Argentine gov. renews fund securing domestic edible oil supply

3 Feb 2022 | Juan Pedro Tomas

The Argentine government has extended the lifespan of a trust fund designed to guarantee the supply of edible oils to the domestic market at low prices through to January 31, 2023.

The fund was implemented initially back in February 2021 after the government concluded negotiations with the industry aimed at allaying mounting fears around domestic price inflation.

The fund works by compensating local market players by subsidising the costs of oils and effectively decouples international prices from the domestic price.

Under the scheme, the industry undertakes to supply the equivalent of 29 million litres of vegoil shipments a month – around 75% of domestic consumption – at a discounted rate that is expected to cost the sector around $190 million per year.

The trust will be funded by private firms that are members of the oilseed crushing chamber Ciara, although the industry lobby group rejects the need for the measure.

“State intervention in prices never works and destroys employment and production. Ciara rejects the implementation of this trust,” the lobby group said in a statement.

The soybean industry group Acsoja was also opposed to the government’s decision to extend the trust claiming it would have a negative impact in soybean production.

“Tools like these discourage production and are against the needs for value-added exports. This type of schemes become distorting, generating an additional cost to the agribusiness chain,” Acsoja said in a statement.

Total soybean crushing in the country in 2021 was up by 18% year-on-year, rising to 42.41 million mt of soybeans - the highest cumulative volume since 2016, according to recent data from the Ministry of Agriculture, Livestock and Fisheries (MAGyP).

However, the country’s crush margins remained mired in negative territory throughout most of the second half of 2021, with the rise to positive figures in the last week of December only a temporary move, local oilseed crushing and export chamber Ciara-CEC said.

“Volatile prices in the soybean complex, the effects of the drought cutting back South American production estimates and the reduction in the Paraná river’s water levels, which increased export costs, pushed crush margins back into negative territory,” Ciara said in its latest monthly report.

The Argentine crushing industry ended last year with an idle capacity of nearly 50% and Ciara-CEC warned they expect the utilisation rate to sink further in 2022.

“The trend for 2022 will depend a lot on the harvest in Argentina and Paraguay, where the drought is having a very negative impact. If these negative estimates are confirmed, the use capacity of Argentina’s crushing industry will be lower compared to 2021,” Gustavo Idigoras, the head of Argentina’s crushing industry and grain exporters group Ciara-CEC told Agricensus.

The country is forecast to produce 8.1 million mt of soyoil in the 2021/22 cycle, slightly up from 7.9 million mt last year and 1.26 million mt of sunflower oil in the current crop, down from 1.41 million mt, according to the USDA.