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Argentina stops exports of soybean oil and soybean meal 'until further notice'

Argentina has banned exports of soybean meal and soybean oil "until further notice", despite what the government said two weeks ago.

Soybean crop in Argentina
Soybean crop in Argentina | © Javier, Flickr

The decision to ban soybean meal and soybean oil exports was communicated by Javier Preciado Patiño, Undersecretary of Agricultural Markets of the Ministry of Agriculture, on March 13.

Food prices have soared on the international market recently and the measure aims at supplying the domestic one.

But soybean byproducts exports also account for a large chunk of business and revenue for the agriculture industry. Argentina exported for $11.8 billion of soybean meal and $6.9 billion of soybean oil in 2021 according to data from the Agriculture Ministry.

The government has recently expressed concern over price bumps in food and fuel as a result of the pandemic supply chain issues and now the invasion of Ukraine by Russia. Soybean oil prices have climbed by almost 40% this year.

As Ukraine is a large producer of wheat, price of flour and cereals have dramatically increased since the start of the war in the country. Ukrainian authorities banned exports of wheat to try to avoid a domestic "humanitarian crisis" while Argentina has been facing difficulties in importing wheat recently. As for the international market, it will need to do without Argentine soybean meal and oil for now.

Ukraine has also restricted sunflower oil exports with the need of a license. Indonesia, the largest producer of the most consumed vegetable oil in the world, increased required volume for domestic supply of palm oil.

Soybean meal is used as a protein supplement for feeding cattle and its price increase affects production costs of Argentine meat, which has already been submitted to export bans to curve inflation. A small portion of soybean meal is transformed into soybean flour used for human consumption like in soy milks.

Soybean oil, extracted from the seed, is one of the most used vegetable cooking oil in the world. It is the most consumed cooking oil in the United States. It can also be used in biodiesel. which can prove even more useful when oil prices are high.

Argentina is the third largest producer of soybeans with 49 million tonnes in 2020 according to the FAO, behind the United States (113Mt) and Brazil (122Mt). Russia (4.3Mt) and Ukraine (2.8Mt) are the 10th and 12th largest producers in the world and the two largest producers in Europe.

The conflict in Ukraine created a spike of demand in cooking oil, particularly sunflower oil, in Portugal and Spain recently.

While Argentina is trying to pay off its massive debt to the International Monetary Fund, cashing in extra foreign reserve could be a good opportunity for the country. But it can also fuel the high domestic inflation rate.

Yet, the minister of Agriculture Julián Domínguez in early March asserted there would be no export ban. "There will be no export ban nor an increase in withholding tax. This the vision and task that the President of the Republic gave me," he said at a press conference. "We have to clear up uncertainties and fears, we are very sure of what we are doing," he said.

Julián Domínguez even emphasized he planned to increase exports and enjoy the higher prices: "Argentina is going to export $5 billion more than what we had exported in 2021, even with less production".

Moreover, it is believed that export tax on soybean meal and soybean oil will also be raised in the future as part of the agreement found with the IMF at the beginning of the month. It could increase from 31% to 33% to be on par with the withholding tax of soy beans. The government could expect an additional $410 million of tax revenue.

Export duties for wheat and corn at currently taxed at 12% and the industry also fears for an increase on these products.

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