Argentina needs more soy to fill crusher capacity

BUENOS AIRES: Argentine soybean crushers are working at only about 80 percent capacity, the head of the grains export chamber said, as farmers have not yet increased production despite more farm-friendly policies from the new government.

President Mauricio Macri ended years of tension between the farm sector and the state when he took office in December.

Spurred by tax cuts and Macri's open market policies, wheat and corn planting has increased. It remains to be seen if soy production will also rise.

While investment is needed in transportation and other logistics, Alberto Rodriguez, president of CIARA-CEC, which represents grains exporters, said that crushers are waiting to fill their idle capacity.

"If soy production does not increase we are going to keep having problems with high idle capacity," said Rodriguez, speaking on Tuesday at a Reuters Summit on Argentina. The country is the world's top exporter of soymeal livestock feed and soyoil, which is used in making biofuels.

Multinational giants like Cargill Ltd, Bunge Ltd and Louis Dreyfus Commodities have crushing plants along the country's waterways, which lead out to the shipping lanes of the South Atlantic. With a capacity of 65 million tonnes per year, Argentine crushers are operating with an idle capacity of 20 to 23 percent, Rodriguez said.

The Rosario grains exchange estimates that Argentine farmers harvested 55.3 million tonnes of soybeans this season.

Macri ditched corn and wheat export taxes early in his term and cut soybean export taxes to 30 from 35 percent. He has promised to cut the soybean export tax by an additional 5 percentage points per year. With overall farm production expected to increase in coming years, Rodriguez warned of transportation bottlenecks ahead.

"Infrastructure is certainly a limiting factor for our sector at the moment," Rodriguez said. "Any increase in production will require roads, railways, energy and natural gas."

Macri's policies led to a 32 percent increase in wheat planting area in the 2016/17 crop year to 4.5 million hectares, according to the exchange. The season's corn planting, which has not yet begun, is also expected to increase dramatically.