MercoPress. South Atlantic News Agency

Paraguay could be forced to import soybeans because drought has halved production

Paraguay's Chamber of Oilseeds and Cereals Processors (Cappro) estimates total production could decrease by 60%, compared to last year's 10 million tons crop

The South American drought that has extended to several Argentine provinces and Brazilian states has also hit hard Paraguay, the world's fourth exporter of soybeans. In effect, crops are suffering and the processing industry is running out of supplies.

This is forcing local industries to look for alternatives to meet domestic demand, ahead of June when current stocks are expected to be depleted plus the poor harvest, and facing difficulties to comply with banks given the expansion of the processing capacity.

According to the country's Ministry of Agriculture, Paraguay soybean processing production has decreased by almost 50% compared to the previous harvest cycle.

The Paraguayan Chamber of Oilseeds and Cereals Processors (Cappro) estimates that total production could decrease by 60%, compared to last year's 10 million tons crop, because of the lack of rain.

“Given this situation, it is expected that the industries will struggle to process soy in the second half of the year, with the percentage of idle capacity fluctuating between 60% and 70%“, stated Cappro in an email to the government.

Faced with the situation, Cappro has requested a tax and customs flexible regime to be implemented only for soy imports monitored by government, similar to the temporary admission regime implemented in Argentina.

“With this… it will be possible to look for regional alternatives to meet the demand that cannot be met locally, ensuring greater industrialization in Paraguay.”

If this measure is approved, it will be the first time Paraguay resorts to importing soybeans.

Cappro’s member industries, including multinationals ADM, Bunge, Cargill, and Louis Dreyfus, processed around 2.8 million tons of the oilseed last year, the lowest volume since 2013 and approximately 500,000 tons less than in 2020, according to the chamber’s latest statistical bulletin.

In addition to grains’ lower quality that hinders the crushing rhythm, the drought has also caused serious navigation problems since the main waterway connecting landlocked Paraguay, the mighty Parana river, has lost much draft generating additional transport costs.

Cappro’s members are “having one of the worst years in its history, if not the worst, since the industries increased their installed capacity in 2013 from 1.5 million tons per year to 4.5 million tons per year.” stated the organization.