Agriculture & Food

Global oil crops are an important part of the food supply chain. All kinds of soybean meal from oil crops are an important part of raising livestock and some aquatic animal, and an important source of protein in the food chain. As a major oil crop in international trade, soybeans are favored for their excellent planting, transportation, storage, and processing qualities, while Argentina is an important participant in the global soybean market. In international trade of commodities, Argentina's soybeans play an important role, affecting the balance of international trade on both production capacity and market demand.

In 2022/23, Argentina was severely affected by dry weather, resulting in a significant decrease in soybean production. In fact, Argentina, located in the southern hemisphere, has a soybean sales period from October of the first year to September of the second year. Argentina's soybean production has continued to decline in the past three sales years, and the US Department of Agriculture estimates that Argentina's soybean production in 2022/23 will reach a 14 year low (33 million tons). The Rosario Grain Exchange in Argentina, on the other hand, is even more pessimistic, reducing its production forecast to 27 million tons, the lowest level since 2000/01. As downstream of soybeans, squeezing companies have already responded in advance, and Argentina's domestic crushing capacity has also dropped to its lowest level in 10 years. The dual decline in Argentine soybean production capacity and crushing capacity is expected to have a significant impact on global soybean, protein meal, and vegetable oil trade in the coming months.

In order to alleviate the shortage of domestic soybean supply, Argentina's soybean imports reached a record high of 7.3 million tons in 2022/23, second only to China and ranking second globally. The main sources of soybean importers in Argentina are Brazil and Paraguay. Brazil's soybean production set a historical record last year, roughly filling the gap in Argentina's soybean production decline. However, the impact of the decline in Argentine soybean production can still be observed, both in terms of total quantity and flow direction and structure. Affected by Argentina, the total trade volume of global soybeans and related products decreased last year. Among them, the trade of soybean meal decreased by 1 million tons year-on-year, leading to an increase in prices. Moreover, some demand has shifted to other categories of protein meal, such as peanut, rapeseed, sunflower seeds, palm, coconut, cottonseed, etc. The global soybean oil trade in 2022/23 will also decrease by more than 2% year on year due to the rise in prices in Argentina and the United States. Argentina's soybean oil exports have decreased, while Brazil has experienced rapid growth. But Brazil may increase the mandatory addition of soybean oil to biofuels in March. If there is an increase from the current 10%, the available soybean oil for export will be affected, which will make importers in various countries more dependent on other varieties of vegetable oil.

Soybeans are the main oil crop imported by China, and the impact of changes in international trade supply and demand on the Chinese market is worth paying attention to. According to customs data, in 2022, China imported 1.07 billion US dollars of non genetically modified yellow soybeans, with an import volume of 1.69 million tons. In comparison, the imported genetically modified yellow soybeans reached $60.16 billion that year, with an import volume of 89.389 million tons. According to unit price calculation, the imported genetically modified yellow soybeans in that year were $0.67 per kilogram, which is 4 cents higher than non genetically modified yellow soybeans. China has a wide distribution of non genetically modified soybean import source countries in 2022, reaching 9. Among them, imports from Russia, the United States, Benin, and Canada accounted for the highest proportion, with 35.8%, 28.2%, 16.1%, and 13.3%, respectively. The average unit price of non genetically modified soybeans in Russia is 0.55 cents per kilogram, which is 4.7 cents lower than that in the United States. The main import sources of genetically modified soybeans are Brazil and the United States, accounting for 62.0% and 31.3% of the import volume of that year, respectively. In terms of unit price, Brazil's genetically modified soybeans are 3.9 cents higher than the United States' per kilogram.

Although from the perspective of import sources, China's direct imports of soybeans from Argentina are all genetically modified soybeans and the quantity is not significant (the proportion of imports in 2022 was only 4.0%), the impact of Argentina's soybean production reduction cannot be ignored. In terms of unit price, the import price of Argentine soybeans is $0.66 per kilogram, which is 2.5 cents lower than that of Brazilian soybeans. The cattle farming industry, as a traditional and important industry in Argentina, has also maintained rapid growth in recent years, driving the continuous increase in domestic demand for soybean meal in Argentina. As members of the Southern Common Market, Brazil, Argentina, Uruguay, and Paraguay are all major producers of soybeans, and trade between countries is not significantly affected by tariffs. The domestic squeezing demand in Argentina will shift to other members of the Southern Common Market, thereby amplifying its impact on global international trade. The squeezing industry is also capital intensive, and large processing conglomerates not only reduce average costs through large-scale processing, but also continuously extend their upstream production, logistics warehousing, and downstream sales networks. The rapid development of the digital economy has further strengthened the market influence of large squeezing enterprises, making the Lebensraum of small and medium-sized squeezing enterprises face more squeeze. China needs to ensure its own food security, while stabilizing its supply chain and maintaining a good industrial competition ecological environment, it also needs to consider international cooperation on biodiversity. We should not only discuss with relevant stakeholders in the supply chain a reasonable model for sustainable development, maintain the economic feasibility of economic and trade cooperation and the stable benefits of participants, but also encourage all parties to be more responsible and rational in planting, avoid irreparable damage to the ecological environment caused by economic activities, and prevent and reduce the risk of damage and impact of single plant species on the global ecological environment.