The Argentine government has renewed a fund to secure the supply of edible oils to the domestic market at low prices until the end of January next year, AgriCensus wrote.

Set up last February, the fund was introduced in a bid to control domestic price inflation following negotiations between the government and industry, the 3 February report said.

The fund compensates local market players by subsidising the cost of oils, according to the report, effectively decoupling international prices from the domestic price.

Under the scheme, the industry agreed to supply the equivalent of 29M litres/month of vegetable oil shipments – around 75% of domestic consumption – at a discounted rate that was expected to cost the sector around US$190M/year, the report said.

The trust would be funded by private companies that are members of the oilseed crushing and export chamber Ciara-CEC (Ciara), AgriCensus said, although the industry lobby group rejected the need for the measure.

“State intervention in prices never works and destroys employment and production. Ciara rejects the implementation of this trust,” the lobby group said in a statement.

The soyabean industry group Acsoja also opposed the government’s decision to extend the trust, claiming it would have a negative impact on soyabean production, the report said.

“Tools like these discourage production and are against the needs for value-added exports. This type of scheme becomes distorting, generating an additional cost to the agribusiness chain,” Acsoja said in a statement.

Total soyabean crushing in the country last year was up by 18% year-on-year, rising to 42.41M tonnes of soyabeans – the highest cumulative volume since 2016, according to recent data from the Ministry of Agriculture, Livestock and Fisheries (MAGyP).

However, the country’s crushing margins remained negative throughout most of the second half of last year, with the rise to positive figures in the last week of December only temporary, Ciara said.

“Volatile prices in the soyabean complex, the effects of the drought cutting back South American production estimates, and the reduction in the Paraná river’s water levels - which increased export costs -, pushed crush margins back into negative territory,” the chamber said in its latest monthly report.

The Argentine crushing industry ended last year with an idle capacity of nearly 50% and Ciara warned they that it expected the utilisation rate to drop further this year.

“The trend for 2022 will depend a lot on the harvest in Argentina and Paraguay, where the drought is having a very negative impact. If these negative estimates are confirmed, the use capacity of Argentina’s crushing industry will be lower compared to 2021,” Ciara head Gustavo Idigoras, told AgriCensus.

The country is forecast to produce 8.1M tonnes of soya oil in the 2021/22 cycle, slightly up from 7.9M tonnes the previous year and 1.26M tonnes of sunflower oil in the current crop, down from 1.41M tonnes, according to the United States Department of Agriculture (USDA).