Much needed rains improve outlook for Argentine soybean crop

• Rainfall in drought-stricken Argentina has improved the outlook for the country’s soybean crop, with around half of soy planting areas receiving much needed moisture over the weekend.

• Argentinian farmers are currently planting this season’s soybean crop, making soil moisture more important during this crucial early stage of the growing season.

• Argentinian soybean production for MY 2022/23 is forecast by the USDA to increase by 12.7% YoY, on higher yields and planted area, however this is highly dependent on an improvement in weather conditions.

• Argentina typically processes soybeans domestically, exporting soymeal. In September, however, the Argentine government offered a temporary preferential exchange rate for soy sales at Peso 200 to the dollar, compared to an official rate of around Peso 150 to the dollar at the time. This was in response to a rapidly depreciating currency that drained the country’s capital reserves and pushed soybean farmers to hold the crop in storage as a hedge against inflation.

• The policy encouraged the export of more unprocessed soybeans, as farmers took advantage of the rate and sold to Chinese buyers rather than domestic crushers. From September-November, soybean sales increased three-fold YoY to total 4 MMT, helped by slow exports from the US amid low water levels on the Mississippi River. 86% of these unprocessed soybeans were sold to China.

• The shift benefited the Panamaxes, which shipped most of these unprocessed soybeans from September-November. As a result, the total volume of processed and unprocessed soybeans shipped by Panamaxes from Argentina increased by 150% YoY during this period, compared to an 11% decrease for Handies and a 16% increase for Supras.

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Vietnamese cement clinker exports slow on weak Chinese demand

• Vietnam’s cement clinker exports fell by 60% YoY in November to 1.9 MMT. This brings the total for January-November 2022 to 3.1 MMT, a decrease of 25% YoY.

• Vietnam increased its clinker exports almost four-fold to 30.5 MMT from 2015 to 2021, driven by strong demand from China’s booming construction sector. Chinese imports of Vietnamese cement increased from 300k tonnes in 2016 to 15.9 MMT in 2021.

• In 2022, however, Vietnam’s exports have been hit by the downturn in the Chinese construction sector, with China’s total January-November imports from Vietnam falling by 62% YoY to 5.8 MMT. Volumes shipped to China in November were the lowest since 2018, at 210k tonnes.

• Energy intensive cement plants have also struggled with a surge in energy and raw material prices, with many forced to cut production.

• These higher production costs have led to a rise in domestic cement prices. In response, Vietnam’s government plans to introduce a 5-10% increase in export tariffs on 1 January 2023 to protect domestic supplies, likely placing further pressure on exports next year.