If he climate In addition, in the 2025/26 campaign, a grain reserve consisting of 59 million tons of corn, 49 million soybeans, 27 million wheat, 6 million sunflowers and a further 4 million sorghum was achieved. Overall, the total harvest is estimated at almost 145 million tons, a production of a very considerable size.
The high production of wheat caused prices to collapse during the harvest, and the market changes in the first half of the year suggest a situation of high prices due to the abundance of goods in relation to demand needs.
For corn and soybeans, history may repeat itself if the forecast productions of Argentina and Brazil, which would total more than 400 million tons, are confirmed. Consequence: in Argentina The most likely scenario is that prices will fall if domestic consumption and export demand do not change. This means that the local agricultural industry is currently unable to absorb productive volumes on the expected scale.
In Argentina, insufficient attention is paid to one of the two key factors in grain trade: demand. Typically, analysts analyze the evolution of supply and its fluctuations up and down, but do not attach the same importance to the behavior of demand. For example, in the country there is no detailed data on corn consumption “inside” the fields as animal feed; just rough estimates. First red light. We need to adapt this low attention behavior to demand.
A possible solution to this negative price scenario due to the overproduction of grain is the increasing demand for cattle and pig farming. They may absorb some of the upcoming large harvest, but they will not be able to handle all of the increased production. Second red light.
Then biofuels seem to avoid the third red light. The proportion of bioethanol and biodiesel in Argentina is significantly lower than in neighboring countries. In Argentina, only 7.5% biodiesel is contained in diesel and 12% ethanol in gasoline, compared to 15 and 30% in Brazil and much higher levels in Sweden, Indonesia and the Netherlands.
Currently, only a very small portion of the local corn and soybean crop is dedicated to “green fuels”: three million tons of corn are used to produce ethanol and 12 million tons of soybeans are used for biodiesel. In return, the United States uses more than 100 million tons of corn for ethanol production, accounting for more than 30% of the crop. There are eight ethanol plants in operation in Argentina, 25 in Brazil and almost 200 in the USA. In the biofuel equation, we must also consider sorghum, a crop that is an important source of bioethanol producing crops in Brazil.
How could the process be developed to expand the demand for corn, sorghum and soybeans for energy production? The path that other countries have already successfully taken is to expand installed capacity for grain processing. Argentina has sufficient soybean processing capacity, but does not have massive industrialization of corn or sorghum. Therefore, the installation of new bioethanol plants in the main production areas (Córdoba, Santa Fe, NEA, NOA) should be encouraged, as is already happening with sunflowers.
But that doesn’t happen voluntarily. To move in this direction and avoid another red light, a change to the biofuels law is required. in order to increase the cut-off values for gasoline and diesel and to create a concrete incentive to process the expected production surpluses.
Biodiesel production has undergone numerous challenges in recent years, characterized by regulations, interventions and political prices responsive to different interests. At times the profitability of the activity was negative. However, looking ahead to 2026, given oil prices expected next year, there is no doubt that it will be profitable.
In summary: Argentina must prevent the only outlet for domestic consumption surpluses from being the export of unprocessed grain, which would lead to a fall in prices. That doesn’t suit the producers or the country’s bills. Value creation must occur at the source, taking advantage of the fact that there is internal and external demand for biofuels. All governments – and therefore their representatives – agree with this overarching goal of value creation.
It is often repeated that the country needs to increase grain production and exports. But without planning, this process can lead to a decrease in the prices received by producers due to its own attractiveness. That would be the closest thing to self-harm. In these cases, inertia is a poor travel companion. The first step to effecting positive change would be to determine sooner rather than later that changes to the biofuels law are needed in the new Congress, which began deliberations in December. This could be the lightning rod to be better prepared to face the storm predicted by the super harvest.
The author is managing director of the consulting company AZ-Group
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