Argentine election result gives soymeal traders a new factor to weigh

Futures of soybean meal jostled between gains and losses in Monday trading as the market began to digest the ways Argentina’s farm economy might change under President-elect Javier Milei. 

Prices for the key ingredient in chicken and pork feed initially slumped as much as 2.6 percent after voters chose the libertarian who pledged to ditch the peso for the US dollar, a move that could encourage more farmers to sell. Futures then reversed course, rising as much as 1.2 percent as traders refocused on current tightness instead of any future supply bump that wouldn’t begin until the new harvest season anyways. 

“Farmers should be more active selling soybeans once Milei implements some campaign promises,” said Thiago Milani, head of trading and origination for 3Tentos, an agribusiness company in Brazil. “Argentina for sure will be an important meal player in the global market, but most likely after May of next year.”

Milei, who takes office December 10, has proposed dropping the peso and dollarising the economy. Such a move could boost farmer sales of soybeans, since they’d rather be paid in US dollars than a weaker local currency. It would also boost coffers for Argentina’s processors that until now have had little material to crush.

If such a policy were implemented, Argentina’s farmers “will sell a chunk of new-crop soybeans forward starting day one of the Milei era,” said Charlie Sernatinger, head of global grains at Marex Capital Markets. 

Until then, the market remains fairly tight. Exiting supplies in Argentina have nearly run out, while hot and dry weather in the world’s top soy producer Brazil has raised concerns about smaller-than-expected supplies next year. Argentina had a small crop this year but traditionally is the world’s biggest exporter of both soymeal and soyoil.