Argentina’s Speedy Soy Harvest Weighs on World Food Prices

As world food prices remain near a five year low, Argentina’s government reports that its soy harvest is progressing at 12 percentage points over the previous week, setting the country on course for another record harvest.

Argentina, the world’s biggest soymeal feed exporting country, now expects a soybean crop of 59 million tons – a significant increase over the previous record 2013/14 crop of 53.4 million tons.

Soybean cultivation has skyrocketed in Argentina over the past 20 years – outpacing both wheat and corn in many regions, and giving rise to concerns about soil health due to lack of crop rotation. This trend goes hand in hand with increasing soy demand from Asia, where the burgeoning middle class is shifting from a diet heavy in rice to one containing more soymeal-fed beef, pork, and poultry.

Aside from global macro drivers, other factors are driving up soy production in Argentina, as well. Despite the government imposing a 35% export tax upon soybeans compared to 23% on wheat and 20% on corn, soybeans are still favored by the country’s farmers because of the export quota system in place for wheat and corn. Under the system, the amount of allowable exports is raised or lowered depending upon the crop size and domestic food demand, making crop planning difficult and hurting farmers’ profits due to a lessening of competition between buyers. In addition, over the past two decades, advances in crop technology has allowed for higher soybean yields and the cultivation of soybeans in areas that were formerly too dry to support production.