybeans for trading are retracted. Since Brazil is the second-largest exporter of soybean meal and oil in the world, the international demand could shift to Brazil, which may resume the processing,” states Cepea.


agriculture

Readers choice: TOP-5 articles of the month by UkrAgroConsult