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Argentine farmers cling to their soybeans amid local currency exchange uncertainty

By Hugh Bronstein and Maximilian Heath

BUENOS AIRES, Apr 9 (Reuters) – Argentine farmers are limiting their soybean sales despite high international prices to avoid exposure to the fragile local currency, while producers from competing countries such as the United States and Brazil are eager to negotiate their commodity.

The trend comes at a time when the South American country, the world’s leading exporter of soybean oil and meal, urgently needs foreign exchange from exports to emerge from a prolonged recession aggravated by the effects of the COVID-19 pandemic.

The official exchange rate of the Argentine peso has fallen 29.6% in the last 12 months through Thursday, to 92.4 pesos per dollar. With this type of exchange rate volatility, Argentine farmers have decided that a soybean in storage is worth more than having Argentine pesos in the bank.

“Our currency is soybeans. We cannot trust the peso,” Francisco Santillán, a producer in the province of Buenos Aires, the country’s main agricultural district, told Reuters. Although exports are made in foreign currency, farmers receive local currency in their transactions.

According to official data, until March 31, Argentine farmers had sold 31% of the soybeans for the 2020/21 cycle, the harvest of which began a few weeks ago. As of the same date last season, that figure was 37%.

Meanwhile, soybean and corn prices are at their highest levels in seven years. In Argentina the price of the oilseed is around 330 dollars per ton, from around 220 dollars registered a year ago.

For their part, producers from major competitors Brazil and the United States have rushed to sell their crops to secure current prices.

In Brazil, until April 2, producers sold 66.6% of the expected harvest, above the historical average of the last five years of 57.1% for the period, said the consulting firm Datagro, which estimates the Brazilian production for 2020 / 21 of the oilseed in 135.48 million tons.

A grain trader in the United States, where the growth cycle is the opposite of South America, said some farmers are already selling up to half of their next production without even having started planting.

SAVE IN WEIGHTS?

Instead, Santillán said he and his neighbors are storing their soybeans in silobags, long, white plastic bags that multiply on the Pampean plains. They are selling just enough of the grain to pay their bills and thinking about the upcoming wheat season.

The local milling industry is also not expecting large sales from farmers this year. “Quite the opposite,” said an operator for a major international export company who, in line with company policies, asked not to be named.

“The uncertainty is limiting the sales of the producers because, when they sell, what do they do with the money? Save in pesos? There is not a producer in this country that wants to do that,” said the operator.

According to the Argentinean chamber of grain processing and exporting companies CIARA-CEC, the industry is currently operating with an idle capacity of 46%.

“The problem is the level of uncertainty, particularly regarding the exchange rate for the coming months,” said Gustavo Idígoras, head of CIARA-CEC.

Meanwhile, political uncertainty grows in a year in which mid-term elections will be held in Argentina. Farmers fear that the road to the October elections could lead to more interventions by the Peronist government in agricultural markets.

Producers were caught off guard earlier this year when the Argentine government imposed a cap on corn exports, which it later undid, and said it could raise rates on wheat exports, a threat that it ultimately failed to fulfill. In both cases, the agricultural sector protested strongly.

“We encourage the government to give full certainty that there will be no more interventions during the 2020/21 season with regard to taxes, export limits or any other type of measure that would affect agricultural production,” said Idígoras.

Argentina currently applies a tax of 33% to soybean exports, 31% to soybean meal and oil, and 12% to shipments of corn and wheat.

The slow pace of sales is not the only factor that is putting pressure on Argentina’s soy export expectations.

A drought that affected important rural areas of the country in the second half of last year and in the first months of 2021 forced the Buenos Aires and Rosario stock exchanges to cut their 2020/21 harvest forecasts to 43 million and 45 million euros. tons, respectively.

(Additional reporting by Mark Weinraub in Chicago, Ana Mano in Sao Paulo and Agustín Geist in Buenos Aires; edited by Carlos Serrano)

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