Required Report - public distribution

**Date:** 5/19/2005

**GAIN Report Number:** AR5017

AR5017

**Argentina**

**Oilseeds and Products**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Bob Hoff

U.S. Embassy

**Prepared by:**

Kari Rojas

**Report Highlights:**

Argentine oilseed production is forecast to increase next year. Although
there are several logistical complications (storage, transportation, and
roads), final soybean harvest is expected to finish close to USDA\'s
forecasted 39 million metric tons (MMT). Post forecasts next marketing
year\'s (MY) soybean area up slightly, mainly due to increased second
crop soy plantings, to 14.5 million hectares (has). Production is
forecast at 38 MMT. Major investments in the crushing industry over the
next few years will increase crushing capacity by 50 percent.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Buenos Aires \[AR1\]

\[AR\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[PRODUCTION 3](#production)

[Soybean 3](#soybean)

[Sunflowerseed 4](#sunflowerseed)

[Peanut 5](#peanut)

[Cottonseed 5](#cottonseed)

[CONSUMPTION 5](#consumption)

[Soybean 5](#soybean-1)

[Sunflowerseed 6](#sunflowerseed-1)

[Peanut 6](#peanut-1)

[Cottonseed 6](#cottonseed-1)

[TRADE 7](#trade)

[Soybeans and Products 7](#soybeans-and-products)

[Sunflower and Products 7](#sunflower-and-products)

[Peanut and Products 7](#peanut-and-products)

[POLICY 8](#policy)

[Export Taxes 8](#export-taxes)

[TABLES 9](#tables)

[Monthly Trade Data MY2003/04 9](#monthly-trade-data-my200304)

[PSD Tables 15](#psd-tables)

# Executive Summary

Several major themes stand out from the past year, and will likely
continue making news into the next. The past year was full of intense
debates between producers and exporters and the government over export
taxes, which, although there was talk and promises of reductions, are
still in place. Second, the ever present threat of soybean rust prompted
the Government of Argentina (GOA) to put in place a educational program
to teach producers the symptoms of rust and how to treat it, as well as
implementing a national warning system. And finally, the ever-present
debate on intellectual property rights, as they pertain to agriculture,
namely biotechnology, and royalty payments continued. Some progress has
been made in the field; most agree that the developers of the new
technologies are owed payment for their investments. What is yet to be
decided is the appropriate mechanism to provide such payments.

Logistical and storage difficulties are being experienced during the
final stages of the bulk of the oilseeds harvest. With nearly 90 percent
of 39 MMT soybean production making its way to the Rosario area,
bottlenecks at the ports and crushing facilities are becoming infamous.
An estimated 30,000 trucks pass through the area daily; unloading
waiting times can range from 2-5 days. Many truckers opt to forgo
entering the port area, looking for routes that allow them to drop off
their cargo in country elevators. Others have no problem entering the
port area, but for a price: transportation charges have increased as
much as 20 percent over last year.

Many producers, either unable to contract transport for their harvest or
deciding to forgo the increased costs, have opted for on-farm storage.
Industry estimates silo-bag storage, for all grains, will increase 30
percent this year to 18 MMT. Static storage capacity, not including
silo-bags, is approximately 45 MMT (wheat basis). Considering total
grain production this year is around 82 MMT, there is a definite need
for additional storage capacity.

The export and crushing industries, in an effort to overcome the
aforementioned bottlenecks, announced investments of over \$600 million
to expand crushing, storage, and port facilities, over the next several
years.

The announced investments in the crushing industry would increase
crushing capacity 50 percent by 2006. Total crushing capacity would
reach 160,000 MT/day or 45 MMT annually, 15 percent above current
soybean production of 39 MMT.

Additionally, increased on farm storage, via silo bags, has allowed
producers more flexibility in selling decisions. No longer do producers
have to turn over their production at the moment of harvest and/or pay
fees to store grain in storage facilities. They can now keep grain in
their 'backyard' and decide the opportune moment to sell.

# PRODUCTION

## Soybean

In the coming year, overall increases in soybean area are expected.
While competition in prime agricultural areas of central Argentina may
limit expansion of first crop soy, increases in second crop soy, due to
forecasted increases in wheat area, are expected. Yields are expected
near average due to increases in less productive marginal areas dragging
down the overall yield.

