Argentine Elections Could Lead to Soy Price “Plunge” – USDA

As Argentina’s presidential elections approach, possible political reforms that would spur the release of even a portion of the country’s stockpiled soybeans could cause prices to ‘plunge’ warns the U.S. Department of Agriculture (USDA).

As of this October, when Argentina’s presidential elections are to be held, the country’s farmers are forecast to be holding 32 million tons of soybeans, or 37% of the world’s total as a hedge against the country’s crashing peso.

But, warns the USDA, a new political leadership will likely be looking toward policies that would stimulate the economy. Facilitating higher soybean sales after the 2015/16 harvest would be a key means toward that end, while reinstating Argentina’s dominance on the global soybean market in the coming season.

However, following a significant USDA cut in its estimate for Argentina’s soybean inventories at the end of the 2014/2015 season while simultaneously increasing its forecast for domestic consumption in its latest World Agricultural Supply and Demand Estimates report, questions remain.

"The drastic changes in Argentina's domestic consumption, with light changes to crush, over the past few years tells us USDA is having a hard time understanding how many soybeans are stockpiled on farms," Terry Reilly of Futures International tells Agrimoney.

The unexplained revision did have one positive outcome – it kept the USDA’s estimate for 2015/2016 world soybean ending stocks to 96.22 million tons – keeping the forecast below the 100 million tons mark, which would have likely caused prices to drop by an additional 0.20 cents per bushel.

Meanwhile, aside from Argentina, Informa Economics estimates that U.S. soybean acreage will increase by 3.5 million acres, easily breaking all previous records. It also estimtes that U.S. inventories will far exceed demand, while high global supplies will limit global trade and continue to pressure prices.

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