Argentina Poised to Gain EU Soymeal Market Share as Deforestation Rules Hit Brazil

Argentina is positioning itself to increase soymeal exports to the European Union, anticipating that its chief competitor, Brazil, will struggle to comply with a stringent new anti-deforestation law set to take effect on December 30. The regulation could create a significant opening for Argentine suppliers, who say they are better prepared to meet the EU's strict traceability demands.

EU Regulation Threatens Brazilian Exports

The European Union's anti-deforestation regulation (EUDR) will require importers to provide verifiable proof that their products do not originate from land deforested after 2020. This poses a significant challenge for Brazil, which is currently the EU's largest supplier of soymeal for animal feed, accounting for about half of the bloc's imports last year, according to the European Feed Manufacturers’ Federation (FEFAC).

FEFAC has warned that the new traceability requirements could block up to 4 million metric tons of Brazilian soymeal, or roughly 17% of the country's total exports. The federation assigned Brazil a "medium" risk rating for EUDR-related disruptions, citing "structural and logistical hurdles" in key agricultural states like Mato Grosso.

A Tale of Two Supply Chains

The core issue for Brazil is the complexity of its supply chain. Farmlands in central Brazil are often over 2,000 kilometers from export terminals, requiring multiple transfers between trucks, barges, and trains, which complicates tracing the origin of the soybeans, according to Dante Romano, a research manager at grains broker Max Agro.

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In contrast, Argentina's primary soy-producing regions are within 350 kilometers of the Rosario port hub, making traceability far simpler and less costly. Much of Argentina's farmland is on the vast Pampas plains, which have been cultivated for over a century, whereas significant parts of Brazil's agricultural frontier were developed on more recently cleared land.

Argentina 'Ready to Fill the Gap'

Argentina's powerful soy crushing industry believes it can capitalize on any shortfall from Brazil. Gustavo Idigoras, president of the CIARA-CEC grains exporters and crushers chamber, estimated Brazil's potential export losses at 5 million to 6 million tons. "We can easily fill that gap," Idigoras told Reuters, adding, "Argentina is ready."

Idigoras highlighted Argentina’s fully operational VISEC traceability system, which tracks agricultural products from farm to port. FEFAC has assigned Argentina a "low" risk rating, projecting that nearly all of the country's soymeal crop would be compliant. This potential shift in trade flows comes as the EU and the South American trade bloc Mercosur, which includes both Argentina and Brazil, navigate a provisional free-trade agreement.