Soybean and sunflower are the two major oilseed crops in Argentina. Although sunflower has a longest-standing tradition (production dates back to the 1920s), soybean has boomed in the last ten years, as clearly reflected by harvest volumes and by investments made by processing facilities. Sunflower production has streamlined to respond to international prices and to the increased role of soybean, but it still is very important. Prospects for this crop are further enhanced because other world growers are reallocating their crop areas to grow rapeseed for biodiesel production purposes, thus reducing the sunflower acreage.

PRIMARY PRODUCTION

SOYBEAN

• Soybean cropping has become the key economic activity of Argentina’s farming sector.
• Argentina is the third world soy bean producer, after the USA and Brazil. Its market share is more than 20% by volume. The USA has recently increased the acreage allocated to corn crops for ethanol production to the detriment of soybean. In this scenario, Argentina and Brazil appear as the major players to make up for this shortfall in supply.
• In the past decade, domestic production increased at a sustained pace: soybean sown area grew at an average 9% per annum, from 7.2 million hectares (17,791,590 acres) in 1997/98 to 16.1 million hectares (39,783,970 acres) in 2006/07. Production for those years was 18.7 million and 47.5 million tons, respectively.
• The sown area is estimated at 16.6 million hectares (41,019,493 acres) for the 2007/2008 crop year (+2.8% compared to the previous year), while production is estimated to range between 45 and 48 million tons. As evidenced, yields have also increased in the period under review.
• The adoption of GM seeds allowed reducing the use of agrochemicals and facilitated no-till practices, thus reducing production costs. These factors, coupled with favorable agricultural and environmental conditions, are the root causes of the soybean boom, further contributed by farmers’ positive attitude towards incorporating new technologies.
• Key soybean producing provinces are Cordoba, Buenos Aires and Santa Fe, but sowing in areas deemed marginal is also increasing.
• The structure of farming and agribusiness has changed dramatically as a result of soybean. Traditional crops, such as sunflower, corn or sorghum, have lost ground to soybean, and even numerous livestock or dairy producers have restructured their business to allocate certain acreage to soybean crops, enticed by lower production costs and higher profit margins.
• GM seeds have enjoyed wide acceptance among growers; almost all the planted area consists of genetically modified soybean.
• Non-GM seeds are only used to manufacture specific products such as soybean-based beverages or protein foods, in line with the image these products enjoy as being “natural”.
• In these cases, marketing is coordinated via the contractual arrangement between the producer and the manufacturer.

SUNFLOWER

• Argentina enjoys most favorable agricultural and environmental conditions for sunflower cultivation.
• Until crop year 2006/07 Russia and Ukraine ranked as the top two sunflower producers. However, in the last season they both reduced the planting area and sowed rapeseed instead for biodiesel production purposes. Thus, Argentina climbed to the 2nd place as world producer (with a 16% market share), behind Russia.
• Sunflower is the most traditional oilseed in Argentina. It has experienced an upward growth trend ever since 1930, when production expanded, but this development was not steady. The variation in sunflower oil prices is mostly accountable for the ups and downs in production volumes.
• Compared to the period 1975-1995, no major yield increases have been recorded in the past 10 years.
• Over 250 commercial hybrids were registered between 1997 and 2006. During that same period, crops moved to more marginal areas, which may have offset the effect of improved genetics. However, results may be deemed successful when considering that the very purpose of genetic improvement is to increase oil yield.
• Sunflower is grown mostly in the Buenos Aires, Chaco and La Pampa Provinces.
• A peak was recorded in the 1998/1999 season, with a record high of 7 million tons. An oversupply of oil and an ensuing drop in prices marked the global scenario in the following years.
• As a result, sown area was reduced in the next two crop years, concurrently with a shift towards soybean by growers.
• Sown area went from 3.5 million hectares (8,648,690 acres) in 1997/98, to a maximum of 4.2 million hectares (10,378,430 acres) in 1998/99, and down to only 2.4 million (5,930,530 acres) in 2006/07.
• Production went down from 5.6 million tons in 1997/98 to 3.5 million in 2006/07. A 10.5% increase is expected in sown area for this season (2.63 million hectares (6,498,871 acres) that are estimated to generate 4.5 million tons).

PRODUCTION, CRUSHING AND INVESTMENTS

• Production of major oilseeds has increased steadily in the last few years. In turn, industry accompanied this growth with investments intended to increase crushing capacity.
• Back in 1996 the daily crushing capacity was 64,000 tons, with an 85% utilization rate. The ongoing increase in primary production and the expectations about a strong expansion in demand triggered new investments to increase crushing capacity, which climbed to almost 92 thousand tons/day in 1998.
• In the years after 1998 existing plants were retrofitted, but constant increases in oilseed production and processing and a favorable export outlook encouraged the expansion of existing facilities and in the construction of new plants.
• Processing capacity reached 149,000 tons/day in 2006.
• The increase in crushing capacity is offset by the decrease in the number of industrial facilities, from 58 in 1996 to only 47 operational plants in 2003.
• The most important processing plants are located in the Rosario and San Lorenzo – San Martín region in Santa Fe Province, a favorable location for exports. The competitive advantages offered by this region caused a significant concentration of installed capacity in said province (from 53% in 1996 to 82% in 2006).
• The following are the most significant investments made to increase crushing capacity, for a total of USD 400 million. Added to these are the investments in port and storage facilities.