Post forecasts MY2005/06 soybean harvested area at 14.5 million has.
Production is forecast at 38 MMT.

As of the week of May 7, 2005, approximately 75 percent of soybean area
was harvested. Average yields are running near 2.87 MT/ha; approximately
10.8 million has, or 31 MMT, have been harvested. Over 80 percent of
first crop and 50 percent of second crop soybeans have been harvested.
Harvest pace picked up over the past 10 days, and continues well ahead
of last year's harvest, which was affected by delayed planting due to
drought as well as rains during harvest.

Post maintains its MY2004/05 soybean production estimate at 39 MMT on
14.2 million has.

Logistical inconveniences are being felt throughout the country. With an
underutilized railway system - only 15 percent of production is
transported by train - the bulk of production is transported by truck to
crushing facilities and ports. Road maintenance has been outpaced by
degradation due to overuse, subsequently increasing transportation
costs. Additionally, producers are experiencing a shortage of trucks to
haul away their production. Truckers, on the other hand, can wait up to
several days to offload their cargo at the storage and crushing
facilities, again, increasing transportation costs.

The following is a breakdown of transportation costs, provided by the
Bolsa de Comercio, Rosario (from February 2005):

  -------------------- --------------------------------------------------
  Mode                 Cost (US\$) per MT/KM

  Truck                .05-.06

  Train                .02 -.025

  Water                .008 - .009
  -------------------- --------------------------------------------------

## 

Additionally, up-river ports around the Rosario area in Santa Fe
province are unable to fully load large sea vessels due to inadequate
dredging. Currently, the main channel of the Rio de la Plata is dredged
to 32 feet. Vessels must be partially loaded in the Rosario ports and
then topped off either in Bahia Blanca, Argentina, or Paranagua, Brazil.
This additional stop dramatically increases transportation costs from
Argentina. Some analysts calculate that every hour a vessel must wait to
finish loading at other ports can cost upwards of US\$1,800.

The cost for dredging the main channel to an optimal 42 feet is great.
Calculations show that to reach a less optimal 36-foot dredge, over 40
million cubic meters of earth must be moved. The cost of moving 1 cubic
meter of earth is approximately US\$2.50. Although it is a major
limitation to the comptetiveness of Argentine agriculture, it is
unlikely this project will be undertaken in the near future due to the
cost.

## Sunflowerseed

Producers in the Chaco area are said to be enthusiastic about planting
sunflowers this year. After two years of drought, hopefully this will be
the year that plantings return to levels seen in the past. Sunflower
area in the Chaco area competes with cotton area; producers may switch
from one to the other in accordance with planting conditions and
relative prices. Currently, prices support an increase in sunflower
area, compared to cotton. The deciding factor will be soil moisture at
planting time. For two years in a row, drought in the Chaco area during
planting has thwarted would-be sunflower producers, forcing them to
instead plant cotton. Industry forecasts cotton planted area from
320,000 to 450,000 has. The 130,000 has difference between the top and
bottom forecasts is the acreage in question that could go to sunflowers.
Additionally, sunflower production remains strong in southern Buenos
Aires province and out-competes corn in western Buenos Aires and La
Pampa.

Post forecasts MY2005/06 sunflower harvested area will rebound to prior
years levels, reaching 2.25 million has. Production is forecast at 3.9
MMT.

The MY2004/05 harvest finished in late April. Harvested area totaled
approximately 1.89 million has with a total production of 1.6 MMT
(average yields were 1.9 MT/has).

## Peanut

Peanut harvest is in full swing and expectations are high for an
excellent crop. The weather has cooperated, allowing producers to
complete harvesting on time. Industry and government estimates put total
harvested area at 212,000 has for a production of 410,000 MT.

Increased prices combined with great returns may set the stage for next
year's plantings. Post forecasts MY2005/06 peanut harvested area up
slightly to 230,000 has. Production is forecast at 420,000 MT.

## Cottonseed

Lint cotton production for MY05/06 is forecast at 145,000 MT. Post
forecasts MY05/06 cottonseed production will be approximately 290,000
MT.

As a result of lower than expected cotton production, due to drought,
cottonseed production in MY04/05 will also suffer. Lint cotton
production is estimated at 150,000 MT. Post increases its MY04/05
cottonseed production estimate to 300,000 MT.

