Argentine crushers low on soybeans, new supply months away

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Argentina's soy crushers are running low on beans, causing plants to suspend operations and worry about losing clients, as a December-January drought has slowed supply of raw soybeans to a trickle.

For Argentina, the world's top soyoil and soymeal exporter, the next bean harvest is at least three months away. The processing plants that line the Parana River at the Rosario grain hub are set to end 2012 working at 68 percent capacity, down from 75 percent the year before.

This is not good news for Latin America's third biggest economy, which has slowed this year under pressure from confidence-draining trade and exchange controls, high inflation and weakening demand from No. 1 trade partner Brazil.

"Some companies are suspending their crushing operations and others are slowing down because there is not enough raw material," said Andres Alcaraz, spokesman for Argentina's CIARA-CEC exporters group, which includes global behemoths such as Bunge Ltd and Noble Group Ltd.

The government said the 2011/12 soybean crop totaled 40.1 million tonnes, way down from early-season expectations of 52 million to 53 million tonnes - and 18 percent less than in the previous season.

On top of the weak supply, the upcoming March-April harvest may be delayed for weeks by floods that have slowed planting.

CHINA IS TOP CUSTOMER

Commodities-hungry China is its top customer for the products, followed by the European Union, India and Iran.

The soy complex is expected to yield export revenues of up to $26 billion this season, money eagerly awaited by the government as President Cristina Fernandez strives to keep up popular welfare spending as the economy slows.

"We are still exporting soyoil and soymeal, but looking ahead we see a risk of losing customers. We've started working with negative margins in order not to lose them," said one Rosario grains company executive who asked not to be named.

His processing plant was forced to stop operations several times in recent weeks due to a lack of beans, the executive said.

"Production costs are up by about 50 percent," he added, noting increased idle capacity at his plant and the fact that the small 2011/12 soy crop increased the price of beans.

Despite a long-running feud between the farm sector and left-leaning Fernandez, grains companies have continued investing in crushing and export capacity.

The private sector does not care much for Fernandez's interventionist policies, such as import curbs and the de facto ban that her government has on buying dollars.

But world food demand is growing and Argentina, with its vast Pampas grains belt and ample water supplies, is a natural exporter.

Its crushing capacity grew to 56.6 million tonnes this year from 52.4 million in 2011. After pushing to build capacity, crushers will have to wait until next year to use it.

"There has been a big reduction in activity and not much soy is left until the new crop comes in," an executive at another exporting company said, also asking for anonymity. "We expect suspensions of operations and negative margins until then."

Buenos Aires-based agricultural consultant Manuel Alvarado Ledesma said to expect an average delay of 15-20 days in the 2012/13 soybean harvest, which usually gets going in March.

Four months ago, Argentina revoked a rule blocking soybean imports from Paraguay in a bid to keep its crushers busy. But the neighboring country also suffered a thin harvest last season due to the same drought that parched Argentine fields.

Meanwhile, Paraguay is increasing its own crushing sector by building new plants and considering a 10 percent export tax on raw beans. The measure has passed the Senate and is headed for a vote in the lower house of Congress.

The country is expected to harvest a record soybean crop this season, with the government projecting 8.4 million tonnes, compared with last year's drought-hit 4.3 million tonnes.



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