The Extreme Weather Condition in Argentina Threatens Yield Reductions of Soybean Oil

Buenos Aires: According to data gathered from the market, this was the eighth driest end to January and beginning of February for the major Soybean Oil-producing regions in more than 30 years in Argentina. In contrast to a warmer start in February, temperatures decreased in the second half of the week. In addition, the first week of February 2023 had little to no rainfall in Argentina, with most of the country's precipitation falling in the northwest.

The current estimate for soy output is 41.5 million tonnes, a decrease of 10.1% from January and an extraordinary 20.1% from the USDA figure. According to the analysis, although monthly decreases of this size are highly rare, they were seen in Argentina's two prior severe drought years, 2009 and 2018. According to the USDA, Argentina's hot and dry weather has severely reduced the outlook for Soybean Oil yields, which may be the lowest in 15 years. However, favorable weather this season in central Brazil and a much larger bumper crop will help to fill the yield gap left by Argentina's unfavorable weather for the global supply of Soybean Oil.

Furthermore, precipitation is expected to be near or above normal for the first full week of February from the main second corn production regions of Mato Grosso eastward to Minas Gerais. As a result, the soybean harvest and subsequent planting of the second corn crop are likely to proceed slowly in February. This will further support the increase in the price of Soybean Oil in the domestic market of Argentina.

As per the ChemAnalyst database, the price of Soybean Oil is likely to increase in the domestic market as Argentina's drought is causing the market for soybeans to have smaller inventories. Argentina is also the top provider of soy meal and Soybean oil products worldwide and the third-largest exporter of soybeans in the world. Local crop conditions, including Soybean Oil crops, are still being negatively impacted by dry weather, and they would probably get worse without the anticipated rains in February.