Worsening Argentine Drought Drives Record US Soymeal Exports

Worsening drought in Argentina’s soybean growing areas is reverberating onto US markets, pushing US soybean meal exports to record highs and boosting prices. 

Argentina is normally the world’s largest exporter of soybean meal, but drought forced the country to cede that role to neighboring Brazil in the just-ended 2022/23 crop year. Now drought is again damaging prospects for the Argentine soybean crop currently being planted.

Drought readings have risen to “severe” levels in recent days, as measured by the Gro Drought Index, weighted to Argentina’s soybean areas using Gro’s Climate Risk Navigator for Agriculture. In addition, soil moisture is at the lowest level since at least 2010, as seen in this Gro Navigator display. 

The continued dryness seems to defy this year’s onset of El Niño, which has historically brought higher precipitation to Argentina’s croplands, as Gro wrote about here. Gro's current forecast data predicts below-average rainfall in soybean growing areas through October, but generally normal precipitation levels for November. 

However, after three consecutive years of drought, Argentina’s soybean growing areas will need above-average precipitation to replenish depleted soil moisture levels. El Niño could still come to the crop’s rescue if it brings abundant rainfall later this year.

View this Gro display showing week-by-week precipitation levels in each of Argentina’s four main soybean growing provinces, compared with historical amounts. 

Argentina’s climate woes are driving buying interest to the US. Total commitments for US soybean meal exports are currently more than 70% above the five-year average for the marketing year ending September 30, 2024, with sales especially having picked up steam beginning around May 2023. Prices for front month soybean meal futures are currently up 14% since the beginning of October to the highest level since August. 

Another disappointing soybean harvest in Argentina could further weigh on the nation’s inventory of soybeans. Argentina’s 2022/23 soybean ending stocks are forecast to fall to the tightest level in 10 years, according to Gro’s Argentina Soybean Monitor. The Monitor also contains Gro’s Argentina Soybean Yield Forecast Model, which will go live once the crop gets established in mid-December.

Most of Argentina’s soybeans are crushed and exported as soybean meal or oil. Soybeans are the country’s primary agricultural export, and therefore strategically important for generating foreign exchange. So far in 2023, Argentina’s soybean meal exports, which flow mainly to Asia and Europe, are running 42% below the five-year average. 

Meanwhile, Brazil’s soybean meal exports totaled over 9 million tonnes in the first eight months of 2023, surpassing the five-year average by 20% and far exceeding the 6.6 million tonnes shipped from Argentina. It was the first time since the 1997/98 season that Brazil edged out Argentina as the leading global exporter of soybean meal.