# CONSUMPTION

Announced investments in the crushing industry would increase crushing
capacity 50 percent by 2006. Total crushing capacity would reach 160,000
MT/day or 45 MMT annually, above current soybean production of 39 MMT.

## Soybean

Argentina is a net soybean product exporter, a fact that is not likely
to change in the near future. As soybean production increases, the
natural outlet for this production is through the export pipeline as
meal or oil. Crushers are expected to absorb the increased raw material
production in order to fill capacity and keep crushing margins in check.
During the January -- March 2005 period, Argentine crush margins were
US\$8.18/MT.

Post forecasts MY05/06 soybean crush at 29 million MT, an increase of 5
percent from MY04/05. MY05/06 soybean meal and oil production forecasts
are 22.75 and 5.25 MMT, respectively.

Post's soybean crush estimate for MY04/05 is raised to 27.5 million MT
to reflect growing demand for soybean meal and oil exports. The
production estimates for MY04/05 soybean meal and oil production are
changed to 21.5 and 4.95 million MT, respectively.

Official Argentine government statistics show 25.07 MMT of soybeans were
processed from April 2004 -- March 2005. This resulted in the
manufacturing of 19.74 MMT of soybean meal and 4.724 MMT of soybean oil.
Post changes MY2003/04 soybean crush and meal and oil production numbers
to reflect these data.

## Sunflowerseed 

The new sunflower crush marketing year started out on an upswing, with
crushing in March 2005 up 32 percent when compared to March 2004. After
ending MY2003/04 on a down note, sunflower crushing declined to 2.85
MMT, down from 3.029 MMT the previous year, March's numbers are
encouraging. Raw material supply difficulties for crushers in the EU,
due to decreased sunflower production in the Ukraine and Russia, bode
well for Argentine sunflower crushers, as demand for sunflower oil by
the EU increased.

Industry sources believe the sunflowerseed crush rebound will continue.
As stated below (See Sunflowerseed trade section), sunflowerseed exports
are drastically down so far this MY. This combined with high FOB prices
of meal and oil may lead to a strong demand from the crushing industry.

Post forecasts increases in MY05/06 sunflowerseed crush, to 3.3 MMT.
Sunflowerseed meal and oil production are revised accordingly.

The sunflowerseed crush estimate for MY04/05 is also revised to 3.15
MMT.

FAS/Buenos Aires reduces its MY03/04 sunflowerseed crush estimate to
2.857 MMT to reflect new data received from official sources.
Sunflowerseed oil and meal production estimates are revised to 1.205 and
1.198 million MT, respectively.

## Peanut

The peanut crush is forecast to rebound over the next few years. As
world prices for meal and oil are expected to increase, crushers in
Argentina will increase processing and ultimately increase meal and oil
exports. Post forecasts MY05/06 crush will be 170,000 MT for a
production of peanut meal and oil of 65,000 and 54,000 MT, respectively.

Likewise, Post revises its MY04/05 peanut crush estimate to 150,000 MT.
Peanut meal and oil estimates are changed accordingly. SAGPyA reports
peanut crush during MY03/04 totaled 135,674 MT shelled, or 194,000 MT in
shell. Production of peanut oil and meal totaled 56,007 and 73,828 MT,
respectively.

## Cottonseed

There are very few crushers dedicated to cottonseed in Argentina. In
2004, only 5 plants reported installed capacity for cottonseed crushing.
Of these five, only 1 reported cottonseed crushing during 2003 (the most
recent statistics available). The rest were either closed or did not
dedicate any crushing capacity to cottonseed. Cottonseed feed
consumption is forecast to increase in the future. Post forecasts
MY05/06 cottonseed crush will be 40,000 MT. Feed, seed, and waste is
forecast at 150,000 MT.

Official GOA statistics report cottonseed crush during MY03/04 totaled
only 63,000 MT (March 2004 -- February 2005). Production of cottonseed
oil and meal totaled 10,000 and 32,000 MT, respectively. FAS/Buenos
Aires lowers the MY03/04 crush estimate to reflect these data.

# TRADE

## 

## Soybeans and Products

Post forecasts MY05/06 soybean exports up slightly to 9.5 million MT.
Soybean exports during MY04/05 are estimated at 9 million MT.

