Exclusive: Paraguay soy crushers, hit by drought, risk running out of beans

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ASUNCION, Feb 16 (Reuters) - Paraguay's soybean crushing industry will run out of beans to process by the middle of the year due to a drought hammering production, the country's trade industry body told Reuters, adding it was in talks to import beans for the first time ever.

The landlocked South American country, the world's fourth largest soybean exporter, is facing its worst soy harvest in a decade, with a drop in production that could see just half the amount of soy versus the previous season.

The Paraguayan Chamber of Oilseed and Cereal Processors(Cappro) told Reuters the impact of the drought could be even worse, estimating a drop of around 60% compared with the previous campaign, when the soy harvest was some 10 million tonnes.

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"This figure could worsen, depending on rainfall in the coming months," the chamber said in exclusive replies to Reuters questions, adding that idle crushing capacity could be 60%-70% in the latter half of 2022.

"Given this situation, it is expected that firms will hardly be able to continue processing soybeans during the second half of the year."

Paraguay has been hit by a drought since late last year, which has badly damaged crop yields and caused navigation problems in the key Paraguay-Paraná waterway, pushing up costs for transporting the processed grains down river for export.

Neighboring countries like Argentina, the world's top exporter of processed soy, are also facing the risk of drought hitting soy and corn harvests, with hopes dwindling of strong rainfall this month. read more

The chamber, which represents big commodity companies such as Archer-Daniels-Midland Co (ADM.N), Bunge Ltd (BG.N), Cargill and Louis Dreyfus, said it had petitioned the government's National Economic Team to approve a tax exemption to enable soybean imports for crushing. The current tax regime makes it uneconomic to import raw beans.

"With this ... it would be possible to look for regional alternatives, to cover the demand that cannot be covered locally," the chamber said. If the measure were approved, it would be the first time Paraguay has imported raw soybeans.

Paraguay's soybean industrial complex processed some 2.8 million tonnes of the oilseed last year, the lowest since 2013 and some 500,000 tonnes less than in 2020, Cappro data show.

Cappro said that the oilseed crushing sector in Paraguay was facing one of its most challenge years on record, certainly since capacity was expanded significantly in 2013 from 1.5 million tonnes per year to 4.5 million tonnes.

"We are experiencing one of the worst years in history," it said.

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Reporting by Daniela Desantis; Editing by Adam Jourdan and Jane Merriman

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