- In 2004, Molinos Río de la Plata announced an USD 80 M investment in its oil plant in San Lorenzo, Santa Fe Province. This was intended to increase the port’s elevation capacity, as well as crushing capacity (from 4,500 to 17,500 tons/day). Works commenced upon receiving the pertinent government approvals. Port expansion works finished by March 2005, whereas the milling facilities were finalized in 2006.
- Dreyfus built a vegetable oil extraction plant in Timbúes, in the north of Rosario, with a capacity of 8,000 tons/day. The investment was estimated at USD 65 million dollars. Seed and flour storage capacity is now 180,000 tons, while that for oil is 30,000 tons. The project was submitted in August 2004, and the plant was commissioned in August 2006. This facility adds to another Dreyfus location in General Lagos, in the south of Rosario, thus totaling 20,000 tons a day.
- Terminal 6 Industrial, a company owned by the Bunge and AGD grain companies, presented a USD 60 million investment plan in March 2004 to expand its crushing capacity, the port and the storage area in San Martín, Santa Fe Province. The new plant may process 8,000 tons/day, thus totaling a 17,000 ton crushing capacity.
- Cargill built a vegetable oil extraction plant with a daily processing capacity of 13 K tons in Villa Gobernador Gálvez, Santa Fe Province. The investment, estimated at USD 160 M, also includes storage and port facilities. Construction commenced in January 2005 and the new facilities were opened in May 2006.
- In April 2005, Oleaginosa San Lorenzo - Vicentín opened a new crushing plant connected to its former facility in San Lorenzo and the port terminal. This USD 40 million investment rendered a crushing capacity estimated at 10,000 tons a day.

• This scenario leads to the conclusion that also when it comes to crushing, Argentina plays a key role in the world oilseed market.
• Recent investments have increased daily processing capacity to almost 150 thousand tons, causing Argentina’s oil industry to rank third behind the USA and China, and before Brazil. This neighboring country has a crushing capacity of 143,500 tons/day.
• As far as geographic concentration is concerned, the Greater Rosario area evidences the largest density worldwide in terms of number of plants and installed capacity.

PROCESSING

• Soybean oil accounts for the largest oil production in Argentina, and evidences a steady upward trend.
• Crushing reached a new record high this year with over 36.2 million tons (11% more than in 2006).
• Yields were also higher, so oil production, which totaled 6.96 million tons, was 13% above that of the preceding year. In turn, pellet production exceeded 28 million tons.
• At a domestic level, per capita soybean oil consumption reached a record of 14.7 kg. / inhabitant/year in 2007.
• Sunflower oil ranks second after soybean oil. Though part of the sunflower seed production is used in the bakery industry, most of it is allocated to oil manufacturing.
• Sunflower seed crushing dropped by 18% from 2006 to 2007.
• Moreover, industrial yield was 40.2%, compared to an average 42.5% for the preceding five years.
• Oil production in 2007 therefore decreased by 22% as compared to 2006.
• Processed volumes totaled 3.06 million tons, with an output of 1.23 million tons of oil and 1.3 million tons of pellets.
• Sunflower oil ranks second in terms of domestic consumption. It totaled 400 thousand tons in 2007 with a per capita consumption of 10.2 Kg./inhabitant/year, the highest in the last 6 years, but below a 14.6 Kg. record high in 2000.

EXPORTS

SOYBEAN

• A combination between high production and low domestic consumption levels turns Argentina into the largest soybean oil exporter worldwide. The soybean complex, consisting of beans, oil and soybean meal, is Argentina’s main source of foreign currency.

• Export volumes in recent years show an upward trend. International prices have also accompanied this growth, after reaching a floor in 2000.
• Soy bean exports amounted to 11.8 M tons in 2007, and a value of USD 3,420 million. The major export market is China (78%), since the Chinese government applies tariff policies that favor the inflow of raw materials in replacement for manufactured products.

• Soybean oil exports (mostly crude degummed oil) reach more than 80 countries. Exports totaled 6.3 million tons in 2007 for a value of USD 4,325 million. Asian countries account for most of the demand, given their significant economic growth and the fact that their consumption levels were below the world average, with China (34%), India (15%) and Bangladesh (15%) being the most important destinations.
• Cargill, Bunge, Dreyfus, Molinos, AGD and Vicentín are the major exporters, accounting for 90% of total exports.
• Key exit ports are those in the San Lorenzo/San Martín axis and the Rosario Port.
• Soybean pellets, the major crushing byproduct, are essentially used as animal feed, and demanded mainly by EU countries.
• Exports in 2007 totaled 25.8 million tons for a value in excess of USD 5,680 million.

SUNFLOWER

• Sunflower oil exports amounted to 849,000 tons in 2007 for a value of over USD 626 M. Refined and packed oil accounted for 8.6% of the total export volume. Major destinations were the Netherlands (20%), South Africa (17%) and India (9%).

• Main sunflower oil exporters are Cargill, Nidera, Vicentín, Oleaginosa Moreno, Molinos Río de la Plata and Aceitera General Deheza, which concentrated 98% of the total export volume.
• The most important export ports are San Lorenzo / San Martín, in Santa Fe Province, followed by Bahía Blanca and Necochea, in Buenos Aires Province.
• Sunflower pellet exports exceeded 835 thousand tons in 2007, generating revenues of 85.7 million US dollars. Major export markets were the Netherlands (36%), South Africa (16%) and the United Kingdom (11%).

By way of general conclusion, it may be said that oilseed production, processing and sale has developed in a complex scenario for the last ten years. Investments have remained steady, however, which allowed increasing volumes, maintaining Argentina’s leading role as an exporter and positioning this business amongst the most developed worldwide. The oilseed sector is one of the most competitive in the Argentine economy, and its excellent performance may be attributed to both the technologies used in primary production and to the efficiency and modernization of the processing industry.