NOSIS, private trade data based on customs port data, reports MY03/04
(April 2004 -- March 2005) soybean exports were 7.05 MMT. Over 65
percent of total soybean exports were to China. Other important
destinations included Thailand (10 percent) and Turkey (4 percent).
Whether these markets will remain key players in the coming year will
depend on price of Argentine beans compared to other suppliers.

The location of the major crushers in Puerto San Martin and the Rosario
area along the Parana River is an ideal stop for barges, which come from
Paraguay. Imports in MY04/05 may increase in order to keep crushers
satisfied. Post slightly increases it MY04/05 import estimate to 350,000
MT to reflect this possibility.

Soybean imports during April 2004 -- March 2005, totaled 759,453,
according to port data. Post revises its MY03/04 soybean imports
estimate to 760,000 to reflect this data.

Soybean product trade (see table below for monthly data), show exports
of meal and oil in MY03/04 (April 2004 -- March 2005) were 4.559 and
18.916 MMT, respectively. Since there is virtually no domestic market
for soybean meals and oil, most production is forecast for exported.
Post forecasts MY2005/06 soybean meal and oil exports at 22.5 and 5.1
MMT, respectively.

## Sunflower and Products

As stated above in the Consumption section, while demand for sunflower
oil exports was up in MY2003/04, it is not clear whether it will
continue through MY2004/05, and beyond. The shortfall of the Ukraine and
Russian crops, led to the increase in exports to the European Union.

Post forecasts MY2005/06 sunflowerseed exports will be up slightly to
240,000 MT due to forecast higher production and limited crushing
capacity and demand. This export number may change drastically,
depending on world events and demand for sunflower products (meal and
oil). As seen in MY2003/04, according to NOSIS data, which is prepared
using official GOA customs data, sunflowerseed exports dropped to 47,000
MT, due to an increased demand from the crushing industry. See tables at
the end of report for month-to-month exports.

Sunflower meal exports for MY2005/06 are forecast up slightly to 1.2
MMT, in light of slightly increased production and crushing, and low
domestic demand. Sunflower oil exports are forecast at 1.1 MMT.

Data from NOSIS, shows MY2003/04 sunflowerseed exports (March 2004 --
February 2005), were 47,295 MT. Sunflower meal and oil were 963,698 MT
and 1.01 MMT, respectively. Post changes its estimates to reflect these
new data.

## Peanut and Products

Peanut and product exports in MY2005/06 are forecast up from the current
MY. A fall in production in MY2003/04, led to a decrease in raw peanut
exports in MY2003/04. Post forecasts MY2005/06 raw peanut exports at
200,000 MT. Meal and oil exports are forecast at 15,000 and 40,000 MT,
respectively.

Data from NOSIS show MY2003/04 peanut exports were 80,730 MT, shelled,
or 115,444 MT, in-shell. Meal and oil exports were 3,618 and 52,308 MT,
respectively. Post changes MY2003/04 export estimates to reflect these
new data.

# POLICY

## 

## Export Taxes

Export taxes for oilseeds and their by-products range from 5 -- 23.5
percent, depending on the level of processing.

Exporters are also eligible for export rebates which vary according to
the product. Processed products are rebated at a higher rate than
primary products. These rebates are supposed to offset the taxes
collected on the product during the manufacturing process.

The following is a table of export taxes and rebates for oilseeds and
products.

![](media/image2.wmf){width="5.108333333333333in"
height="3.7284722222222224in"}

# TABLES

## Monthly Trade Data MY2003/04

![](media/image3.wmf){width="6.416666666666667in"
height="4.542361111111111in"}

![](media/image5.wmf){width="6.416666666666667in"
height="6.667361111111111in"}

![](media/image6.wmf){width="6.25in" height="0.6673611111111111in"}

![](media/image12.wmf){width="6.416666666666667in"
height="6.042361111111111in"}

![](media/image13.wmf){width="6.333333333333333in" height="7.875in"}

![](media/image14.wmf){width="6.000694444444444in" height="1.0in"}

## ![](media/image16.wmf)PSD Tables

![](media/image18.wmf)

![](media/image20.wmf)

![](media/image21.wmf)

![](media/image22.wmf){width="6.647222222222222in"
height="4.613888888888889in"}

![](media/image23.wmf)

![](media/image24.wmf)